AMEC report calls for changes to open up hydrogen and renewable gas development

The Australian Energy Market Commission (AEMC) has taken the next critical step toward the development of a national hydrogen industry, releasing a draft report proposing 25 changes to the national gas and energy retail rules to include hydrogen and renewable gases alongside natural gas.

The draft recommendations provide an important development in setting up the national regulatory framework so low-level hydrogen blended gases and renewable gases can be safely supplied to existing distribution systems and appliances in homes and businesses.

The AEMC’s work in this area aims to expand existing gas market frameworks to hydrogen and renewable gases to facilitate trade, investment and innovation in these markets. In particular, establishing how the gas markets rules will apply to new facilities provides clarity for investors on how new infrastructure will be impacted.

Another aim of the AEMC’s draft recommendations is to provide clarity on the roles and responsibilities for the quality, safety, reliability, and security of supply of gas, to maintain operational safety of infrastructure and customer equipment and appliances. In addition, the commission has recommended that existing consumer protections be maintained during the transition to the increasing use of hydrogen and renewable gases.

AEMC Chair Anna Collyer says reforms in the regulatory framework will lay the foundations for the development of a decarbonised gas sector in Australia.

“Hydrogen is one of a handful of new, low carbon, zero-emissions fuels that can be used for heating and cooking in homes. Fuel cells can also power trucks, trains and cars,” says Ms Collyer.

“In the future, the hydrogen sector may grow to include power generation and some industrial processes. Electrolysers that create hydrogen may also provide beneficial services to the electricity market such as contributing to demand response and essential system services.

“These reforms are considered a priority under the Australian Government’s National Hydrogen Strategy and we need to make sure they’re designed to ensure efficient, safe and

secure outcomes that are in the best interests of consumers.”

The AEMC has worked closely with industry and market participants, as well as other stakeholders, in the development of its draft recommendations and will continue this engagement as it develops draft rules and final recommendations.

The review is being undertaken concurrently with the assessment of a rule change request to include distribution connected facilities in the Victorian Declared Wholesale Gas Market (DWGM). The AEMC published a draft rule to open up the Victorian DWGM to include distribution connected facilities that can supply natural gas, low-level hydrogen blended gas, biomethane, and other renewable gases.

Currently, the Victorian DWGM only recognises transmission-connected facilities and does not allow market participation from entities connected to distribution pipelines. This work addresses that by amending the National Gas Rules (NGR) to also recognise facilities connected at the distribution level.

The draft rule maintains the current design of the Victorian gas market while clarifying the roles and responsibilities of market participants.

Ms Collyer says importantly, this will encourage technological innovation in an evolving market and regulatory environment as it seeks to promote safety, reliability, and security of supply.

The Hydrogen Park Murray Valley project is one example of an emerging pilot project that will benefit from the new rules.

This joint venture between AGIG and ENGIE, aims to inject renewable hydrogen into Australian Gas Networks’ (AGN) existing network in Albury-Wodonga. Production from the facility is expected to commence in late 2023 with delivery to customers in 2024.

“These reforms will enable the proposed pilot projects to participate in the Victorian gas market, providing the foundation for innovation that will allow this industry to develop further,” says Ms Collyer.

“These draft rules along with the changes proposed through the national hydrogen strategy, complement the various decarbonisation initiatives from the Victorian Government and work to enable the development of the national hydrogen industry.”

The review’s draft report and the draft rule determination are available from the AEMC’s website for stakeholder feedback.

AEMC Chair Anna Collyer. “Hydrogen is one of a handful of new, low carbon, zeroemissions fuels that can be used for heating and cooking in homes. Fuel cells can also power trucks, trains and cars.”

For more information visit www.aemc.gov.au