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The development of the hydrogen industry in Australia has been identified as a key priority of the Commonwealth Government.
The existing gas networks provide a means to store, transport and distribute hydrogen in Australia. With long term objectives of operating pure hydrogen gas networks, key natural gas infrastructure owners and operators have commenced or are planning pilot projects in South Australia, Victoria, Queensland, New South Wales and Western Australia to inject hydrogen into existing natural gas pipelines. There are also proposals to blend biogas and other renewable gases into gas distribution networks.
While this is not a new concept (in fact, prior to the conversion to natural gas in the late 1960s and early 1970s, Australia’s gas pipelines were used to carry “town gas” which comprised of approximately 50-60% hydrogen), the use of hydrogen and biogases in Australia’s gas networks was not contemplated when the national gas regime was implemented.
In order to ensure that Australia is in a position to leverage its potential as a producer, user and exporter of hydrogen, it is important that legislative frameworks facilitate the introduction of hydrogen into gas networks containing hydrogen.
On 20 August 2021, the Energy Ministers agreed that the national gas regulatory framework should be reviewed and amended to bring hydrogen, biomethane and other renewable gas blends within its scope. The Energy Ministers allocated responsibility for various aspects of the review to the Australian Energy Market Commission (AEMC), the Australian Energy Market Operator (AEMO) and officials from the various State and Territory governments.
On 23 September 2021, the AEMC announced the commencement of its review into extending the energy market rules to hydrogen and renewable gas blends.
Consultation papers are expected to be released on 21 October 2021.
The National Gas Law (NGL) and National Gas Rules (NGR) (together, the National Gas Regime) provide the framework for economic regulation of gas distribution and supply in Australia.
This National Gas Regime governs access to natural gas pipeline services and elements of broader natural gas markets. It provides the legal framework for the wholesale gas market, short-term trading markets (STTM), the gas trading exchange, retail gas markets, third party access to gas pipeline services and the provision of information in relation to gas. These provisions aim to encourage efficient investment in gas infrastructure, producing benefits for various stakeholders.
The sale and supply of gas to retail customers in various Australian jurisdictions is governed by the National Energy Retail Law (NERL), the National Energy Retail Regulations 2012 and the National Energy Retail Rules (NERR) (together, the National Energy Customer Framework or NECF). This regime provides protections to consumers of energy, including information rights and minimum contract terms.
A review of the national gas regulatory framework, completed for the Commonwealth Department of Industry, Science, Energy and Resources as an action of the National Hydrogen Strategy in 2020-21, found that most elements of the current framework could apply to hydrogen, biomethane and other renewable gas blends in the same way they apply to natural gas.
The National Gas Regime currently applies to “natural gas”, which is defined in the NGL as a substance that:
(a) is in a gaseous state at standard temperature and pressure; and
(b) consists of naturally occurring hydrocarbons, or a naturally occurring mixture of hydrocarbons and non-hydrocarbons, the principal constituent of which is methane; and
(c) is suitable for consumption.
Similarly, the protections given to customers in respect of the sale and purchase of gas under the NECF apply only to “natural gas”, as defined in the NGL.
While the definition of “natural gas” does not cover pure hydrogen (as hydrogen is not a “hydrocarbon”), blends of natural gas with hydrogen, biomethane and other renewable gases may be covered by the national gas regulatory framework provided they fall within the definition of “natural gas”, which turns on whether those blends: (1) contain at least 50% methane; and (2) consist of “naturally occurring hydrocarbons” or a “naturally occurring mixture of hydrocarbons and non-hydrocarbons”.
Given that the regime did not specifically contemplate hydrogen, biomethane and other renewable gas, there are obvious problems in how the gas regulatory framework applies when hydrogen, biomethane and other renewable gases are introduced.
With a view to expedite the process of ensuring that the existing regime facilitates the development of the hydrogen industry in Australia, the Energy Ministers are commencing with reforms that focus on “hydrogen blends and renewable gases that can be used in existing natural gas appliances”  (referred to as “NG equivalents”).
The key objective of the reforms are to ensure that:
The Energy Ministers have indicated that further reforms relating to the application of the national gas regime on a pure hydrogen network may be considered further in the future.
Officials from each State and Territory, the AEMC and AEMO have each been allocated responsibility for various aspects of the reforms, as set out in the table below:
Source: Information Sheet available at: https://energyministers.gov.au/publications/extending-national-gas-regulatory-framework-hydrogen-blends-and-renewable-gases
On 23 September 2021, the AEMC announced the commencement of its new work program to support the ongoing decarbonisation of the energy sector, with the initiation of its review into extending the energy market rules to low-level hydrogen blends and renewable gases (together with a rule change request for the Victorian declared wholesale gas market (DWGM)).
The AEMC has been tasked with identifying and developing the amendments to the NGR and NERR required to accommodate hydrogen and renewable gas blends.
In its review, the AEMC has been requested by the Energy Ministers to consider:
A consultation paper is expected to be released by the AEMC on 21 October 2021.
21 October 2021: Initial consultation papers published
Late October – December 2021: Stakeholder forums and engagement opportunities
Late March – May 2022: Consultation on draft reports and draft legislative amendments
Mid 2022: Draft legislative amendments presented to Energy Ministers for agreement
Late 2022: Consultation on proposed initial Rules, Procedures and other subordinate instruments
A virtual public forum will be held by the Department of Industry, Science, Energy and Resources, AEMO and the AEMC from 1pm (AEST), Friday 22 October 2021.
Those interested in attending can register their interest by email to: firstname.lastname@example.org.
 The NECF applies in the ACT, Tas, SA, NSW, QLD and, to a limited extent, VIC. It does not apply in WA or the NT.
 See Terms of Reference available at: https://www.aemc.gov.au/sites/default/files/documents/hydrogen_reforms_-_signed_letter_to_aemc_with_terms_of_reference.pdf.
 See Information Sheet available at: https://energyministers.gov.au/publications/extending-national-gas-regulatory-framework-hydrogen-blends-and-renewable-gases
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