Release of NSW’s hydrogen strategy

Articles Written by Samantha Daly (Partner), Cloe Woodward (Associate), Heather Pym (Associate)

On 13 October 2021, the NSW Government launched the NSW hydrogen strategy, establishing the Electricity Infrastructure Roadmap for the development of the state’s hydrogen industry.

A green hydrogen industry will assist the state to achieve its net zero emissions target by 2050, whilst also driving economic growth by diversifying the energy sector, creating new jobs and driving overseas hydrogen export. The three pillars on which the strategy is based are in enabling industry development, laying industry foundations, and driving rapid scale.

The strategy includes $70 million in funding for ‘hydrogen hubs,’ new regional hotspots for the production, transport, and innovation of hydrogen. The development of hydrogen hubs is hoped to minimise the cost of state-wide infrastructure, by leveraging existing transmission infrastructure, workforces, export terminals and facilities in the Hunter and Illawarra regions.

Additional hydrogen hubs may be developed in Special Activation Precincts (SAPs) and Renewable Energy Zones (REZ) to leverage various networks including freight, logistics, agriculture and manufacturing. Business will be able to express interest in becoming a part of the hydrogen hub networks once the NSW Government extends this invitation before the end of October.

The strategy also establishes Australia’s first dual hydrogen/gas power plant in the Illawarra, as well as 100 refuelling stations in preparation for the introduction of hydrogen-powered trucks. The NSW Government is aiming for 20% hydrogen fuel cell electric heavy vehicles by 2030, which is hoped to generate further demand for hydrogen. The feasibility of a hydrogen-powered train network will also be studied under the strategy.

Driving uptake of hydrogen solutions is key to the success of the strategy, thus temporary concessions for hydrogen producers which will be available for a period of 12 years for producers who install hydrogen electrolysers before 2030, subject to review in 2027. These concessions include exemptions, including reduced network charges of up to 90%, and incentives under the pre-existing Energy Security Safeguard, which has now been expanded to support hydrogen and provide hydrogen producers with tradeable certificates to incentivise energy efficient projects.

The NSW Government will also extend the Net Zero Industry and Innovation Program beyond 2030. The program will provide funding from the Climate Change Fund to support the deployment of new innovative technologies. A reduction in hydrogen production costs will see net-zero hydrogen become a cost-competitive option for the private sector, levelling the playing field with fossil fuels.

The strategy provides a list of 60 detailed actions by sector to affect the above strategy.

The strategy will provide opportunities for the NSW energy sector to diversify and expand their operations into hydrogen at a reduced expense, by capitalising on the incentives available under the scheme. Particularly for businesses located in the new hydrogen hubs in the Hunter and Illawarra, the strategy should also see considerable growth in employment opportunities, infrastructure and demand for hydrogen power. Consequently, the strategy will play a critical role in assisting hydrogen power to become a widely accessible renewable energy alternative for business in broader NSW and beyond.

Important Disclaimer: The material contained in this article is comment of a general nature only and is not and nor is it intended to be advice on any specific professional matter. In that the effectiveness or accuracy of any professional advice depends upon the particular circumstances of each case, neither the firm nor any individual author accepts any responsibility whatsoever for any acts or omissions resulting from reliance upon the content of any articles. Before acting on the basis of any material contained in this publication, we recommend that you consult your professional adviser. Liability limited by a scheme approved under Professional Standards Legislation (Australia-wide except in Tasmania).

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