AEMC Looking to Incorporate Hydrogen and Other Renewable Gases into Regulatory Framework

The Australian Energy Market Commission (AEMC) has released a draft report outlining 25 recommendations for updating the gas and energy retail regulatory frameworks to accommodate hydrogen and renewable gases. These recommendations are a welcome development in setting up Australia’s regulatory framework to allow hydrogen blended gases and renewable gases to be distributed to existing systems and appliances in homes and businesses.

The AEMC’s work in this area aims to facilitate trade, innovation and investment in the hydrogen and renewable gas markets. The proposed recommendations are intended to enable efficient delivery of new services and continued innovation in developing new services, as well as ensure continued quality, safety, reliability and security of gas supply to end-users.

The key draft recommendations are to:

  • extend the economic regulatory framework;
  • extend the market transparency mechanisms of various gas bodies and reporting obligations of non-pipeline infrastructure;
  • streamline the arrangements for the short-term trading market;
  • adapt the Victorian declared wholesale gas market (DWGM);
  • allow new services and commodities to be priced or traded within the retail gas markets;
  • enable consumers to be informed about the transition to natural gas equivalents; and
  • retain the new regulatory sandbox rules in their current form.

AEMC’s review of the energy and gas retail rules has been a welcome development on Australia’s path to net-zero by 2050.  This is another lever that can be pulled to increase demand for green hydrogen (GH2), thereby generating larger economies of scale and faster deployment, leading to a virtuous cycle of increasing demand encouraging increased supply, improving efficiencies and economies of scale which reduce production costs, lower prices, and further encourage demand.

The AEMC has stated that its review of the gas and energy retail rules will provide clarity around access to pipelines.  Accessing existing gas networks will be key to Australian GH2 projects unlocking global export markets and making Australia a green hydrogen superpower.

As with any proposed rule changes, written submissions are invited until 19 May 2022 with a final report to be published on 8 September 2022. A set of rules is expected to be provided to Energy Ministers for approval by 14 November 2022.

We at Hamilton Locke are already engaged with clients in relation to this review and we will be assisting in preparing submissions in response to the proposed rules changes.

We are keen to hear from other stakeholders in the sector. Please reach out to our New Energy lead, Matt Baumgurtel, should you wish to discuss.

The Hamilton Locke team advises across the energy project life cycle – from project development, grid connection, financing, and construction, including the buying and selling of development and operating projects. For more information, please contact Matt Baumgurtel.