The beginning of a Hydrogen Gas Network?

AEMC given go ahead to review National Gas Rules and National Energy Retail Rules

In what is the first step towards an Australian hydrogen gas network, Energy ministers have requested the Australian Energy Market Commission (AEMC) review the National Gas Rules (NGR) and National Energy Retail Rules (NERR) to determine what changes are necessary to include low-level hydrogen blends and renewable gases in the NGR and NERR frameworks. 

Formal consultation will begin on 21 October 2021 with the release of a consultation paper inviting formal submissions however we understand the AEMC have been working on this review for some time, with soft sounding by AEMC of various stakeholders being conducted in recent months. 

While there are significant technical and regulatory challenges in blending hydrogen into the existing network, pilot programs and demonstration projects have been successful in Western Australia, North America and Europe.

Accessing existing gas networks will be key to Australian green hydrogen projects unlocking global export markets – and potentially supercharge the Australian green hydrogen sector.

The release of the consultation paper on 21 October 2021 will also mark the commencement of the AEMC rule change request process for the National Gas Rules which apply to the Victorian DWGM.  This will assess a request made by the Victorian Minister for Energy, Environment and Climate Change that seeks to enable that market to recognise distribution connected facilities. These facilities may include hydrogen and renewable gas facilities as well as others such as storage.

Scope of AEMC’s review

In conducting its review, Energy Ministers have asked AEMC to:

  • Have regard to the findings of the desktop review that was conducted for the Department of Industry, Science, Energy and Resources as the starting point for the identification of potential gaps in the NGR and NERR that could emerge if low level hydrogen and renewable gas blends are permitted to be supplied through gas distribution networks
  • Consult with market participants, industry, consumers, other market bodies and government officials, as appropriate, to identify any other material gaps in the NGR and NERR
  • Develop the initial rules that are required to address the identified gaps in the NGR and NERR, and consult on the draft initial rules
  • Advise officials working on the legislative reforms of any gaps in the NGL and NERL identified by the AEMC in its review of the rules.

In their review, AEMC will consider:

  • The economic regulatory framework, including:
    • Connection and access by facilities for the production, injection and blending of hydrogen, biogas and other renewable gases into distribution networks (and other facilities as necessary) to ensure that:
      • access for these facilities is available on reasonable terms;
      • these facilities are covered by the dispute resolution provisions; and
      • hydrogen blending facilities only connect in parts of the network suitable for the injection of hydrogen; and
    • Ensuring that any cap on the level of blending that may be set by a jurisdiction is implemented consistently in the regulatory framework.
  • The facilitated markets and regulated retail markets, including:
    • addressing any matters that AEMO identifies in its review of the NGR, AEMO made Procedures and other AEMO made subordinate instruments that are required to ensure that settlement and metering in the Short-Term Trading Markets (STTM), the DWGM and regulated retail markets operate as intended
    • registration categories for the STTM, the DWGM and/or regulated retail markets; and
    • responsibility for the creation of the blend (as between distributors and retailers) and whether and how that should be accounted for in the regulatory framework.
  • The NERR and whether any additional consumer protections may be required, such as the provision of information to customers and any minimum contract terms or bill content requirements.
  • The regulatory sandbox provisions in the national gas and retail regulatory frameworks.
  • Any other material aspects of the NGR and NERR necessary to support low-level gas blends under the regulatory framework.

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 consultation paper.

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, construction, including the buying and selling of development and operating projects.

Matt Baumgurtel leads the New Energy sector team at Hamilton Locke which specialises in renewable energy, energy storage and hydrogen projects and transactions as part of the firms Energy, Infrastructure and Resources practice.

Andrew Smith is a lawyer in the Hamilton Locke Energy Infrastructure and Resources team and specialises in renewable energy projects including wind, solar, energy storage and hydrogen.