Green Hydrogen Funding Plan
A couple of weeks ago, numerous articles reported on the discussions between the Australian and German governments for a potential €400 million ($660 million) green hydrogen funding plan. The proposed plan seeks to marry Australia’s potential to become a superpower in the global supply of hydrogen fuel with Germany’s demand to decarbonise its energy intensive economy and replace Russian gas with diverse sources.
GlobalH2: Developments and Mechanisms
The discussions follow initial proposals in 2023 for the development of an auction scheme under the German GlobalH2 Instrument, managed by the GlobalH2 Foundation. The discussions also represent a continued commitment from both countries to collaborate and build upon the foundations established in the Australia-Germany Hydrogen Accord signed in June 2021. The two countries have already embarked on hydrogen research projects through the German-Australian Hydrogen Innovation and Technology Incubator, known as HyGATE. These various initiatives are a testament to the German government’s intent to become a world leader in green hydrogen technologies, which we reported on previously, here.
A subsidised auction mechanism for the supply and sale of green hydrogen (and its derivative products) through a competitive, market-based approach is the focal point of the current discussions. While the actual model that could be followed by any partnership between Australia and Germany is purely conjecture at this stage, the currently active GlobalH2 mechanism sheds some light on how a collaborative auction mechanism could work.
How the auction mechanism might look:
Long-term hydrogen offtake agreements are particularly important to provide investment security and enable the financing of hydrogen projects in Australia, and a partnership with GlobalH2 to facilitate hydrogen exports to the German market may provide just that in these volatile times.
Prices at the auctions will be determined through competition-based bidding procedures within a tailored funding window. This funding window is grounded in modular principles, and we anticipate that those principles will be collaboratively defined by both countries. The modular aspects may include the promotion of green products, geographical specifications, and sustainability criteria, aiming to strike a balance between national interests while fostering greater cooperation and collaboration.
As the dialogue between the Australian and German governments progresses, we will actively share updates on the advancements and joint mechanisms. To stay informed on the evolving challenges and opportunities in the renewable energy sector, please reach out to our experts Matt Baumgurtel or our New Energy team.
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.
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 firm’s Energy, Resources, Construction and Infrastructure practice.