01/06/2022

"Together we can end the climate wars. Together we can take advantage of the opportunity for Australia to be a renewable energy superpower”. 

In his first speech as the 31st Prime-minister, Anthony Albanese sent a clear message to not only his Federal colleagues, but also to Australian States and Territories.  Cohesion, coherency and cooperation are Australia’s pathway to meaningful energy reform and climate change action.  If this Commonwealth government can unify Australia’s push to transition, and concentrate our natural resources, skills and willingness, the nation stands to become a formidable force for change. In this article, we assess Western Australia’s (WA) readiness for the potential shift in emphasis nationally.

Australian States and Territories need to engage in significant infrastructure development and regulatory reform in the race to become clean energy leaders and meet net zero goals between 2030 and 2050.  The WA Government in particular has begun taking significant steps to expedite WA’s clean energy transition and position it as a forerunner in a developing industry (such as preparing the Greenhouse Gas Storage and Transport Bill, which we discussed in our previous article Reform rumbles along in the West – carbon capture in Australia set to play a key role.)  

During the transition, Government must provide clear leadership, vision, ambition and translate that into actionable policies through the effective legal and economic encouragement of innovation and investment.  However, a key challenge faced by Government is striking the right balance in transforming the energy mix against the scientific, political and economic demands for decarbonisation in the quest to wrest control of our climate through reform.

Australia’s climate and energy policy frameworks – unify and codify

A startling feature of Australia’s energy transition is the lack of a coherent energy policy framework at a Commonwealth level.  In the absence of such guiding principles, the approach of State and Federal Government as a cohesive force has been lacking.  However, the States, recognising the race to be global and industry leaders is far from over, have largely driven all major reform thus far.  A national uniform approach to the transition would surely be beneficial and increase the efficiency of a currently disparate national approach punctuated by a myriad of State policies built and implemented at department-level.  National uniform laws are not a foreign concept to Australian State and Federal governments.

While WA might benefit from a unification of its many climate and energy policies and strategies, the benefits of already having such a clear vision and implementation provide a clear selling point for energy investors considering the State.  As we set out below, the focus areas and key strengths of WA as a clean energy producer are clearly communicated through policy, the implementation of which we will keenly observe.

However, harmonisation of Australia’s climate and energy policy framework would not be without difficulties for WA.  One of the State’s key strengths – a high concentration of natural resources – logically results in a high concentration of energy intensive industry, amounting to WA being home to approximately one third of Australia’s biggest emitters.  The effect of such concentration can be seen in WA being the only State to increase emissions since 2005.  The introduction of emissions reductions targets and changes to Australia’s climate change laws and policies touted by federal Labor may result in, not only increased investment in renewable energy and the energy transition in WA, but also pressure on WA to readjust its own policies.  In this regard, we understand an announcement may soon be forthcoming from the WA Government regarding an interim net-zero goal.

Land tenure reform

Land tenure reforms including a new form of tenure – the diversification lease – were announced in November and December 2021 alongside the release of 3 million hectares of unallocated Crown land for carbon farming.  The purposes of diversification leases will include carbon farming, providing further support for the creation of environmental offsets and promoting renewable energy, such as hydrogen, wind and solar.  We understand that a bill is expected to be introduced into Parliament by the end of the year. 

Whilst industry awaits the introduction of the reforms, a number of assumptions need to be made by project proponents in WA regarding the likely effect of the reforms and the complex range of conflicting land use and approval pathway issues that will arise as a result of the new diversification lease being introduced.

For an analysis of the announcements and published information read “Renewable energy and reusable reforms: WA’s land tenure amendments are familiar but exciting” and for the takeaways from an in-person consultation session with the then Minister for Lands, Tony Buti, and representatives of the Department of Planning, Lands and Heritage, read our update “WA Land Tenure Reform Bill expected within months”.

Hydrogen gas blending

In January 2022, a report into the feasibility of blending hydrogen into the Dampier-Bunbury Gas Pipeline was released which found up to 9% hydrogen blending was feasible, despite noting operational and regulatory barriers.  The WA Government will need to consider which legislation and regulation needs to be amended in order to enable hydrogen gas blending, with some relevant regulation already identified in the report and summarised in our article Only a pipe dream: Report into hydrogen gas blending in the DBNGP.  This identification will be critical to the feasibility of hydrogen projects that are predicated on the ability to transport hydrogen through the natural gas pipeline network.  However, it is important to note that the business case for blending hydrogen with natural gas remains informed by implementation challenges such as the introduction of new infrastructure and the necessary upgrade of existing infrastructure to support blending.

Hydrogen safety

Another area in which Government legislation and regulation will support the development of a hydrogen industry is the development of health, safety and environment standards.  Queensland has already announced and released a draft code of practice for hydrogen safety.  WA’s new work, health and safety (WHS) laws have only recently commenced, and there is a substantial amount of regulatory guidance and codes of practice yet to be finalized.  Whether a hydrogen safety code of practice is included is yet to be revealed.  Such a code could be an important risk management tool under the newly increased WHS obligations which allow approved codes of practice to be relied on in proceedings to establish if a duty of care has been discharged.  Currently, a Standards Australia work program is underway to prepare standards specifically tailored to hydrogen.  This will include international collaboration to ensure the standards are aligned and harmonized with international standards and approaches.  An internationally aligned approach would make WA more competitive, grant greater access to the Australian hydrogen market and facilitate the development of an export market for hydrogen (or as ammonia). 

Hydrogen-fueled transport

Queensland, New South Wales and Victoria have also recently announced a tripartite effort to support domestic hydrogen haulage with refuelling stations and infrastructure.  We await to see the WA Government’s announcement relating to the recipient(s) of the Hydrogen Fuelled Transport Expression of Interest under which up to $10 million of funding under the Western Australia Renewable Hydrogen Grants will be awarded to support hydrogen uptake in transport in WA.

Guarantee of origin scheme

Underpinning WA’s clean hydrogen future will be a guarantee of origin scheme or certification scheme. A scheme is required to enable businesses to sell verified low emissions hydrogen from renewable sources and fossil fuels with substantial carbon capture and storage.  In March, the Australian Government Department of Industry, Science, Energy and Resources commenced 17 voluntary industry trials of a Hydrogen Guarantee of Origin Scheme for Australia (H2GO) which are currently being undertaken by the Clean Energy Regulator and will span until June 2023 with the hope to finalise H2GO soon after.  H2GO considers clean hydrogen as a production pathway with the output of the scheme being a certificate but it does not specify the manner in which hydrogen would be described as “green”.

The Green Hydrogen Organisation, an international organisation focused on the development and utilisation of green hydrogen and whose Board includes Ms Martina Merz of Thyssenkrupp and Dr. Andrew Forrest of Fortescue Future Industries, released a green hydrogen standard (GH2 Standard) at its recent Green Hydrogen Global Assembly and Exhibition in Barcelona.  The GH2 Standard provides a global definition for “green hydrogen” as well as a holistic framework to evaluate the production of green hydrogen.  It is intended that the GH2 Standard will provide governments with a global reference point in developing their national standards. The WA Government will no doubt be paying attention given the developing Commonwealth H2GO scheme and given they have already committed to the Smart Energy Council’s Zero Carbon Certification Scheme (formally a green hydrogen-specific certification scheme).

Ports and export

In early March this year, a review into WA’s shipping industry was announced in relation to supply chain issues caused by floods and COVID-19.  However, the scope of the review as described is likely to touch on port capacity.  This will provide a useful insight to future export issues especially in relation to the export of hydrogen and ammonia from the many projects dotted along the vast WA coastline.  In addition to the review of WA’s shipping industry, reviews conducted by West Australian port authorities provide an insight into Government’s long-term strategies and plans for each port, including their green hydrogen export capabilities.  For example, the Port of Dampier Land Use Master Plan 2030 published by the Pilbara Port Authority sets out strategies to support anticipated growth at the port over the next decade.  Although that Plan does not make specific reference to clean energy exports, it does note the Port of Dampier will remain a bulk liquid operator.  These capabilities would likely support the export of ammonia, an alternative method of hydrogen export.

In Port Hedland, extensive consultation is being undertaken between the Pilbara Port Authority and port proponents to finalise the review of the port development plan, expected to be completed by mid-2022.  It was recently announced that the plan facilitates a future bulk liquids berth in South West Creek.  Given the port of Port Hedland is Oceania’s biggest port, it will likely be used for the bulk export of clean energy and we anticipate that the revised port development plan will provide further insights into how the port will be adapted for this purpose.  Although the WA Government plays a key role in transitioning the port of Port Hedland into a global clean energy export facility, port proponents play an equally integral role, given they likely fund the development.

The range of structural reforms currently underway to modernise the climate and energy policy framework in WA is positioning the State to be highly competitive in an increasingly global marketplace of clean energy and decarbonisation projects.  Gilbert + Tobin’s Clean Energy and Decarbonisation team will continue to bring you updates regarding the raft of reforms expected to be unveiled this year.  If you have any queries about how these might affect your firm or existing or proposed projects, please contact our experts for advice.

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