12 February 2020

Victorian Hydrogen Investment Program Via online submission

To whom it may concern Green Hydrogen Discussion Paper – Victorian Hydrogen Investment Program Australian Gas Infrastructure Group (AGIG) is pleased to provide a response to the Green Hydrogen Discussion Paper. Green hydrogen represents a significant opportunity for to address the targets in the Climate Change Act 2017 (the CCA), while making use of Victoria’s extensive existing gas network and lowering costs. With appropriate incentives and a supportive enabling environment, Victoria can be a leader in producing and using green hydrogen to provide reliable, affordable and low emissions energy. After briefly introducing AGIG this letter will focus on two key issues: the role of green hydrogen in support of the CCA and Victoria’s economy, and the enabling environment required to see green hydrogen flourish in Victoria. Attachment A provides responses to the consultation questions. About AGIG AGIG is one of ’s largest gas infrastructure businesses and combines the operations of Networks (MGN), Australian Gas Networks (AGN) and Dampier Bunbury Pipeline (DBP). We have over two million customers across every Australian mainland state and the . Out assets include 34,000km of gas distribution networks, over 4,000km of gas transmission pipelines and 57PJ of storage capacity. In Victoria, we reliably distribute gas to over 1.3 million customers through over 21,000km of distribution network. AGN and MGN serve much of Victoria including the CBD, the eastern and south-eastern suburbs, and much of eastern and central Victoria extending north to Wodonga and east to Bairnsdale. We are also at the forefront of the emerging hydrogen industry in Australia. Through the Australian Hydrogen Centre (AHC), of which the Victorian Government is a founding member, we are developing feasibility studies to decarbonise gas distribution networks in Victoria and including studies for 10% blending and 100% hydrogen networks in each state. At Hydrogen Park South Australia (HyP SA), we expect to deliver a 5% green hydrogen gas blend to around 700 customers in the suburb of Mitchell Park by mid-2020. Green hydrogen to support the targets in the Climate Change Act Through the CCA, Victoria has adopted the most ambitious, legally binding approach to emissions reduction of any state in Australia. Achieving the targets in the CCA will require significant emissions reductions across the whole economy, as noted in the discussion paper. Natural gas and oil represent 60% of Victoria’s primary energy consumption1 – much of which is for use directly in homes, businesses and vehicles, not for electricity generation.

1 Australian Energy Statistics, 2017-18, Table C

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Addressing these emissions will require much more than electrification, and green hydrogen represents a cost-effective mechanism to reduce these emissions. The discussion paper correctly identifies the existing gas network as an attractive mechanism for the delivery of green hydrogen, particularly as a fuel substitute for both natural gas and oil. The discussion paper also identifies many of the potential uses for green hydrogen. These include green hydrogen transported via gas networks for use in homes and businesses for heating and cooking, for industry as process heat, and for transport. Over time, the ability of gas networks to store green hydrogen produced with renewable electricity coupled with the widespread use of fuel cells for distributed electricity generation, will see the electricity and gas networks become more closely integrated. This will enable renewable electricity revenue streams to diversify, but more importantly will improve the reliability and security of electricity supplies. By making use of existing gas networks, green hydrogen can reduce the overall costs of achieving the targets in the CCA when compared to full electrification of all energy consumption. Analysis undertaken by AGIG with modelling support from Deloitte suggests that using existing gas networks to deliver 100% hydrogen is likely to be 40% cheaper than electrifying existing uses of natural gas in distribution networks.2 Developing an appropriate enabling environment An appropriate enabling environment is needed to achieve the rapid and widespread deployment of green hydrogen, as has occurred for renewable electricity. This includes direct incentives to deploy hydrogen for use in gas networks. The primary benefit of green hydrogen is its potential to achieve the targets in the CCA at a lower cost to the economy as a whole than relying solely on electrification. Achieving these benefits requires an approach which recognises the economy wide benefits of green hydrogen and combines incentives, support and regulation. Firstly to incentives. In our submission to the review of Interim Emissions Reduction Targets for Victoria we noted that a Renewable Gas Blending Target should form part of a Sector Pledge under the CCA. Such a target would require that hydrogen or other renewable gases3 be blended into gas distribution networks up to the equivalent of 10% hydrogen (by volume) by no later than 2030. The target would mirror existing Renewable Energy Targets by requiring retailers to source a growing proportion of the gas they sell from renewable gases. As part of the target, we also propose that gas networks be required to offset completely the fugitive emissions from gas distribution networks (unaccounted for gas) with renewable gases blended into the network by 2025. Our analysis suggests that a Renewable Gas Blending Target is both achievable and affordable; adding less than 1% to the cost of gas delivered to customers for a 10% hydrogen blend (by volume). In addition to incentives, direct support from programs like the Victorian Hydrogen Investment Program will also help to demonstrate the applicability of hydrogen before targets increase the levels of penetration. Direct support delivering blended green hydrogen and, in the medium-term 100%, green hydrogen to entire precincts and suburbs, will demonstrate its applicability to residential, commercial and industrial users. This will help support and build confidence for appliance manufacturers, retailers, developers and customers that sustainable markets exist for green hydrogen. We are particularly grateful for the Victorian Government’s support of the AHC. Through the AHC we will set out a clear pathway forward for the widespread deployment of green hydrogen. Setting clear blending targets for the state will facilitate the implementation of the plans developed by the AHC. The

2 See https://www.energynetworks.com.au/resources/reports/decarbonising-australias-gas-distribution-networks-deloitte/ 3 While green hydrogen is a particular focus, other verifiable renewable, or net zero emission, gases (e.g. biomethane) could also be included.

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AHC will provide a foundation for many of the technical, policy, regulatory and commercial challenges that need to be addressed in order to successful deploy green hydrogen across Victoria. Finally, regulation also forms an important part of the enabling environment. Economic, safety and emissions regulation all play an important role in existing gas markets. In 2020, regulation should form a focus for government and industry, to ensure that consumer interests and safety remain protected, while also ensuring there is sufficient flexibility to deploy new technology and develop new business models for green hydrogen. Achieving this balance, will specifically require more detailed consideration of the National Gas Law (NGL) and the treatment of hydrogen. We look forward to participating in the 2020 review of the NGL stipulated in National Hydrogen Strategy. An overview of how we see the broad enabling environment for green hydrogen is included in Figure 1 below. All of these elements as described above and in Attachment A are crucial if Victoria is to capitalise on the opportunity of green hydrogen.

Figure 1: Elements of the green hydrogen enabling environment

Supportive Direct regulatory Widespread support for Renewable Feasibility environment Private 100% green projects Gas Blending studies (AHC) (safety, investment hydrogen (ARENA, Target consumer, deployment VHIP) NGL)

Once again, we thank you for the opportunity to respond to the Green Hydrogen Discussion Paper. We would welcome an opportunity to discuss any aspect of our submission and our investments in green hydrogen. Should you have any queries about the information provided in this submission please contact Drew Pearman, Manager Policy and Government Relations ([email protected], 0417 544 731). Yours sincerely,

Craig de Laine General Manager People and Strategy

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Attachment A – responses to consultation questions 1. What are the greatest opportunities for investment and employment in hydrogen? Green hydrogen has wide ranging potential for investment, employment and decarbonisation in Victoria. As identified in the Discussion Paper this includes as a fuel substitute for natural gas in residential, commercial and industrial applications. Perhaps the greatest opportunity created by green hydrogen is its potential to provide a more cost- effective means of reducing emissions than relying on electrification alone (as is the case today). AGIG’s analysis with modelling from Deloitte suggests that the costs of deploying 100% hydrogen in existing gas networks in Victoria is 40% cheaper than electrifying these uses of energy.4 Importantly, the use of green hydrogen in existing networks represents the perfect near-term opportunity that can be readily implemented, increasing scale and lowering costs of hydrogen production for other uses in the future. This includes significant potential to support electricity systems. It is clear that many large-scale renewable energy projects will often be “constrained off” or receive zero or even negative prices for wholesale electricity delivered. Electrolysers can purchase this power and further support the project economics for renewable energy projects. Electrolysers can also be an important source of demand response. Hydrogen vehicles also present an opportunity to create an early source of demand underpinning future export opportunities. 100% hydrogen, in existing networks, could be used to supply refuelling stations, potentially substantially lowering overall distribution costs by increasing demand for network services. To maximise spill-over benefits and efficiency, hydrogen production could be co-located for blending into networks, refuelling light and heavy vehicles, and tube / trailer for use away from major gas networks. AGIG is actively considering these applications for its HyP SA project. Industrial users represent one of the most important applications for green hydrogen, but also present some of the biggest challenges. Current industrial users of natural gas for feedstock, heat and as a reductant represent some of the most challenging applications to achieve cost-effective emissions reductions. Globally, there are significant moves to use hydrogen for industrial uses - in the production of steel in particular.5 These examples demonstrate that green hydrogen use for industrial applications is viable. Victoria has an opportunity to lead this activity in Australia and the Asia-Pacific. While important activities are already underway, particularly through the Future Fuels Cooperative Research Centre (FFCRC), the right policy settings and incentives are essential to take advantage of this enormous opportunity. Finally, the green hydrogen export opportunity is significant, with markets across the globe looking for supplies of zero emissions energy many times larger than Australia’s domestic requirements. Initial blending of hydrogen in distribution networks is an important step towards the development of the Australian hydrogen export industry. Without practical experience installing electrolysers and managing renewable electricity generation in concert with hydrogen production, we are unlikely to have the scale and experience necessary to support an export industry.

4 See https://www.energynetworks.com.au/resources/reports/decarbonising-australias-gas-distribution-networks-deloitte/ 5 See https://reneweconomy.com.au/another-nail-in-coals-coffin-german-steel-furnace-runs-on-renewable-hydrogen-in-world- first-55906/ and https://reneweconomy.com.au/nordic-steel-giant-to-use-renewable-hydrogen-to-produce-fossil-free-steel-by- 2026-2026/

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2. What is Victoria’s competitive advantage in relation to capitalising on an emerging hydrogen economy? Initial blending of hydrogen in distribution networks is an important opportunity to support the development of the Australian hydrogen industry. Because of Victoria’s reliance on natural gas for heating and industry, the state has arguably the greatest need and potential market for green hydrogen, and the greatest potential to benefit by making use of existing gas infrastructure in lowering the costs of the transition overall. As noted in the discussion paper, existing gas distribution networks present an attractive mechanism for streamlined distribution of green hydrogen making hydrogen attractive as a fuel substitute. Victoria’s reliance on natural gas for heat and industry, also suggest the importance to the local economy of developing alternatives to natural gas. In addition, Victoria’s existing commitments to renewable energy, specifically achieving 50% renewable electricity by 2030, present an opportunity to maximise the benefits of both renewable electricity generation and hydrogen production. The need to constrain renewable electricity generation, and store it in large quantities over longer periods of time, create synergies with green hydrogen production, that deliver benefits not possible with battery technology and without the significant capital cost of pumped hydro. The scale required includes both significant electrolyser capacity, as well as a large number of individual units spread across the country and across individual networks, albeit with concentrations in areas in close proximity to renewable energy resources and other supporting infrastructure. Blending at 10% will require a significant increase in capacity (we estimate approximately 920MW to produce 14.16PJ of hydrogen). However, this scale is small relative to the capacity required for exports. Because of their small scale, and existing compatibility with blends of up to around 10%, Victorian gas distribution networks represent the perfect near-term opportunity for increasing scale and lowering costs for hydrogen production, using existing infrastructure and demonstrating our capabilities on a global scale.

3. What lessons can Victoria learn from the global hydrogen agenda and international experience to date? A number of countries are embarking on a hydrogen agenda and these activities have been well described elsewhere. The FFCRC has provided a summary of plans from various countries in Advancing Hydrogen: learning from 19 plans to advance hydrogen across the globe.6 The International Emergy Agency (IEA) in its report The future of hydrogen: seizing the opportunities7 points around 50 targets, mandates and policy incentives that directly support hydrogen. Based on its analysis, the IEA has recommended four near-term opportunities to boost hydrogen on a path to widespread use: - using industrial ports as the nerve centres for scaling up the use of clean hydrogen; - building on existing infrastructure such as millions of kilometres of natural gas pipelines; - expanding hydrogen through fleets, freight and corridors; and - launching hydrogen trade’s first international shipping routes. For Victoria’s specific circumstances, the use of existing gas infrastructure to blend hydrogen in the near term, would as the IEA describes boost demand for hydrogen and drive down costs (including for

6 See https://www.futurefuelscrc.com/files/download/450181d39712b07 7 See https://www.iea.org/reports/the-future-of-hydrogen#

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the electricity network by increasing the scale, and flexibility of variable electricity and providing a large alternative market).

4. Geographically, where are the most significant clusters for this investment, employment and production? Within Victoria, regions most likely to benefit from investment and employment in green hydrogen value chains are likely to have a confluence of strong renewable resources, as well as existing transportation and distribution capabilities. The Discussion Paper points out the key regions for renewable electricity production as identified by the Australian Energy Market Operator (AEMO). These regions should be considered in concert with the capabilities of the existing gas network to introduce hydrogen. For initial blending of up to around 10%, we are confident that the majority of our networks and materials including mains, meters and associated equipment are hydrogen ready. The current generation materials that make up our more recently constructed distribution networks (eg, polyethylene (PE) or coated steel) are capable of transporting 100% hydrogen. Tables 1 and 2 below provide an indication of outer Melbourne and regional networks in Victoria, constructed over the last two to three decades, which meet these standards and provide the ideal test bed for 100% hydrogen. These networks represent a wide range of towns in terms of population, industries and local economies. Mains that are nearing their end of life (eg, cast iron) are currently the focus of mains replacement programs for each network operator driven by public safety and leak management. Our existing mains replacement program means that our networks can accommodate a mixture of 10% hydrogen now, and 100% hydrogen in the near future when the programs are complete. Table 3 below outlines our performance to date in mains replacement and expectations in completing this work (for some parts of the networks as soon as 2022). It provides a strong overview of the readiness of our major networks for blended and 100% hydrogen. Delivery of these replacement programs can be easily accelerated if required to support any target set by the Victorian Government.

Table 1: AGIG (sub or regional) distribution networks with no cast iron or uncoated steel mains – Vic Outer Melbourne

Victoria – Outer Melbourne

Epping Berwick Mornington Peninsula and towns

Healesville Clyde Narre Warren

Mernda Cranbourne Officer

Whittlesea Hampton Park Pakenham

Donnybrook Lyndhurst

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Table 2: AGIG (sub or regional) distribution networks with no cast iron or uncoated steel mains – Vic Regional

Victoria – Regional

Bairnsdale Kyabram Tatura

Benalla Longwarry Tongala

Beveridge Maffra Trafalgar

Broadford Merrigum Traralgon

Chiltern Mildura Wallan

Churchill Moe Wandong Heathcote Junction

Cobram Morwell Wangaratta

Darnum Rosedale Wangaratta East

Drouin Rutherglen Warragul

Echuca Sale Wodonga

Euroa Seymour Yarragon

Kilmore Shepparton Yarrawonga

Koonoomoo Tallarook

Table 3 Mains replacement progress in AGIG regulated distribution networks

Low-pressure Low- mains to be pressure % Anticipated Starting Network replaced at start mains replaced completion Year of programme replaced to to date year (km) date (km)

Australian Gas Networks – 2011 1,149 916 80% 2022 Melbourne and inner suburbs

Multinet Gas Network - 2003 3,196 1,319 41% 2033 Melbourne inner eastern suburbs

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5. What are the skills and training requirements needed to grow Victoria’s hydrogen industry? The existing plumbing and gas-fitting workforce is skilled in working with natural gas. While additional training will be required to expand their skillset to include hydrogen, this will not require a significant retraining exercise. It is more likely to require additional competences to be built progressively into training requirements, and practical requirements for networks. We are considering the potential to include training in the scope of the Australian Hydrogen Centre. Workforce competence will also be considered in detail in the risk-based safety assessments for hydrogen production and blending conducted by state-based regulators. The widespread adoption of fuel cells is one area that will require a new mix of skills in the workforce to address the complexity of these unfamiliar appliances.

6. What are the challenges to developing a hydrogen economy in Victoria? The first order challenge to realise the benefits of hydrogen production for Australia is to reduce the cost of hydrogen production. The commercialisation, development and expansion of hydrogen supply chains, and the establishment of markets, depends on government, industry and other stakeholders addressing this challenge collectively. Victoria has significant and recent experience in supporting this type of transition in the deployment of renewable electricity technologies including solar and wind. Many lessons can be taken from this experience; non-hydro renewable electricity generation increased from 2.6% in 2008-09 to over 17% of power output in CY2018.8 At a high level the rapid increase was underpinned by two key types of policy measures: - direct grants and investment by government including through the Australian Renewable Energy Agency (ARENA), Clean Energy Finance Corporation (CEFC) and various state government programmes including feed-in-tariffs; and - demand incentives including the Victorian Renewable Energy Target and Commonwealth Renewable Energy Target. These measures enabled investment in Victoria by reducing the risks associated with the novel application of well-established technologies, working in parallel with cost reductions in the technologies themselves. The same types of policy settings will help instigate a hydrogen economy for Victoria. In addition to the fundamental importance of these types of incentives, there are a range of other barriers to overcome. The National Hydrogen Strategy recognised that the basic research and development required for hydrogen production is largely complete. Furthermore, work to address many of the technical, regulatory and behavioural barriers identified is underway as part of coordinated efforts across industry, government, research organisations and energy consumers. These include directly through the National Hydrogen Strategy, as well as through other organisations including the FFCRC and the AHC. Green hydrogen, like other technologies, faces a number of barriers to commercialisation which present risks for investors. Support from government can help reduce these risks, which are particularly prominent in establishing new sources of energy and complicated supply chains. Government support is warranted because of the potential benefits for Australia both in terms of a

8 Department of the Environment and Energy, Australian Energy Statistics, Table O Electricity generation by fuel type 2017-18, https://www.energy.gov.au/publications/australian-energy-statistics-table-o-electricity-generation- fuel-type-2017-18-and-2018

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lower cost transition to low and net-zero carbon emissions, and the potential economic benefits of hydrogen exports. As noted above in response to question 2, a blending target represents an important means for Victoria to maximise its competitive advantages in renewable electricity production and existing gas infrastructure to lead Australia in the production of hydrogen. A blending target would help secure demand for hydrogen at the lowest cost. Furthermore, Government itself can play a major role in securing demand for hydrogen. Major Government users of energy including hospitals, schools and departments and other agencies, could be required to procure hydrogen in place of natural gas. This quantity of green hydrogen would be injected into the gas network to offset the actual energy used in government operations, operating in much the same way as the existing solar trams program.9 This would be an affordable and technically feasible mechanism for increasing hydrogen production in Victoria and capturing the long-term opportunities.

7. Who are the critical stakeholders needed to support a Victorian hydrogen economy? We believe a broad coalition of stakeholders are needed to support the Victorian hydrogen economy. These include but are not limited to: - customers (residential, commercial and industrial users of natural gas, hydrogen); - state and federal government (including central Departments and regulatory agencies including Energy Safe Victoria, the Victorian Essential Services Commission, the Australian Energy Regulator); - the broader community (particularly around safety issues); - gas network owners and operators; - appliance manufacturers; - electrolyser manufacturers; and - energy retailers.

8. What does a supportive regulatory environment for a sustainable hydrogen industry look like? As noted above, many of the challenges of developing a sustainable green hydrogen industry in Australia are similar to those faced in the last decade by the renewable electricity industry. We believe appropriate incentives for the deployment of hydrogen electrolysers are crucial to rapidly lower costs and secure the significant benefits from domestic and export use. A Renewable Gas Blending Target should be a key part of the suite of policies in support of demand for green hydrogen. This target could form a Sector Pledge under the CCA and would require blending of hydrogen (or other carbon-neutral gases) into gas distribution networks up to the equivalent of say 10% hydrogen by no later than 2030. The target would mirror the Commonwealth Renewable Energy Target by requiring retailers to source a growing proportion of hydrogen and renewable gases for the gas they sell. As part of the target, we also propose that gas networks be required to offset completely the unaccounted for gas (UAFG) from distribution networks with renewable gases blended into the network by 2025. Our analysis suggests that a Renewable Gas Blending Target is both achievable and affordable - adding less than 1% to the cost of gas delivered to customers. Nonetheless, mechanisms to minimise the costs for gas consumers and support for trade-exposed industries should be a key part of policy development.

9 See https://www2.delwp.vic.gov.au/media-centre/media-releases/on-board-with-solar-trams

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In addition to direct incentives for hydrogen production and blending, a range of other regulatory reforms will be needed. These include minor reforms to gas and pipeline regulations (the Gas Act 2005) and more detailed consideration of the treatment of green hydrogen for energy retail and distribution under National Gas Law (which applies in Victoria through the National Gas (Victoria) Act 2008). Reform of each of these Acts, and others, will require a measured approach that ensures consumer interests and safety remain protected, while also ensuring there is sufficient flexibility to deploy new technology and develop new business models for green hydrogen.

9. Are there barriers to achieving a social licence for hydrogen to operate? What does the Victorian Government need to consider in addressing these? Both government and industry have important roles to play in addressing possible consumer concerns and building social acceptance for green hydrogen. Community engagement has been pivotal in developing AGIG’s renewable gas production facility, Hydrogen Park South Australia (HyP SA) in the Tonsley Innovation District in . HyP SA will deliver a 5% renewable gas blend to around 700 customers in the suburb of Mitchell Park (blendedgas.agn.com.au). In the early stages of project scoping, we developed a comprehensive community engagement program, designed to provide the community with as much information as required, in an easily accessible manner. This program considered work already completed by the University of Queensland10 and also took into account results of Focus Group testing conducted by AGN. We have begun engaging with the Mitchell Park community providing letters, brochures and access to webpages and fact sheets. We have also offered free appliance audits to gas customers. During project engagement we have sought to inform customers that they won’t see any change in their gas bills, the quality of gas they receive or to the high safety standards they expect. Following the initial letterbox drop, there was an article in the Adelaide Advertiser and we also placed an advertisement in the local paper. To date, the community response to our program has been in line with that of the Focus Group testing. That is generally a neutral to positive response, and a general appetite for efforts to reduce carbon emissions. Based on our experience at HyP SA it is clear that government and industry need to work together to assure the community that safety expectations are being addressed, while also addressing environmental, cost and reliability concerns in the community. Our Focus Group testing indicated that the community seeks independent (non-industry) validation that the pursuit of hydrogen is safe and in their best interests. Therefore, as standards and regulations are amended to better allow for hydrogen blending, and as project proposals are assessed by regulators, open and transparent engagement with the community for parties outside of industry will be essential to maintain trust.

10. What role can hydrogen play in Victoria’s energy system into the future? Are there limits to the role hydrogen can play in Victoria’s energy mix? Hydrogen can play a significant role in Victoria’s energy system into the future. As outlined above, these include in decarbonising existing uses of natural gas in buildings, transport particularly heavy haulage and in industry.

10 https://arena.gov.au/assets/2018/12/the-australian-publics-perception-of-hydrogen-for-energy.pdf

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The use of 100% hydrogen in household appliances is already achievable. At AGIG we have a number of hydrogen barbeques which are used at community events across the country. The challenge is that the appliances sold in Australia today are designed for use with natural gas, not with hydrogen or hydrogen blends. Research for the FFCRC suggests that appliances could work safely with blends of at least 10-20% hydrogen. In Australia, any Type A appliance sold in the market is already tested for 13% hydrogen as a limit. Consistent with this, the characteristics of small amounts of hydrogen blends with natural gas up to 10% are consistent within the limits outlined in AS 4564 – Specification for General Purpose Natural Gas.

11. What does the Victorian Government need to consider attracting investment in the hydrogen supply chain in Victoria? See responses to questions 2, 3 and 6 above. 12. What is the best way for the Victorian Government to support hydrogen R&D, pilot projects and demonstrations? Are there any we should prioritise? The feasibility studies to be conducted by the AHC will be a key precursor to understanding the specific pilot projects and demonstrations that should be prioritised. These will necessarily balance the potential for low-cost renewable electricity production, with the potential for green hydrogen to be deployed within gas networks.

13. What possible uses for hydrogen offer greatest benefit to Victoria? See response to question 1 above.

14. What is the level of hydrogen transport infrastructure needed in Victoria and where are the priority areas for infrastructure and Victorian Government policy (e.g. procurement)? International examples are growing of public transport as a driver of uptake for hydrogen fuelled transport (these include examples of hydrogen buses11 and trains12 already in use). Passenger vehicles are already available albeit with limited refuelling opportunities.13 As with electric vehicles the widespread adoption of hydrogen will require additional refuelling infrastructure which is often subject to market failures as technology is refined, costs reduced and consumer adoption accelerates. Government has a role to play in supporting the deployment of refuelling infrastructure. To maximise spill-over benefits and efficiency, hydrogen production could be co-located for blending into networks, refuelling light and heavy vehicles, and tube / trailer for use away from major gas networks. AGIG is actively considering these applications for its HyP SA project. Co-location and and maximising the uses of the network, can also reduce the overall costs of the transition. Government should also consider the procurement of hydrogen vehicles as part of its fleet in particular for public transport. As the examples above demonstrate, technology already exists and government can lead the way in creating demand.

11 See http://www.rfi.fr/en/science-technology/20191218-france-unveils-hydrogen-bus-fleet-no-carbon-pollution-macron-strikes- pen 12 See https://www.theguardian.com/environment/2018/sep/17/germany-launches-worlds-first-hydrogen-powered-train 13 See https://www.toyota.com.au/news/toyota-australia-extends-hydrogen-mirai-fcev-loan-program

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15. What are the considerations for business and consumers in purchasing a new type of vehicle, such as hydrogen or battery electric vehicle? There are several issues to consider including cost, reliability, range, and convenience (e.g. ease of refuelling). As noted above, there are a range of market failures in the deployment of battery electric and fuel cell electric vehicles which warrant government support in the early stages.

16. Other than cost and technology barriers, what factors help current and potential users of hydrogen in commercial and industrial settings decide how to procure hydrogen? How could the Victorian Government assist commercial and industrial businesses switch to green hydrogen for chemical feedstock and/or heating? Industrial facilities are usually underpinned by large capital investments directly associated with their energy consumption. This can make existing technologies difficult and costly to replace depending on the precise use natural gas or other energy sources today. As with vehicles some existing commercial uses of natural gas could be replaced by new appliances compatible with 100% hydrogen today. Other uses, those with the highest cost of abatement, will require further research and development to develop viable solutions. In most of these cases green hydrogen is recognised as a viable pathway to decarbonisation as highlighted in the CSIRO Hydrogen Roadmap.14 Given the scale of these industries in Victoria, Australia and globally, they represent a significant opportunity for first-movers in deploying green hydrogen technology. The potential for Australia has most recently been outlined by Professor Ross Garnaut noting Australia’s potential to becoming a zero emissions manufacturer of iron and aluminium (not just a producer of their respective raw materials).15 Therefore, the potential benefits of deploying hydrogen in gas networks today are significantly greater than those anticipated from domestic use alone. Certification schemes are one means government can use to help businesses that want to reduce their emissions. Certifying the production and injection of green hydrogen into the gas network, would give commercial and industrial users (and government users) the confidence that they are purchasing green hydrogen and that emission reductions are actually achieved. Such a scheme would provide the backbone for the widespread procurement of green hydrogen by those users who want to lead in reducing emissions. The Victorian Government should coordinate efforts to develop a certification scheme with other states and the Commonwealth as outlined in the National Hydrogen Strategy.

14 See https://www.csiro.au/en/Do-business/Futures/Reports/Hydrogen-Roadmap 15 https://theconversation.com/australia-could-fall-apart-under-climate-change-but-theres-a-way-to-avoid-it-126341

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