Policy and legislation

Guarantee of Origin for hydrogen and renewable electricity open for consultation

The Department of Climate Change, Energy, the Environment and Water (DCCEEW) (the Department) has commenced consultation on its proposed guarantee of origin (GO) scheme through the release of draft policy position papers for hydrogen and renewable electricity respectively. This reflects growing demand for certainty around the certification of hydrogen and renewable electricity (understanding that the Renewable Energy Target sunsets in 2030), via a ‘transparent, consistent, and trusted emissions accounting framework’, to support production, use and export of these products.

This consultation, particularly for a hydrogen GO, builds on the work done by the Department over the last two years, including the development of the scheme’s framework, stakeholder engagement and drafting of emissions accounting methodologies for hydrogen production, which Energetics has supported.

A voluntary framework to be administered by the CER

DCCEEW’s proposed GO scheme will be a voluntary product-based greenhouse gas (GHG) accounting framework, initially including hydrogen, hydrogen energy carriers (such as ammonia), and renewable electricity. Over time, it could be expanded to include other relevant products such as biofuels or metals. The scheme is designed to ensure domestic producers can credibly account for the emissions associated with their products and provide consumers (both domestic and international) with certainty around the GHG credentials of their purchased goods.

The scheme is proposed to be administered by the Clean Energy Regulator (CER), complementing the CER’s existing remit, including the National Greenhouse and Energy Reporting (NGER) scheme. DCCEEW is targeting legislation of the scheme by 2024.

Aiming for consistency and comparability with international developments

Consistent with the Australian government’s original position for its scheme to align with international developments, the government plans to continue engaging and leading discussions within the International Partnerships for Hydrogen and Fuel Cells in the Economy (IPHE) in pursuit of a global hydrogen GO framework.

DCCEEW’s proposed GO scheme features a strong degree of alignment with IPHE’s working papers with respect to emissions accounting methodologies for hydrogen and hydrogen carriers[1].  However, there are a number of areas where the Department has stated its firm position, including:

• an expanded emissions accounting boundary to include storage and transport of hydrogen

• ruling out the use of third-party sourced offsets

• avoiding the need for producers to synchronise their production with renewable energy generation supply for their electrolysis process

• setting a materiality threshold of 2.5% of total emissions per source.

Broader scheme design builds on existing domestic certification

DCCEEW’s consultation papers outline key design elements for the GO scheme. The scheme will create two types of GO certificates:

• Renewable Electricity GOs (REGOs) linked to renewable electricity production (and equivalent to the existing Large-scale generation certificates (LGCs))

• Product GOs created under the product-based emissions accounting framework.

The GOs will be ‘housed on a public register with general information’. The GO creation process will include collection and validation by the CER of ‘profile’ and ‘batch’ specific data, with batches ranging from a single hour period up to a maximum of 12 months. The process also includes ongoing compliance monitoring by the CER, along with proposed ‘Limited Scope Technical Reviews’ (LSTRs) rather than limited assurance audits.

Tracking of renewable electricity inputs

DCCEEW’s proposed scheme is designed to support ‘interoperability’ across the GOs. For example, REGOs will be used to track renewable electricity inputs into hydrogen production via electrolysis covered by Product GOs. A market-based approach is to be adopted, with standard residual mix factors (RMF) to be produced by the National Greenhouse Accounts (NGA) to support standardisation across this and other frameworks such as Climate Active. While the European Union is considering requirements for quarterly balancing (both spatially and temporally) of renewable electricity production and consumption claims in the context of hydrogen production, the domestic GO scheme proposes no such requirement, though a 12-month vintage is proposed covering LGCs and REGOs surrendered against a product GO.

Next steps

DCCEEW’s policy position papers, particular with respect to a hydrogen GO, reinforce the government’s intentions to implement a rigorous, yet robust GO scheme, which will evolve over time to ensure ongoing alignment with international developments.

The government’s consultation closes on 3 February 2023.