Welcome to the first in our new four-part series of net zero policy discussions. In each article we will look at a different topic that states and regions have discussed as part of the Net Zero Futures Policy Forum.
Every topic has previously been identified as important to subnational governments as part of their route to net zero emissions to help them understand the role they could have in future policy development.
About the Net Zero Futures Policy Forum
The Net Zero Futures Policy Forum has been uniting state and regional policymakers from Australia, Europe and South Africa for almost a year. Co-chaired by New South Wales and Scotland, it’s driving progress on emissions reduction across the world.
Sharing lessons and learning from one another is crucial to the work of the Under2 Coalition and it is great to see the Net Zero Futures Policy Forum deliver positive impacts for governments around the world.
Sharing lessons and learning from one another is crucial to the work of the Under2 Coalition and it is great to see the Net Zero Futures Policy Forum deliver positive impacts for governments around the world.
Through targeted learning groups, designed by Climate Group and the governments themselves, policy makers have been addressing some of the most topical and challenging climate subjects to learn from one another’s knowledge and experience.
In late 2023 the Forum launched a series of LEAD (Learn, Engage and Discuss) sessions, for deep dive discussions: the first topic of the series was “Green hydrogen – powering sustainable futures”. Governments shared the most up to date policy information on this complicated issue and explored how it might be rolled out in their individual regions. Read on to find out more.
Green hydrogen: connecting German and Australian states
Where electrification is not viable for decarbonisation, hydrogen can be an important energy carrier. Many subnational governments around the world are now putting policy frameworks in place and increasing investment to grow the sector.
The Energy Transitions Commission estimates that hydrogen could account for 15-20% of global final energy demand by 2050, particularly in the production of steel, ammonia, methanol, shipping and aviation. To be considered ‘green’, hydrogen’s production must switch from carbon-intensive processes - using natural gas - to production via electrolysis using renewable electricity. However, uptake will largely depend on decreases in end-to-end costs.
Members of the Forum selected green hydrogen as a topic of high priority for best practice sharing and policy alignment, demonstrating a growing demand for better understanding of how other countries are approaching the sector.
During the LEAD session, Richard Day, Director Industry Development, Office of Hydrogen Power from South Australia and Christian Scholz, Project Manager, Industry and Production from North Rhine Westphalia (NRW) presented their approaches. Both states are members of the Under2 Coalition’s steering group and have strong climate and decarbonisation targets in place. South Australia aims to become a global leader in the energy transition, and it is now on track to achieve 100% renewables by 2030.
Despite the challenges in scaling up green hydrogen (e.g. complex processes, capital intensive, reliant on government intervention and social licence from communities), the state will invest AUD$593 million in capital funding for a hydrogen-fuelled power plant in Whyalla. This will deliver 250MW electrolysers (devices capable of splitting water molecules into their constituent oxygen and hydrogen atoms), supporting long-duration storage for the electricity system and unlocking significant economic opportunities.
NRW is Germany’s industrial state, employing 1.3 million in the sector. Responsible for 51Mt CO2-eq emissions per year (6% of Germany’s total emissions), the region is highly committed to developing a climate neutral economy. Green hydrogen is increasingly seen as one of the main pillars to meet high demand for steel, chemicals, glass and cement. However, domestic hydrogen production will not be sufficient to cover NRW’s industry demands, with 75-90% of demand expected to be supplied by imports. NRW aims to become Germany’s hydrogen infrastructure centre, and this will generate huge green hydrogen demands between 2030 and 2045.
Expanding use of green hydrogen
A growing hydrogen economy will likely result in a reorientation of value chains, and this is something both New South Wales and NRW are planning for. There are regions with abundant clean electricity and feedstocks which have the potential to become “exporters of hydrogen-based chemicals and materials processed using low-carbon electricity and hydrogen” (IPCC, 2022).
Green hydrogen is also likely to become a globally traded commodity, with significant consequences for a number of state and regional governments that are investing in the sector at either the receiving or producing end. South Australia has sought to address some of these potential consequences in advance through its proposed South Australian Hydrogen and Renewable Energy Act 2023. This has been welcomed by the First Nations Clean Energy Network due to its emphasis put on maximising beneficial economic, environmental and social impacts while minimising adverse cultural and heritage impacts as part of a more just transition to new energy sources.
Common challenges have however emerged, especially when it comes to securing investment for green hydrogen projects. This is because hydrogen projects are typically:
- Complex, involving simultaneous deployment of production, distribution and new use technologies
- Capital intensive
- Not yet commercially viable, and so need government investment
Top trends and recommendations
This session led to some key recommendations for subnational governments around the use of green hydrogen:
- Regional governments looking to expand the sector should know the drivers for pursuing green hydrogen in their regions. For example, is the strategy about economic growth, grid stabilisation, industrial decarbonisation, new generation capacity, or something else?
- States and regions should take a clear policy position and provide a reliable, fixed framework to act as a common basis for discussion and investment decisions.
- Alignment with national policies is helpful as industry benefits from clear standards for green hydrogen production (for example the EU Hydrogen Strategy of 2020)
- Just transition approaches should be included early in every aspect of green hydrogen strategies, for example by mapping green hydrogen supply chains to understand the businesses and communities involved, building supply chain capability by including local sourcing requirements in tenders and identifying workforce needs over the medium to long term and planning to meet them.
- Supporting longer-term industry research and partnering with researchers and community groups to understand the dynamics of a ‘social licence’ for green hydrogen. For example, in NRW the public perceives green hydrogen quite positively, but underground storage of hydrogen is contentious.
- ‘Tech-first’ approaches are often hard. Timely government support, such as what South Australia has done with battery storage technologies, can help new technologies become bankable asset classes.
- A systems view can reduce the risks of ‘hydrogen hype.’ Green hydrogen has exciting potential but may not be the best solution for all decarbonisation problems. Robust policies put green hydrogen in context, using a systems lens to understand the role it could play (locally and globally) and the conditions required to support it.
Following the session, Scotland endorsed the Joint-Agreement on the Responsible Deployment of Renewables-Based Hydrogen agreed at COP28. This guide outlines key principles and standards around the development and deployment of hydrogen and outlines potential consequences for its widespread use. As policymakers continue to grapple with the clean energy challenge, this document will help to support governments find the solutions that are right for their regions and their communities economically, socially and culturally.
We will be publishing further articles in this series over the next two months. Keep checking the Climate Group website to explore issues including climate regulation and bold action from subnational governments.
