Extending the national gas regulatory framework to hydrogen blends and renewable gases

On 28 October 2022, Energy Ministers agreed to amendments to the National Gas Law and Regulations to bring hydrogen blends, biomethane and other renewable gases under the national gas regulatory framework.

Energy Ministers also released a policy paper (DOCX 457 KB) (PDF 583 KB), which provides an overview of the final reforms and includes several case studies that explain how the regulatory framework would apply to different renewable gas project types.

This agreement comes after two rounds of public consultation, and has been developed in collaboration with the Australian Energy Market Commission (AEMC), Australian Energy Market Operator (AEMO), Australian Energy Regulator and the Western Australian Economic Regulation Authority (ERA).

The reforms provide regulatory certainty to support investment in innovative projects that will reduce emissions in our gas networks. The reforms will also ensure existing regulatory provisions and consumer protections will work as intended when hydrogen and renewable gases are incorporated into the gas network.

What has changed?

Previously, the National Gas Law (NGL) and the National Energy Retail Law (NERL) referred only to ‘natural gas’. With projects underway to introduce hydrogen and biomethane into gas networks, this terminology has been updated to provide regulatory certainty to the emerging industry.

The NGL will now refer to ‘covered gases’. From the outset of the reforms, the list of covered gases will include:

• natural gas
• hydrogen
• biomethane
• synthetic methane
• blends of these gases.

The NERL will now refer to ‘natural gas equivalents’ (NGEs) and ‘prescribed covered gases’ (PCGs). Natural gas equivalents are gases that can be used in gas appliances, such as natural gas, biomethane, synthetic methane and low-level blends of hydrogen with these gases. Jurisdictions will be able to authorise projects supplying NGEs from the commencement of the reforms.

PCGs are gases that may require changes to networks or appliances before they can be supplied, such as 100% hydrogen. Before these gases can be supplied, a focused review is needed to understand how specific regulatory elements should be applied. Jurisdictions will be able to bring PCGs under the NERL through a National Energy Retail Regulation.

Reform process

The National Hydrogen Strategy noted that before widespread blending of hydrogen in gas networks could occur, a review of a range of technical, economic, regulatory and legal matters was required, including how the natural gas regulatory framework would apply to hydrogen blends.

On 20 August 2021, Energy Ministers agreed that the national gas regulatory framework should be extended to hydrogen and renewable gases to ensure regulatory barriers would not restrict proposed investments in projects, and existing regulatory arrangements and protections continue to work as intended where renewable gases are supplied.

Under the expedited approach, Ministers tasked:

1. Jurisdictional officials (Officials) to lead work to identify and develop amendments to the NGL, the NERL and Regulations.
2. The Australian Energy Market Commission (AEMC) to lead work to identify and develop amendments to the National Gas Rules (NGR) and the National Energy Retail Rules (NERR). Further details on the AEMC’s process can be found on their website.
3. The Australian Energy Market Operator (AEMO) to lead work to amend the Procedures and other AEMO-made instruments required for settlement and metering in the facilitated and regulated retail gas markets. Further details on AEMO’s process can be found on their website.

Consultation

Officials released an initial consultation paper on a proposed approach to amend the NGL, National Gas Regulations, NERL and National Energy Retail Regulations in October 2021.

Eighteen submissions were received directly, and another was received through the AEMC’s consultation process:

AGL Energy
APA
APGA
ATCO
AusNet Services
Australian Energy Council
Australian Gas Infrastructure Group
Australian Hydrogen Council
Bioenergy Australia
EnergyAustralia
Energy Networks Australia
ENGIE Australia & New Zealand (Document 1)
ENGIE Australia & New Zealand (Document 2)
Evoenergy
Fortescue Future Industries (AEMC’s website under ‘Documentation – Initiation’)
Gas Appliance Manufacturers Association of Australia
Jemena
Origin
Public Interest Advocacy Centre
Shell Energy

Considering feedback received through the initial consultation process, a consultation draft of the National Energy Laws Amendment (Other Gases) Bill 2022 and associated consultation paper were released in March 2022.

As part of this process, the AEMC advised on proposed changes to the NGL related to the Rules and the AER advised on proposed changes to the pipeline-related ring-fencing and associated contract arrangements.

To assist stakeholders in providing feedback, Officials prepared a Q&A document responding to questions asked by stakeholders during consultation.

Seventeen submissions were received:

AER
AGIG
Alinta Energy
APA
APGA
ATCO
AusNet
Beyond Gas Network
ENA
EUAA
Jemena
Origin Energy
Individual – Alan Pears
Individual – Jim Crosthwaite
Individual – John Godfrey
Individual – Lesley Walker
Individual – Michael Nolan

Stakeholder feedback was used to inform the development of the final policy and regulatory package.

Next steps

The AEMC will provide Energy Ministers with a proposed final rules package for agreement in November 2022.

By 2023: New measures intend to take effect subject to passage through the South Australian Parliament

Following passage of the reforms through the South Australian Parliament, AEMO will consult on proposed changes to the relevant procedures.