Transporting hydrogen via existing gas pipelines potentially a step closer

Significant progress in National Gas Regulatory Reform 7 min read

Since our last update on 18 October 2021, significant progress has been made in the ongoing review of the National Gas Regulatory Framework. The latest proposed amendments open the door for renewable generated gases to be transported and sold using existing pipeline infrastructure, by ensuring that existing regulatory arrangements and consumer protections continue to operate where these renewable gases are used. This is a natural next step in laying the foundations to expand hydrogen production and transportation in Australia. States and territories will need to follow this lead and implement the proposed regulatory framework, ensuring the products can start to be transported via pipelines.

The review considers the amendments to the National Gas Law (NGL), National Energy Retail Law (NERL), and related rules, regulations and market procedures which would be necessary to accommodate the introduction of hydrogen, biomethane, synthetic methane and gas blends into the national gas pipeline network.

The proposed changes recognise the opportunity that exists for green hydrogen and other renewable generated gases in the existing gas pipeline network. They are an important step for Australia's National Hydrogen Strategy and net zero commitments, as they lay the regulatory foundation for hydrogen and other renewable generated gases to be supplied using existing gas pipeline infrastructure, thereby increasing their viability as a utility-scale energy source. The proposed amendments are also in line with broader trends that we are seeing nationally to facilitate the development of a hydrogen industry, including efforts by the Victorian Government to decarbonise its gas infrastructure to meet net zero targets by 2050.

With several hydrogen trials and projects across the country announced, these reforms are a timely way of ensuring that the regulatory framework facilitates investment in this developing industry during its large-scale market activation phase.

Key takeaways 

The proposed amendments to the National Gas Regulatory Framework will enable:

• biomethane, synthetic methane, hydrogen and gas blends to be treated in largely the same way as natural gas;
• the introduction of blend processing facilities to the gas network, ensuring market participants have fair and equal access to these facilities by subjecting them to a light-handed access regime and ring-fencing provisions;
• the near-term sale and supply of natural gas equivalents (which are safe for use in current natural gas appliances) through the existing gas network by extending the application of the NERL to these gases;
• National Gas Regulations, National Energy Market Regulations, and associated market procedures to accommodate the proposed changes to the NGL and NERL and ensure transparency in the future market for transport and sale of renewable gases; and
• the introduction of 'covered gases' into the short term trading market.

Review timeline and key documents

Proposed changes to the NGL and NERL

The Officials' Consultation Paper and draft Bill proposes expanding the application of the NGL to cover biomethane, synthetic methane and hydrogen, as well as natural gas and blends of these gases. This would be achieved by replacing the term 'natural gas' with the broader 'covered gas' throughout the NGL, thereby expanding all parts of the NGL. As a result, the pipeline access regime and ring fencing provisions in the NGL will be expanded to cover all pipelines involved in the transportation of a covered gas.

A 'light handed' blending services access regime is also proposed, which would require blend processing service providers to publish certain access-related information (including relevant prices, costs and methodologies associated with gaining access to and using a blend processing facility), negotiate in good faith with prospective users, not hinder access to their facility, and comply with similar ring-fencing provisions to those currently governing pipelines.

The proposed changes to the NERL also seek to expand its scope to govern the supply and sale of a wider range of gases. However, unlike the NGL, the proposed NERL amendments distinguish between natural gas and natural gas equivalents (NGEs), and other covered gases. The sale and supply of natural gas and NGEs will automatically be subject to the consumer protection and retailer authorisation arrangements in the NERL, while other covered gases must be designated as a 'prescribed covered gas' in the NERR before the NERL applies. This proposed differential treatment recognises that organisational and technical capacity to supply these products may differ.

Proposed changes to the NGR and NERR

The proposed changes to the NGR and NERR aim to increase market transparency – by making information about pipelines that may transport hydrogen publicly available  - and facilitate the introduction of covered gases into existing infrastructure and market arrangements.

The key transparency measures include the introduction of obligations on service providers to publish the type of gas a pipeline is licensed to transport, any limits on blending that apply to the pipeline, and details of any proposed trial of or transition to transporting another gas in the pipeline. The AEMC's draft report also proposes extending the non-pipeline infrastructure access reporting obligations to blend processing facilities, and extending the Gas Bulletin Board and Gas Statement of Opportunities to the broader covered gases. These increased transparency measures aim to reduce the likelihood of material information gaps occurring, and facilitate third party access to pipeline and blend processing facilities.

The AEMC's draft report also proposes amendments to the Short Term Trading Market (STTM) and regulated retail markets to expand their application to broader covered gases. These include a proposed streamlining of the STTM to introduce a single injection facility category in the NGR, covering production, storage and blend processing facilities.

Proposed changes to market procedures

The AEMC report sets out changes required to the STTM and regulated retail market procedures if the proposed changes to the NGL and NGR take effect. These changes largely seek to ensure that existing arrangements in the procedures are extended to covered gases and facilities or participants operating at facilities that inject into distribution systems.

Key dates in the reform process

Actions you can take now

• The Federal Government is currently seeking feedback from industry and other stakeholders on the Officials' Consultation Paper and draft Bill. The deadline for submissions is 5pm on 19 May 2022. Interested stakeholders should review these documents and consider any operational issues which your organisation may face as a result of the proposed reforms. To view these documents and provide submissions, please visit the gov.au website.
• The AEMC and AEMO are currently seeking feedback on their respective draft reports. Interested stakeholders should review these reports and consider any operational issues your organisation may face due to the proposed reforms. The deadline for submitting both reports is 5pm on 19 May 2022. Submissions can be made via the AEMC and AEMO.
• Potential investors in, and developers of, gas pipelines and renewable generated gas projects should consider how these reforms would impact their potential investments or projects.