The Australian government has today opened its A$2bn ($1.28bn) Hydrogen Headstart subsidy programme, inviting developers to register their expressions of interest (EOI) as the first page of a two-stage application process.

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Only those applicants deemed to have the highest merits, under a ranking system, at this EOI stage will be invited to submit a full application for hydrogen production credits (HPCs), which will take the form of quarterly grants for a period of ten years, starting in 2027.

There is no set rate for the HPC — developers must nominate their own HPC value, which “should represent the difference between the expected sales price to each offtaker and the applicant cost of production (inclusive of a justifiable return on capital”, according to a consultation paper published in June.

As Hydrogen Headstart is intended to fund large-scale green hydrogen projects, “it is expected that at least two projects will be supported under the program”, according to an FAQ (frequently asked questions) document released today.

Australia explicitly states that there will be no additionality, or temporal/geographic correlation requirements (see panel below) for the production of green hydrogen under this scheme, which means that any exports to the EU would not be eligible for subsidies in future import auctions or count towards the transport and industrial use mandates that were yesterday signed off by EU ministers.

Each application’s merits will be assessed by the Australian Renewable Energy Agency according to five criteria:

  • Alignment to Competitive Round Objectives, including cost competitiveness and the potential of projects to lead to further decarbonisation
  • Capability and capacity, including the experience and expertise of applicants
  • Scope, methodology, deliverability and risk
  • Financial capability
  • Knowledge sharing, including “the extent to which the knowledge generated supports the development of new markets and supply chains”.

Developers must post their applications online under the EOI stage by 10 November, including a project plan, financial model, project budget and agreements with offtakers.

Climate change and energy minister Chris Bowen described Hydrogen Headstart as “the largest government investment in Australia’s developing hydrogen industry”.

“Hydrogen Headstart will move the dial on the technical and commercial viability of renewable hydrogen production in Australia,” he said.

For more details on the scheme and the application process, click here.

Additionality, time-matching and geographic correlation

“Additionality” means that the green hydrogen would have to produced from new renewables projects, so that they do not utilise existing clean electricity facilities that would otherwise help decarbonise the power grid.

“Time-matching", or "temporal correlation”, relates to how frequently producers would have to prove that their electrolysers have been powered by 100% renewable energy — usually hourly, weekly, monthly or annually — and therefore to what extent they can use grid electricity at times when the wind isn't blowing and the sun isn't shining, and then send the same anount of renewable energy back to the grid at a later date.

"Geographic correlation" refers to how close the hydrogen-producing electrolyser is to the source of renewable energy it uses. Distances can be set to ensure that an electrolyser in, say, Texas, is not powered by solar panels in California through renewable energy credits, which in practice could mean that green power is sent to a grid that doesn't need it, with the electricity actually used by the electrolyser coming from fossil-fuel power plants.

All three rules would prevent fossil-powered grid electricity being used directly or indirectly to produce "green hydrogen".