28 Oct 2021

The hydrogen revolution: Federal Government offering grants to establish Regional Hydrogen Hubs

By STUART MACGREGOR, TRISTAN APPLEBY AND ERIC JEFFERY

Applications for grants under the "Activating a Regional Hydrogen Industry – Clean Hydrogen Industrial Hubs Program" can be made until 5:00pm AEDT on 22 November 2021.

Aimed at supporting the development of clean hydrogen hubs across regional Australia, the Australian Government's "Activating a Regional Hydrogen Industry – Clean Hydrogen Industrial Hubs Program" is now open, offering grants of up to $70 million to approved clean hydrogen hub projects.

Grant opportunities

There are two offerings under the scheme:

Funding to develop and advance a hydrogen hub concept

What's on offer?

The Australian Government will provide matched grant funding from $500,000 up to $3 million to support project proponents to develop and advance clean hydrogen hub concepts to investment ready proposals.

What kind of projects?

This grant is aimed at supporting Hydrogen Hub Projects which are still in the "conceptual" phase. Previous experience with similar grant programs suggests to us that the proponent would need to demonstrate they have a concept or plan which could feasibly be advanced to "investment ready" status with grant assistance. 

Funding to establish a hydrogen hub in regional Australia

What's the offer?

The Australian Government will provide matched grant funding from $30 million up to $70 million.

What kind of projects?

This grant is aimed at Clean Hydrogen Projects which are "investment ready". Our previous experience in dealing with similar grant programs suggests to us that projects which are closer to "shovel ready" than "investment ready" will tend to be preferred when offering grant schemes. 

What are "Hydrogen Hubs"?

First devised under the Australian Government's "Australia's National Hydrogen Strategy", the term "Hydrogen Hub" denotes a special industrial precinct which aggregates various users of hydrogen into one area. These hubs are seen as crucial to the hydrogen strategy (and net-zero by 2050 commitment) and are likely to attract ongoing support and investment from both the market and governments alike, given they ultimately decrease the cost per kilogram of hydrogen by:

  • creating central locales of hydrogen demand, thereby decreasing aggregate transport costs, especially where placed near existing port, rail and road infrastructure.
  • centralising hydrogen supply infrastructure, thereby decreasing development, infrastructure and maintenance costs.

While the Australian Government has encouraged applications from around Australia, it has identified seven "priority" prospective hub regions, suggesting that applications for hubs in these regions will be assessed more favourably:

  • Bell Bay (TAS);
  • Pilbara (WA);
  • Gladstone (QLD);
  • La Trobe Valley (VIC);
  • Eyre Peninsula (SA);
  • Hunter Valley (NSW); and
  • Darwin (NT).

A number of these target regions overlap designated 'renewable energy zones', including in Victoria, New South Wales and Queensland, earmarked for a range of government-led projects.

The assessment criteria

Grant applications must first meet eligibility, project requirement and knowledge sharing thresholds before being assessed against four key criteria.

Eligibility

  • The application must be a joint application with one or more project partners (noting there is a clear preference for multiple project partners joined to one application).
  • The application must identify a Lead Applicant who will be responsible for managing and steering the project.
  • All applicants must be incorporated in Australia or be an Australian State/Territory Government agency or body. All applicants must have an ABN and may not include individuals, sole traders, partnerships or unincorporated association.

Project requirements

  • The project must have board level support and include a certification of such support.
  • The applicants must certify they can meet the project costs which are not covered by grant funding.

Knowledge sharing

The applicant must agree to publicly share knowledge and information about, and resulting from, the project. Information that would be particularly attractive from the Department's perspective would be that which may meaningfully contribute to the Australian Renewable Energy Agency's "Knowledge Bank, including non-proprietary green hydrogen production techniques, operational data, or insights obtained from operating green hydrogen infrastructure.

Assessment Criteria – Funding to develop and advance a hydrogen hub concept

Additional grant objectives

Applicants are encouraged to address the objectives of the "Hydrogen Hubs – Development and Design" Grants. Applications should be drafted in view of these objectives and make consistent reference throughout:

  • Advancing the planning for construction of a variety of hydrogen hubs across Australia, clearly intending to stimulate demand for, and facilitate production of, clean hydrogen for domestic and export markets.
  • Demonstrate and/or develop feasibility of hydrogen hub proposals – likely by focusing on design methods which may be easily transferrable to multiple hydrogen hub applications.
  • Demonstrate value of regional hydrogen hubs including commercial, knowledge and employment value – and likely how the applicant's project will contribute to the furtherance of such.

Criterion 1 – Alignment with grant program objectives (25%)

The application must consider how the Development and Design project aligns with the grant program. A strong applicant would likely consider the above objectives in responding to this criteria.

Criterion 2 – Advancement to "investment ready" status (30%)

The applicant should demonstrate clear plans to advance the Clean Hydrogen Industrial Hub to "investment-ready" status. Attachment of supporting materials such as a feasibility study and financial strategy may strengthen the application as it may demonstrate a worked-strategy to furthering the project.

Criterion 3 – Applicant capability (30%)

The capacity, capability and resources of the applicant must be addressed. Applicants should address their sufficient expertise, financial backing and industry connections to undertake development and feasibility activities and to ultimately deliver a hydrogen hub.

Criteria 4 – Impact of grant funding (15%)

The applicant must address the impact that grant funding may have on the project. Applicants who demonstrate that the project is feasible and comfortably within the design and/or development phase but who could further advance, develop or refine their project with grant funding are likely to be treated favourably. 

Assessment criteria – Funding to establish a hydrogen hub in regional Australia

Criterion 1 – Regional Development (30%)

The application must address the degree to which the project will facilitate the development of a regional industrial hub. Furthermore, the application should consider the extent that the project will aid in the development of an export and domestic clean hydrogen industry.

Criterion 2 – Use of existing infrastructure (20%)

Applications must address the use (and support of) existing infrastructure and industry capability. Central to this criteria is the degree to which the project will leverage these existing capabilities to contribute to their long-term viability in a clean hydrogen industry.

Criterion 3 – Applicant capability (30%)

The capacity, capability and resources of the applicant must be addressed. Applicants should demonstrate they have the sufficient expertise, financial backing and industry connections to effectively establish a hydrogen hub.

Criterion 4 – Impact of grant funding (20%)

The applicant must address the impact that grant funding may have on the project. In previous analogous matched-funding grant applications, applicants who demonstrated that the project had investor support but who could further advance, develop or refine their project with grant funding were treated favourably. 

Australia's revenue underwriting and alternative finance ecosystem

In the Australian market, this scheme for part of a growing number of alternative finance and underwriting opportunities is designed to complement and operate in conjunction with traditional project offtake and debt markets to support a stable, orderly and urgent increase in renewable energy and clean hydrogen as part of Australia's energy mix.

The Australian Government also offers early-stage and project finance opportunities to renewable project developers through the Clean Energy Finance Corporation (CEFC), the Australian Renewable Energy Agency (ARENA), and the Northern Australia Infrastructure Facility (NAIF).

How do I apply?

Applications can be made in the form of an online application via the business.gov.au website until 5:00pm AEDT on 22 November 2021.

Please contact us to discuss your proposed application and what a grant under this scheme could mean for your hydrogen project.

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Clayton Utz communications are intended to provide commentary and general information. They should not be relied upon as legal advice. Formal legal advice should be sought in particular transactions or on matters of interest arising from this communication. Persons listed may not be admitted in all States and Territories.