Five key takeaways from the New Zealand Hydrogen Conference

Recently, our team was at Hydrogen New Zealand's H₂ 2 Zero Summit, which brought together Government, industry and international partners. Below, we outline some of our key takeaways from the Conference.

1. A light touch approach from Government

The Government has hydrogen on its radar but is taking a light touch approach, encouraging rather than intervening. Minister for Energy, Hon Simon Watts opened the conference making the following points:

• promoting the existing Hydrogen Roadmap and Action Plan which outlines a broad direction of travel for the sector;
• reaffirming the need to reduce consenting barriers to speed up project development timelines;
• advocating for the Hydrogen Industry Leadership Group to act as a conduit between Government and industry;
• announcing a strengthening of the Emissions Trading Scheme to make low emissions fuels more competitive;
• announcing a forthcoming consultation on "natural" and "orange" hydrogen; and
• announcing updates to the Low Emissions Transport Fund to expand the fund’s eligibility criteria.

In addition, the Government signalled that its recently announced Investment Boost policy (which we discuss further here) could assist in the feasibility of developing new hydrogen infrastructure. 

Despite these announcements, the message was clear: the Government sees promise in hydrogen, but it expects the private sector to lead. That said, the capital requirements for hydrogen infrastructure are significant and project payback periods can be long. Some investors noted that they would be looking to the Government for further support and regulatory certainty.

2. NZ positioned for leadership in green hydrogen 

Momentum is building behind the global hydrogen economy and New Zealand has been recognised as being well placed as a future producer and exporter of “green” hydrogen. With high levels of renewable energy and the potential for even more, New Zealand has the ingredients to become a competitive supplier of low-carbon hydrogen to international markets like Japan and Singapore.

There is also emerging interest in New Zealand's naturally occurring underground "natural" and "orange" hydrogen. While still in its early stages, the Government will be exploring options to enable natural and orange hydrogen development through a consultation process on the regulatory treatment of hydrogen. Specifically, the Government is seeking feedback on whether hydrogen should be regulated as a mineral or a non-mineral natural resource under the Crown Minerals Act 1991.   

3. Carbon credentials matter 

If New Zealand wants to position itself in the green hydrogen market, carbon certification is essential. A recurring topic across the Conference was the importance of robust, transparent and verifiable data on carbon emission intensity. As hydrogen produced (or combined) from sources that have different carbon emission intensities are indistinguishable, buyers will want assurance that hydrogen labelled "green" meets defined carbon thresholds. New Zealand is in the early stages of developing a certification regime, with the Hydrogen Industry Leadership Group requesting that the Government provide support in developing a New Zealand Hydrogen Certification Pilot.¹ The robustness of this regime will be important in the context of accessing international markets for green hydrogen.

4. Scaling hydrogen requires scaling generation

Hydrogen doesn’t just need policy and an offtake market; it needs power. While hydrogen is chemically the same regardless of how it is made, it is categorised by its production method. "Green" hydrogen is produced by splitting water (H₂O) into hydrogen and oxygen through electrolysis using renewable energy (See our article on green hydrogen from 2022 here).

Therefore, the reality is that large scale hydrogen production would place significant new demand on the electricity system. Scaling hydrogen production, therefore, requires a scaling of our energy systems. Participants at the Conference, therefore, stressed that hydrogen development cannot be decoupled from broader energy planning. Any significant increase in hydrogen production will necessarily require energy production and a broader energy system to support it. 

5. Strong international demand 

There is significant offshore interest in New Zealand both as a market to test hydrogen technologies and as a market to export from. Delegates from Japan and the European Union spoke to the growing demand for clean hydrogen and the appeal of New Zealand as a stable, renewable-rich and geo-politically trusted supplier. There is a real appetite for certified green hydrogen, particularly from markets that cannot generate enough for themselves.  

However, interest alone does not translate into investment. International players are looking for confidence, not just in the resource itself, but in policy and the regulatory environment. Several observations emerged from international stakeholders at the Conference:

• Regulatory clarity: At present, the production and transportation of hydrogen is governed by a patchwork of legislation and regulatory bodies. Certain investors noted that without a unified framework that addresses hydrogen-specific activities it is time intensive and difficult to navigate the various requirements.
• A hydrogen export consortium: Investors have suggested the formation of an export consortium that could fund feasibility studies on green hydrogen exports, identifying customers and export barriers.
• Fast-track pathway: Certain investors have noted that determining whether hydrogen projects are eligible to be included in a fast-track or priority consenting pathways can be difficult and unclear, and advocated for a clearer or bespoke framework for hydrogen. 

Conclusion

These issues underscore a recurring theme expressed by investors: regulatory reform and coherence are important in unlocking international investment. Some investors are of the belief that without the proper certainty and alignment, projects may struggle to get off the ground. We see an important role for the Hydrogen Industry Leadership Group to ensure that Government is clear about what the industry needs to leverage these opportunities, and to ensure industry is supporting the Government's efforts in paving the way for further investment in the sector. 

This content is intended only to provide a summary of the subject covered. It does not purport to be comprehensive or to provide legal advice. No person should act in reliance on any statement contained in this publication without first obtaining specific professional advice. If you require any advice or further information on the subject matter, please contact a Russell McVeagh partner/solicitor.