AHC FED ‘Front Door’ for major, transformational projects

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4^th October 2024

Front Door Taskforce
National Interest Framework Division
Treasury
Langton Cres
Parkes ACT 2600

To the Front Door Taskforce,

Re: Establishing a ‘Front Door’ for major, transformational projects

The Australian Hydrogen Council (AHC) welcomes the opportunity to engage with the development of the Front Door for investors under the Future Made in Australia (FMIA) agenda.

The AHC is the peak body for the hydrogen industry and our membership includes companies from across the hydrogen value chain. Our members are at the forefront of Australia’s hydrogen industry, developing the technology, skills and partnerships necessary to ensure that hydrogen and its derivatives play a meaningful role in decarbonising Australian industry.

The Front Door initiative is a critical step forward for Australia to demonstrate to global investors seeking to deploy trillions of dollars that the Australian Government is serious about its net zero by 2050 domestic ambitions, and serious about landing the right projects here.

For some time now we have observed that the complexity and uncertainty of the investment environment and the overall ecosystem (multiple states, regulatory differences, permitting within states) is making hydrogen project proponents’ decisions unnecessarily difficult. There is a need for governments and other decision makers to progress significant investments in new infrastructure and technology, and the current environment is not conducive to this.

The AHC fully supports the development of a Front Door investment stewardship approach and has been advocating for similar measures from the Australian Government, as part of our broader response to the US Inflation Reduction Act (IRA) and our submission to the National Hydrogen Strategy. We also advocated for better national case management of international investors in the recent submission to the Senate Enquiry to the FMIA Bill.

The AHC Secretariat also has over 20 years’ combined experience attracting and facilitating international investment into a range of Australia’s priority sectors (including automotive, medtech, biotech, resources, energy and hydrogen). This experience covers the full spectrum, from early-stage R&D, to supply chain (services, technology and manufacturing), to project development and project equity. Our experience spans new entrants to Australia and strategic aftercare of clients from Asia, the Americas, the Middle East and Europe.   

Coverage

The AHC supports the services provided by the Front Door approach being available to both Australian and international investors. This enables a level playing field for all project developers. Based on the initial impressions gained from the Consultation Paper, some members expressed concern that if the Front Door was prioritising only international investors, it might disadvantage domestic companies and investors.

The AHC recommends that the Front Door service focusses on the highest calibre projects, and if projects do not meet the high threshold to get access to the Front Door services, then they revert to existing processes. A qualification process of an applicable company is required immediately before any detailed assessment of the project.  This process will ensure that only credible companies with the ability to invest get through the Front Door.

Without this qualification process, the AHC is concerned that government resources might waste time on projects that have no chance of progressing to actual investments. It is especially critical to understand where the capital for an investment is coming from, as company structures become complex and credible information is often difficult to source. This qualification process should be developed in consultation with Austrade and the SIVs (Specialist Investment Vehicles) to streamline the process.

There are three different segments of members that could utilise the Front Door:

1. Project developers: investors who are developing projects that need the upstream renewable electricity, along with the hydrogen manufacturing facility and will usually have an agreement with an offtaker. These projects can be very complex when developing export scale with several partners. An example is Stanwell’s CQH2 project in Gladstone.
2. Technology developers and manufacturers: these parties have developed world leading IP and will be seeking locations to manufacture it in Australia. An example is Hysata with its efficient electrolyser technology.
3. Enabling infrastructure: investors who build and operate infrastructure that enables hydrogen molecules to be moved and stored domestically and internationally. An example is port infrastructure to enable green methanol to be bunkered.

Each of these types of investments currently align with FMIA and NRF (National Reconstruction Fund) priorities, yet the parameters of investment will likely differ in scale. In our view, priority should be provided to the projects aligned with the following:

• Investment size:
  • Project developers with an investment value greater than $500m. It’s highly likely that hydrogen projects that fit this investment threshold will take a staged/phased approach to realise the full nameplate capacity of its project. Scaling in a fiscally responsible manner that matches the current commercial realities reduces the risk of the project not progressing at all. 
  • Technology developers and manufacturers with an investment greater than $150m and TRL greater than 7.
  • Enabling infrastructure companies greater with an investment greater than $100 million.
• Investment industry: FMIA or NRF priority sector.
• Location: anywhere across Australia, but projects should have relevant state government support (either through coordination or opportunity to provide funding). 
• Australian Government funding support: required and note this is complex and can cover several different types of financial support.    

The AHC notes that several of the FMIA priority sectors are nascent and need ‘first of a kind’ projects to be designed, permitted, funded, constructed and commissioned. These projects will be technically and commercially complex and will provide integral lessons for the next wave of projects to learn from. These ‘first of a kind’ projects will be transformational for the sectors to grow. 

A recent example is the Hornsdale Power Reserve project in South Australia. Australia’s first 100 MW/129 MWh battery was completed in November 2017. Only seven years later, there were 27 large-scale batteries under construction at the end of 2023, totalling approximately 5 GW / 11 GWh[1].

One of the major risks for hydrogen projects (and other emerging sectors) is the uncertainty around demand and offtake size, scale and contract duration. The proposal for the Front Door investment support should consider expanding to a role in engaging and qualifying domestic and international offtakers in the nominated priority sectors. This service would provide additional confidence to negotiating parties that the Australian Government has brokered the possible partnerships. Germany’s Hint.Co is a live example of this type of engagement. The German Government undertakes a double-auction approach that simulates a functioning market on both the supply and demand sides, assuring negotiating parties as well as maintaining financial accountability to EU citizens and ensuring that climate change targets for clean liquid fuels can be realised.

Recommendation 1
The Front Door investor support should be available to Australian and international investors who meet the relevant criteria and thresholds.

Recommendation 2
The Front Door service should focus on the highest calibre projects via an early-stage qualification process. These projects should be led by larger proponents (in their categories), with existing government support (or a high probability of government support).

Coordination

The general feedback from members suggests that the current foreign direct investment attraction activities of Australian and state government officials abroad is appreciated, and that the Australian hydrogen opportunity and value proposition is understood by international investors and developers. But there is room for improvement due to the intense global competition to win first investments (the assumption being that these projects are the most likely to scale and expand as the industry develops, cementing the company – and jurisdiction – with those investments as global leader).

Case management is needed

The AHC is seeking far greater cohesion and clarity across Australian and state and territory investment attraction services and strategies. Whilst we understand Austrade engages with its state and territory government counterparts, as do relevant Ministers, we still see room for improvement. Greater clarity of roles and responsibilities is warranted. The main concern is predominantly around in-market messaging and engagement with investors. International investors only see the Australian market and often get confused when multiple different states engage with them and often with different messaging.

There is also a proliferation of engagement streams. Some members have highlighted that there is increased government engagement due to two key reasons:

• the introduction of new government agencies with a remit to support investors (e.g. Net Zero Economic Agency and National Reconstruction Fund Co); and
• as their projects mature, they fall into the remit of an increasing number of agencies  (e.g. Northern Australia Investment Fund or Export Finance Australia).

This is positive for the development of Australia’s hydrogen industry, but can also overload stakeholders.

The AHC has advocated for and continues to recommend that the Australian Government should provide a single point of contact for investors, such as case manager for investors with major, transformational investment proposals. The case manager would be the single point that can lead the investor throughout wider government engagement. This wrap around service would be different for each investor based on need; for example, some have large government relations teams, others do not. Each case manager would develop a bespoke plan for each project that had been assessed and passed through the Front Door.  

Public financing reform

We support greater coordination of public financing, and we note this also aligns with Action 3 from the recently released National Hydrogen Strategy (“Consider reforms that may further enable specialist investment groups to play a bigger role in supporting the hydrogen industry to mature and secure further finance through traditional capital markets”).

AHC recommends that the Future Fund is added to the grouping of SIVs that need to be coordinated and possibly reformed to include the creation of a dedicated Future Made in Australia Fund. This could be developed in consultation with industry, just as they have developed dedicated funds for medical research. The development of clean energy technologies requires long-term, patient capital and support:   dedicated FMIA Fund could assist projects that meet the criteria to use the Front Door service to secure additional investment and capital. This would also send a signal to many international investors in nascent industries that Australian Government support and funding is being used to progress nationally significant projects.

Member feedback highlights that the teams responsible for hydrogen transactions at the Australian Renewable Agency (AREN and the Clean Energy Finance Corporation (CEFC) interact and share information where appropriate. Others have highlighted that similar agencies in North East Asia have far greater integration and coordination. Similar examples exist in the Americas, with the Loan Programs Office in the US Department of Energy. The AHC recommends that given the increased need for coordination, more formal integration of processes is considered across SIVs. This could include sharing qualification processes (including one standardised Non-Disclosure Agreement), integrating databases and project due diligence processes. In addition, if there was an opportunity to reduce duplication, increase fund size and increase investment throughput through the merger of SIVs that provide similar services, this should be considered.   

There is similar duplication when engaging with AusIndustry, Austrade and the Major Project Facilitation Agency. All have similar qualification processes and engagement requirements, but often do not align, with each agency requiring project proponents to provide similar information.   

Information sharing benefits from coordination

There are other benefits in greater coordination:

• Learning from others: for example, the Queensland Government’s model of creating a project management office wrap around its major hydrogen projects is a workable option for the Australian Government. This model brings all relevant agencies together to create a transparent pathway for projects to progress. Australian Government regulatory bodies could possibly interact with this model to enhance coordination.
• Better information flows: Given there are many opportunities for Australian or state governments to be involved or assist with guidance, the AHC recommends that the Front Door service is engaged by the jurisdictions and kept aware of possible projects. This could be a joint exercise across several government agencies and would also enhance coordinated engagement between state and federal based planning departments when the project has developed further.
• Processing unsolicited industry bids to government: currently there is no process for industry to engage on unsolicited bids seeking Australian Government support. A Front Door should create a framework where industry is able to bring forward these bids and receive a coordinated response.

Recommendation 3
The Front Door should provide a single point of contact for investors; a case manager for investors with major, transformational investment proposals, delivering a coordinated approach to investment attraction and facilitation for these projects.

Recommendation 4
The Future Fund is added to the grouping of SIVs that need to be coordinated and possibly reformed to include the creation of a dedicated Future Made in Australia Fund. More formal integration of processes could also be considered across SIVs.

Recommendation 5
Coordination should also address how information might flow better between the different levels of government.

Regulatory facilitation

Membership feedback suggests that progressing through the EPBC Act is currently the greatest challenge to reaching FID and financial close. In some cases, projects are allowing several years (up to ten for complex supply chains) for approvals and are still not confident that the allowed time will be sufficient. We recommend focused and additional support to accelerate projects through the EPBC Act regulatory process. It should be emphasised that AHC members are not seeking to cut corners in the legitimate planning and oversight process, rather they are seeking additional guidance to have their applications accelerated through the regulatory process. The approvals bottleneck must be addressed if the Australian Government is truly committed to the Front Door objectives.

The Front Door could also play a role in reducing the time required to obtain power connections. Some members indicate that delays in this process hinder the scaling up of manufacturing and renewable energy generation capacity. Power connection delays are often due to the process being managed through the specific Distribution Network Service Provider (DNSP) in that region, where applicants are continually put to the back of the queue after each interaction. The Front Door could ensure that priority projects remain at the front of this queue until resolutions are reached, significantly accelerating the time frame in which facilities can commence operations.

Broader regulatory facilitation is always welcomed, especially in Australia, where there are three levels of government to engage with. Member feedback highlights several examples that would create value and could be assessed for introduction:

• Early testing of projects through regulations that would allow projects to “fail fast” and not have to go through an expensive and time-consuming process of application and review.
• Parallel coordination across different regulations (as opposed to sequential), which would reduce time spent waiting for regulatory approvals.  

There will be hundreds of projects across the priority FMIA, NRF priorities and Critical Technology List sectors that will not meet the Front Door criteria yet will significantly deliver on the government’s agenda.  The lessons learned from regulatory facilitation of projects with the Front Door service should be understood, mapped and assessed as to how the service can be delivered broadly to other project proponents facing similar challenges.   

Recommendation 6
The Front Door should accelerate projects through the EPBC Act regulatory process. This might happen via a ‘fast fail’ rapid review and increased assistance via case management.

Recommendation 7
Many of the regulatory facilitation measures from the Front Door could be introduced more broadly in the future to assist other project proponents. 

Governance and resourcing

If not resourced properly with suitably experienced staff, or provided enough authority to act, the Front Door could actually create an additional bottle neck for investors. 

The Front Door will require Ministerial oversight to ensure that it able to act effectively across the different Australian Government portfolios and cut through other Ministers’ responsibilities. The AHC recommends that the newly appointed Minister for Future Made in Australia is given this task as it reports directly to the Prime Minister. This single point of accountability will provide the investors with the certainty required that coordinated action will be taken. It may also be able to fast track Ministerial meetings and communication, as required. 

Whilst we understand sector priorities may evolve and shift as technology advances, costs decrease and scale is created, the proposed Front Door service needs to transcend election cycles. We suggest that the Front Door service becomes part of the standard service offering to international and Australian businesses to guide, advise and standardise complex project development.

The AHC recommends that the team delivering the Front Door service is:

• Established in the Department of the Prime Minister and Cabinet as its own division.
• Led by an executive that has deep industry experience and developed industry network and relationships.
• Resourced with a team that has their own complementary industry and government skills and relationships that align with the priority sectors. This includes finance, legal, engineering and corporate strategy.
• Given authority to act to progress projects through bottlenecks that will arise with federal and state jurisdictions. 

The scale of this team will ramp up and down in alignment with the project pipeline it is servicing. Flexibility is also required to be able to bring in specialised skillsets. This team needs to reach across other relevant government agencies to gain information, skills and insights to deliver on the Front Door objectives.

Services from Austrade and the Major Project Facilitation Agency along with Australian Industry Participation Plans, Environmental Management Plans, Stakeholder Management Plans, and Cultural Heritage Management Plans are all critical enablers or requirements for projects to succeed. These should be reviewed, revised and resourced to enable more projects to progress. 

It should be noted that the above recommendations will deliver an optimal service to hydrogen and other energy projects. Given that the proposed sectoral remit for the Front Door service is much broader, consideration regarding the size and resourcing of the Front Door team (in particular the case managers) is critical. Due to this broad remit, the greatest risk to resourcing the Front Door service appears to be the creation of a service that is too large, unwieldy and effectively duplicative of the services of the SIVs.

One educative example of this is Breakthrough Victoria. This is a brilliant initiative on the part of the Victorian Government, however by mandating the sectoral focus (and the split of investments) the ability to source and secure investments has been hampered, even in what is intended to be an investment body at arms-length from government. Similarly, an incredible amount of external attention has been given to the recruitment of suitably qualified staff able to do the due diligence on potential investments and manage the agency’s investment portfolio – a similar level of scrutiny and criticism will be levelled at the Front Door service, particularly if it is perceived to be duplicating the efforts of CEFC, the Medical Research Future Fund (MRFF) and others.

Recommendation 8
The Front Door team should be established in the Department of Prime Minister and Cabinet as its own division, and reporting to the newly appointed Minister for Future Made in Australia.

Thank you for the opportunity to provide input to the development of this important initiative. The AHC and our members look forward to engaging further in this process. Please contact me for any questions you may have or if you would like to discuss this submission in further detail.

Yours sincerely,

Leigh Kennedy
General Manager – Industry and Supply Chain Development

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[1] clean-energy-australia-report-2024.pdf (cleanenergycouncil.org.au)