Biomethane and renewable hydrogen pathways

The official consultation question

Q02 · §2.4(a) · paper page 15

Should the work on a national renewable gas policy focus on biomethane, or should other renewable gases, such as bioLPG, biogas and renewable hydrogen, be included? Please explain your reasoning.

Shelby’s response

Biomethane and direct-use biogas should be the first implementation priorities within a broader renewable-gas policy. Their production pathways are established and can provide an immediate platform for Australian deployment. BioLPG, renewable hydrogen, e-methane and other renewable gases should remain within the national framework, but with support mechanisms tailored to their technical maturity, customers and infrastructure requirements. Policy should not delay deployable biomethane and biogas projects while seeking identical arrangements for every renewable gas.

The framework should support upgrades to existing facilities and appropriately sized regional projects alongside larger developments. Australia's geography makes flexibility particularly important: network injection will be appropriate for some projects, while direct supply, dedicated pipelines or road delivery may be more economic for others. The correct route should be determined by whole-of-chain delivered cost, reliability and emissions performance. Clear pathways for commercialising digestate and recovered biogenic CO2 can further diversify revenue where the net value after processing, quality assurance, storage and delivery is credible.

Hydrogen policy should also compare production pathways on whole-system resource use rather than assuming that electrolysis is the preferred route for every industrial application. The IEA uses an electricity demand of about 50 kWh/kg H2 for low-temperature electrolysis, including compression to 30 bar. By comparison, its reference case for steam methane reforming with 93% CO2 capture uses about 49 kWh/kg H2 of methane and only about 0.8 kWh/kg H2 of electricity. The comparison is therefore not one of total energy use - the reformer uses the chemical energy and feedstock value of methane - but it highlights the very different demand placed on the electricity system.

This pathway has an explicit international certification precedent. ISCC's official 'List of material eligible for ISCC EU certification' dated 29 August 2023 lists Hydrogen in Table 2 (Intermediate and final products) with the additional information: 'Biomethane or bio-LNG of biomass origin (E.g. via steam reforming/WGSR)'. This demonstrates that hydrogen produced from biomass-origin biomethane or bio-LNG through steam reforming and water-gas shift is an established certifiable product pathway under ISCC EU, subject to the applicable feedstock, sustainability, greenhouse-gas and chain-of-custody requirements. Australia should therefore ensure that its renewable-gas and hydrogen frameworks are technology-neutral and capable of recognising appropriately certified renewable hydrogen from biomethane, rather than creating an implicit preference for electrolytic hydrogen. Australian eligibility and renewable-hydrogen claims would, of course, remain subject to Australian certification, emissions-accounting and guarantee-of-origin rules. [ISCC System GmbH, List of material eligible for ISCC EU certification, 29 August 2023, Table 2, p. 21 of 23.]

For large continuous hydrogen users, including steelmaking and other hard-to-abate industrial facilities, Australia should therefore assess biomethane-to-hydrogen alongside electrolysis. Renewable biomethane can be delivered through gas infrastructure or, where appropriate, transported as liquefied biomethane and reformed close to the point of use. Steam reforming, water-gas shift and pressure-swing adsorption are mature industrial processes capable of producing high-purity hydrogen. Where this pathway is used, the resulting biogenic CO2 stream should be captured for beneficial use or permanent storage, with lifecycle emissions and methane leakage transparently accounted for.

The cost comparison can also be material. Recent Australian analysis of renewable hydrogen under firm-delivery conditions reports a levelised cost of approximately A$8.44/kg H2. A 2026 peer-reviewed techno-economic study of biogas reforming reports hydrogen costs of approximately EUR3.5-3.7/kg H2 with carbon capture, equivalent to approximately A$5.6-6.0/kg H2 at an illustrative exchange rate of A$1.61/EUR. These figures are not universal project prices: actual costs depend strongly on biomethane cost, plant scale, capacity factor, financing, CO2 capture and purification requirements. They nevertheless demonstrate that renewable biomethane reforming can be economically competitive with, and in suitable cases materially cheaper than, firm electrolytic hydrogen while imposing far lower demand on the electricity system.

The electricity-system effect can be material. At an illustrative hydrogen demand of 10,000 tonnes per year, 50-55 kWh/kg H2 corresponds to approximately 500-550 GWh/year of electricity for electrolysis.

Using the IEA 0.8 kWh/kg H2 reference for SMR with high CO2 capture corresponds to approximately 8 GWh/year of auxiliary electricity, although the reformer additionally consumes biomethane.

Policy assessment should therefore compare delivered hydrogen cost, lifecycle emissions, renewable-electricity requirements, gas and electricity infrastructure, reliability, carbon capture performance and the opportunity cost of scarce renewable electricity. Electrolysis remains an important pathway where abundant low-cost renewable electricity is available; it should not, however, be favoured by default over a lower-electricity biomethane pathway where the latter provides a stronger whole-system outcome.

Shelby therefore recommends one coordinated national framework with distinct pathways and staged implementation. Bring technically mature biogas and biomethane opportunities into production now, while creating clear development pathways for other renewable gases. Projects should be assessed on sustainable inputs, reliable utilisation, achievable delivery, verified emissions benefits and credible economics after all relevant support and co-product revenues are transparently identified.

Frequently asked questions

What is Shelby’s position on biomethane and renewable hydrogen pathways?

Biomethane and direct-use biogas should lead implementation within a broader renewable-gas framework. Shelby recommends comparing hydrogen pathways on delivered cost, lifecycle emissions and whole-system resource use, without treating auxiliary electricity demand as total energy demand.

What should a project team read alongside this answer?

Read the linked commercial guides and original question. Separate the response’s recommendations and illustrative assumptions from source-reported operating evidence.

Sources & References

• Department of Climate Change, Energy, the Environment and Water, National Renewable Gas Policy consultation

  Publication: Date not verified

  Observation period: Not recorded

  Relevant page / section: Claim-level locator not yet verified

  Last link / title verification: 2026-10-11

  Publisher link checked; individual claims, costs and regulatory applicability still require review.

  Check scope and current applicability before relying on this reference.

• Department of Climate Change, Energy, the Environment and Water, National Renewable Gas Policy consultation paper

  Publication: 2026-08

  Observation period: Australia; 2026 consultation

  Relevant page / section: Consultation questions; use answer-specific paper page and question reference

  Last link / title verification: 2026-10-11

  Publisher link checked; individual claims, costs and regulatory applicability still require review.

  Source for questions/context, not proof of an implemented support mechanism. Question text attribution: Commonwealth, CC BY 4.0, as noted in Shelby’s supplied consultation response.

• Creative Commons, Attribution 4.0 International

  Publication: Date not verified

  Observation period: Not recorded

  Relevant page / section: Claim-level locator not yet verified

  Last link / title verification: 2026-10-11

  Publisher link checked; individual claims, costs and regulatory applicability still require review.

  Check scope and current applicability before relying on this reference.