Part 5
Hy-ly Volatile? making it safe, sustainable and transportable
On 13 July 2020, the German Federal Network Agency (Bundesnetzagentur – “BNetzA”) adopted an assessment (Bestandsaufnahme) of current regulatory conditions for hydrogen infrastructure and potential future changes (“BNetzA Assessment”).74
Power to gas plants
Currently, power to gas plants are granted one major privilege: currently, they are exempted from electricity and gas network access fees. Hydrogen falling under the definition of the German Energy Industry Act (Energiewirtschaftsgesetz – “EnWG”) also benefits from biogas privileges. In addition, if hydrogen is produced using exclusively renewable electricity, and is later re-electrified, the renewable electricity required to produce the hydrogen is granted a renewable energy surcharge reduction. Under the same conditions, it is eligible for a reduction of the cogeneration surcharge.
Since according to BNetzA, unbundling rules prevent grid operators from producing hydrogen covered by the EnWG definition and feeding it into an existing natural gas grid, grid operators currently may not become active in this field.
As there is considerable interest from grid operators to use power to gas plants to stabilise the electricity grids, it is currently being discussed whether the unbundling requirements could be less strictly applied in this regard. The National Hydrogen Strategy (measure no. 2) also mentions this as a possibility. The outcome, however, is open.
Infrastructure regulation
In the BNetzA Assessment of current regulatory conditions for hydrogen infrastructure and potential future changes, BNetzA anticipates that due to the limited possibility to feed additional hydrogen into natural gas grids, a separate hydrogen network structure will eventually develop in addition to the existing gas network. The basis for this will be converted and upgraded natural gas pipelines or newly constructed hydrogen pipelines.
Current regulatory context
According to the BNetzA Assessment, in principle, dedicated hydrogen networks are currently not subject to the EnWG, i.e. the law that governs network-bound energies. The usual regulatory provisions applicable to gas (and power) grids, such as access regulation, network fee regulation and unbundling rules therefore do not apply to dedicated hydrogen networks. Instead, such dedicated hydrogen networks would only be subject to competition rules prohibiting, for example, abusive market behaviour.
The only exception would be distribution (not transmission) networks for hydrogen that meet the definition of “biogas”. This is the case if the hydrogen has been produced by electrolysis using predominantly renewable energy sources (in practice, at least 80%).
Unbundling rules, however, apply if a producer of hydrogen that falls under the definition of the EnWG also operates a gas grid. The BNetzA concludes that grid operators may not produce hydrogen covered by the EnWG definition and feed it into an existing natural gas grid. The EnWG definition of hydrogen, however, is very narrow, requiring that hydrogen (i) has been produced from water using electrolysis and (ii) has either been fed into a gas grid or has been produced using predominantly renewable energy (biogas, cf. above).
The recently adopted EU electricity directive stipulates that in principle, transmission system operators shall not own, develop, manage or operate “energy storage facilities”, which may potentially cover certain electrolysers. Member States may grant derogations from this rule if, inter alia, the energy storage facilities are fully integrated network components and the regulatory authority has granted its approval. Depending on how this will be transposed into national law, BNetzA may thus potentially have some room for manoeuvre in the future.
Beyond this, transmitting or distributing hydrogen is only covered by the EnWG if the hydrogen supplements natural gas in a conventional gas grid. Such hydrogen feed-in must comply with the requirements of the regulations of the German Technical and Scientific Association for Gas and Water (Deutscher Verein des Gas- und Wasserfachs e.V. – DGVW). Due to sensitive consumers, particularly natural gas fuel stations, the potential for feeding a hydrogen share into natural gas grids is currently very limited. According to the BNetzA Assessment, hydrogen may in fact only account for 2%, which may not be exceeded anywhere in the entire network. Various tests, however, are currently being carried out, exploring the possibility of higher hydrogen shares of up to 20% and 30% in real network operation.
Future regulatory changes – outline
BNetzA has not yet come to a final conclusion on what regulatory measures will be required to adequately cover hydrogen and to ensure non-discriminatory behaviour in any future dedicated hydrogen networks. BNetzA discusses, however, the following key measures:
- the current narrow definition of hydrogen will have to be broadened. It should, in the future, also cover hydrogen produced by pyrolysis or reforming. Hydrogen regulation would, however, ideally not be governed by the EnWG, but by a specific hydrogen law.
- BNetzA is considering introducing a network access regulation regime in order to prevent the refusal of transit and the refusal to accept third-party hydrogen. For green and possibly blue hydrogen, BNetzA considers privileged network access possible, comparable to the privilege for biogas. This would be justified by the goal of a CO2-neutral energy economy.
- in addition, BNetzA is considering the regulation of hydrogen network fees in order to prevent monopoly returns for network operators. This will be particularly necessary if hydrogen grids reach a stage where they turn into closely meshed distribution networks connected by transport lines. BNetzA does not yet have a clear position on whether the incentive regulation regime that governs electricity and gas networks should then apply to hydrogen as well, or whether it would be preferable to establish a simplified regime.
- BNetzA also briefly discusses a hydrogen-specific unbundling regime that would ensure the implementation of possible network access and network fee regulation.
- another potential change may be necessary regarding balancing systems. It is doubtful whether balancing systems for natural gas on the one hand and biogas on the other hand will be sufficient in the future. It is conceivable to introduce just one separate hydrogen balancing system, or even multiple balancing systems to account for different hydrogen production methods.
Finally, the National Hydrogen Strategy points out that sustainability and quality criteria for hydrogen will be required in the future. It does not, however, recommend any concrete regulatory steps to be taken in this regard.
Planning and permitting aspects/safety regulation
Production
For hydrogen production plants (onshore), a permit from the relevant local authority might be required under the German Federal Emmission Control Act (Bundes-Immissionsschutzgesetz – “BImSchG”). The BImSchG and the related Federal Ordinances (Bundes-Immissionsschutzverordnungen – “BImSchV”) implement the requirements of Directive 2010/75/EU of the European Parliament and of the Council of 24 November 2010 on industrial emissions (integrated pollution prevention and control) (EID), which regulates the production of hydrogen by virtue of Annex 1. Installations where hydrogen is produced on an “industrial scale” are classified under Annex I to the 4th BImSchV, 4.1.12, requiring a formal permit procedure with public participation and possibly an environmental impact assessment (EIA). The term “industrial scale” is not defined by law; however, the federal states have produced a common interpretation aid for the administrative practice, in which an “industrial scale” of production is defined by the internal organisation of the plant, rather than the produced quantity of hydrogen. Therefore, currently, an individual assessment for each production site is mandatory. Against this background, special interest groups call for a legal definition of the term “industrial scale” or even for a general exception for hydrogen production plants of Annex I to the 4th BImSchV to create legal certainty for investors.
In this context, the National Hydrogen Strategy provides that for offshore production of hydrogen/PtX:
“potential adjustments (…) will be discussed [including] the designation of additional areas that can be used (…), the infrastructure necessary for this, and the potential for additional auction rounds for the production of renewables”.
There are various safety regimes which apply to the production of hydrogen and which impose obligations on producers in relation to health and safety management, namely the Hazardous Substances Ordinance (Gefahrstoffverordnung), the Ordinance on Industrial Safety and Health (Betriebssicherheitsverordnung) and various Technical Regulations for Industrial Safety (Technische Regeln für Betriebssicherheit) as well as regulation by the German Social Accident Insurance (Deutsche Gesetzliche Unfallversicherung).
Transportation: Pipelines
As described above, hydrogen may be injected in the existing German natural gas network, however, due to technical requirements only in a small amount. Thus, a separate hydrogen network may be developed, possibly requiring modifications of existing natural gas pipelines and/or the construction of new ones. The permitting of such modifications or the construction of new gas supply pipelines with a diameter greater than 300 millimetres would be subject to a plan approval procedure pursuant to sec. 43 EnWG. The corresponding permitting process would include, amongst others, an Environmental Impact Assessment as well as an assessment of the project’s compatibility with other nature conservation issues (such a “Natura 2000” nature protection areas and species protection etc.). Furthermore, as set out in the Regulation on High-Pressure Natural Gas Pipelines (Verordnung über Gashochdruckleitungen - GasHDrLtgV), the competent permitting authority would also be responsible for the technical examination and acceptance of the project.
Transportation: Road
International regulations govern the carriage of dangerous goods by road, via the European Agreement concerning the International Carriage of Dangerous Goods by Road (Accord européen relatif au transport international des marchandises Dangereuses par Route - ADR). Furthermore, the Transportable Pressure Equipment Directive 2010/35/EU (TPED) regulates the technical requirements for pressure vessels.
Both the ADR and the TPED are transposed through various national regulations, namely:
- the ADR Act (Gesetz zu dem Europäischen Übereinkommen vom 30. September 1957 über die internationale Beförderung gefährlicher Güter auf der Straße (ADR));
- the Ordinance on the international and cross-border carriage of dangerous goods by road, railways and inland waterways (Gefahrgutverordnung Straße, Eisenbahn und Binnenschifffahrt - GGVSEB);
- the 26th ADR Amending Ordinance - 26th ADR (26. ADR-Änderungsverordnung – 26. ADR); and
- the Ordinance for Transportable Pressure Equipment (Ortsbewegliche-Druckgeräte-Verordnung - ODV).
Those regulations restrict the trailer payload and the size of pressure vessels used for transport. Amendments to increase those parameters are currently being made on an international, European and national level, which will reduce the cost of transportation. In addition, the National Hydrogen Strategy states that a robust quality assurance infrastructure for hydrogen transport (as well as production, storage and use) needs to be built up on a national, European and international level.
