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Part 2

Hy-Politics – political considerations shaping the evolution of clean hydrogen policy

Summary of the use case in Italy

In December 2019, the Italian Government officially released the Integrated National Plan for Energy and Climate (Piano Nazionale Integrato per l’Energia e il Clima 2030) to implement the EU Regulation no. 1999/2018, which sets binding targets regarding energy efficiency, renewable sources and reduction of CO2 emissions to be achieved by 2030. Its objective includes the promotion of the use of green hydrogen, and it is currently being updated and strengthened in order to reflect the new ambitious goals defined at European level.

In November 2020, the Minister for Economic Development published the Preliminary Guidelines on the National Hydrogen Strategy (Strategia Nazionale Idrogeno - Linee Guida Preliminari – “Hydrogen Guidelines”), whose 2030 term objective is the development of a national hydrogen ecosystem and for hydrogen to gradually become competitive in selected sectors, covering about 2% of the 2030 Italian energy demand. In the long term, up to 2050, the Hydrogen Guidelines’ goal is for hydrogen to support the effort of decarbonisation together with other low carbon emissions technologies, especially in hard-to-abate sectors (e.g., steel production, chemicals). Thus, hydrogen would be able to cover up to 20% of the 2050 Italian energy demand.

The National Recovery and Resilience Plan for Italy (“Italian Recovery Plan”) published on 26 April 2021 follows in the steps of the Hydrogen Guidelines with its second Mission, “Green Revolution and Ecological Transition”, focusing on, inter alia, renewable energy, hydrogen, and sustainable transportation with an overall budget of €23.78bn, €3.19bn of which is allocated for promoting the production and distribution of hydrogen in order to contribute to the achievement of the decarbonisation target. This goal is expected to be achieved through five lines of reforms and investments, provided also by the Hydrogen Guidelines, for which investments of up to €10bn between 2020 and 2030 will be needed:

  1. creating the so-called “hydrogen valleys” in disused industrial areas already connected to the electricity grid. “Hydrogen valleys” will be in strategic positions to build a more granular hydrogen production and distribution network to neighbouring SMEs via trucks or via dedicated existing pipelines mixed with methane;
  2. fostering decarbonisation of hard-to-abate sectors that are energy-intensive and lack scalable electrification options such as the chemicals, petroleum refining, steel, concrete, glass and paper sectors. Hydrogen is mainly produced on site in its “grey” form, hence from natural gas, which is not a zero-emission process: a significant development of green hydrogen would increase the abatement of emissions to about 90%;
  3. increasing hydrogen trucks use up to 5 - 7% of the market by 2030 by creating approximately 40 hydrogen-based refuelling stations;
  4. envisaging the conversion to hydrogen of about 9 refuelling stations on 6 non-electrified railway lines. Over the next 10 years, fuel cell hydrogen trains could become competitive at cost level compared to diesel trains, becoming one of the most promising areas to develop a national hydrogen market. This project includes the production of green hydrogen near refuelling stations, through the development of the entire relevant system for the production, storage and use; and
  5. envisaging R&D on: (i) the production of green hydrogen; (ii) the development of technologies for storage and transport of hydrogen and for transformation into other derivatives and green fuels; (iii) the development of fuel cells; and (iv) improving the resilience of current infrastructure in the event of greater hydrogen diffusion.

Moreover, the Hydrogen Guidelines state that injecting and mixing hydrogen at low-levels in the gas grid can represent an effective method to contribute to the decarbonisation objectives and to stimulate the hydrogen market while investing in the development of the supply chain and distribution. As regards green hydrogen, overgeneration from renewable sources can be exploited to produce hydrogen to be mixed at a lower cost. In addition, the selection of the sites for hydrogen injections can also have a social impact, for instance using disused industrial areas would stimulate the local economy creating new opportunities for businesses.

Examples of demonstration/feasibility projects in Italy
Industry


Tenaris, Tenova and Techint Engineering & Construction: In January 2021, Tenaris launched the “Dalmine Zero Emissions” initiative aimed at integrating green hydrogen in steelmaking from the electric arc furnace steel and in the downstream processing. This would represent the first use of green hydrogen on an industrial scale in the Italian steel industry.

Tenaris, Edison and Snam: this project is part of the “Dalmine Zero Emissions” launched on 11 January 2021. It is aimed at decarbonizing Tenaris's seamless pipe mill in Dalmine by generating hydrogen and oxygen through a 20 MW electrolyser and by adapting the steelmaking process to use green hydrogen instead of natural gas. The construction of a storage facility may be envisaged.

SNAM: Use of the grid to transport hydrogen. In 2018, SNAM S.p.A (“SNAM”), launched a project called “SNAMTEC” – Tomorrow’s Energy Company, aimed at increasing energy and operational efficiency, reducing pollutant gas emissions and promoting innovation in the energy sector. Among the initiatives included in the SNAMTEC project, was a trial to introduce a quota of 5% of hydrogen in the energy mix relating to two industrial plants in the Campania region for a period of a month. The trial proved that the introduction of even a small portion of hydrogen in the energy mix would allow a substantial reduction in carbon dioxide emissions (approximately 2.5 million tons per year).

Eni: In March 2019, ENI S.p.A. (“ENI”) signed an agreement with the National Consortium for the Collection, Recycling and Recovery of Plastic Packaging, to develop a research project aimed at producing hydrogen and high-quality biofuels from non-recyclable plastic packaging waste. ENI is undertaking a strategic plan that will allow it to reduce absolute carbon emissions by 80%, by 2050.

Maire Tecnimont and ENI: Since 2019, ENI and NextChem, the Maire Tecnimont Group’s subsidiary for green chemistry, have entered into several partnership agreements to conduct engineering studies with the aim of developing and building gas production plants from non-recyclable plastic packaging waste. The partnership agreements provide for the development of new waste-to-hydrogen production plants in Venice and in Taranto, and a waste-to-methanol production plant in Livorno.
Transport

Enel Green Power and FNM: the two companies partnered up to identify the most efficient way to supply green hydrogen to increase rail mobility in Lombardy in February 2021. This will lead to the first Italian hydrogen valley. The key points of the project called “H2lseO” include purchasing new hydrogen-fuelled trains and building hydrogen production plants powered by renewable energy.

SNAM and Alstom: in June 2020, SNAM and Alstom reached an agreement to develop hydrogen trains in Italy and the related technological infrastructure in order to expand railway mobility projects based on hydrogen. Alstom will manufacture and maintain newly built or converted hydrogen trains, while SNAM will develop the infrastructures for production, transport and refuelling.

CNH Industrial: transport of hydrogen in partnership with Nikola, an American company. The final goal is to produce battery electric vehicles and fuel cell electric vehicles for the European market.

Landi Renzo: mobility solutions based on hydrogen fuel.

ENI: ENI has entered into partnerships with Toyota aimed at developing hydrogen fuelling stations and encouraging hydrogen powered vehicles in Italy.

Ferrovie dello Stato: On 20 October 2020, Ferrovie dello Stato Italiane S.p.A. (the Italian State-owned railway operator) and SNAM signed a Memorandum of Understanding to evaluate the technical and economic feasibility of the development and diffusion of hydrogen rail transport in Italy.
Transport

Italgas: in May 2021, the company has announced the allocation of €15bn for the realisation of the first European hydrogen hub in Sardinia Region. The project provides for the installation of an electrolyser powered by renewable energy; the green hydrogen will be used to test the whole hydrogen chain: from on-site storage to delivery of liquid hydrogen by truck to industrial customers, through to distribution to hydrogen-fuelled road vehicles used for local public transport via a service station and feeding it into the gas grid, mixed with methane, to supply households.

Saipem: the group’s commitment will be focused in particular, on the production of green hydrogen (e.g. by improving the efficiency of electrolysis), the storage and transport of hydrogen, its use and its injection into gas networks. (reserved reproduction).

Enel Green Power: in January 2019, Enel Green Power (Enel Group’s renewables subsidiary) and the Municipality of Lipari entered into an agreement for the building of a new solar PV and green hydrogen energy storage plant on the Island of Stromboli.

Società Gasdotti Italia: in March 2019, the National Agency for New Technologies, Energy and Sustainable Economic Development (ENEA) and the Società Gasdotti Italia, an Italian gas transportation company, signed a framework agreement to develop a “Power to Gas” pilot project using green hydrogen. The hydrogen can then be used for several purposes, e.g. industry, transport and energy.
Green vs. blue

To kick-start the development of the hydrogen market, the Italian Government plans to install approximately 5 GW of electrolysis capacity by 2030. National production of green hydrogen could be integrated with imports or with other forms of low carbon hydrogen, such as blue hydrogen.

There is no common view amongst leading Italian industrials as to whether green or blue hydrogen should be the focus of the hydrogen strategy:

  • blue hydrogen: ENI and SNAM wish to pursue their sustainability goals without generating losses from the large investments made in recent years in gas pipelines and gas fields located in the Mediterranean;
  • green hydrogen: Enel firmly supports the idea of a new way of producing hydrogen with low impact on the environment. The position is in line with the company’s green strategy. In addition, Enel disagrees with granting incentives to companies that rely on the use of blue hydrogen as it is not a “clean” form of energy.

At Governmental level, the Italian Recovery Plan seems to tip the balance in favour of green hydrogen considering the provision of measures aimed at introducing (i) a simplified authorisation procedure for the construction of small green hydrogen.

Part 4

Hy-Achieving – creating a suitable incentive regime

Even though hydrogen is expected to play a key role in reaching the targets of energy efficiency and reduction of CO2 emissions by 2030, a dedicated hydrogen development strategy plan has not been adopted yet. According to the Hydrogen Guidelines, the Long-Term Hydrogen Strategy (Strategia a Lungo Termine), integrating the Italian energy strategy for the complete decarbonisation within 2050 should be published shortly.

Hydrogen is considered essential to contribute to decarbonisation of commercial transportation and a fundamental element for power storage and production (particularly power to gas). Italy also joined the Renewable and Clean Hydrogen Innovation Challenge within the “Mission Innovation” project, a global initiative of 24 countries and the European Commission, aimed at increasing private and public investments in clean energy and international collaboration to accelerate global clean energy innovation and the development of a global hydrogen market. The members of “Mission Innovation” have committed to seek to double public investment in clean energy R&D and are engaging with the private sector.

Both the Italian Recovery Plan and the Hydrogen Guidelines hint at legislative initiatives to be adopted in order to incentivise a hydrogen development strategy.

Within the Italian Recovery Plan, the Government proposes to implement other measures to stimulate the production and consumption of hydrogen, which will facilitate its integration in the Italian energy system. In particular, the reform provides for the establishment of: (i) tax incentives to support the production of green hydrogen taking (green taxes), included in a broader project for a general revision of the taxation and subsidies in the energy sector; and (ii) measures for widespread green hydrogen consumption in the transport sector through the transposition of the Renewable Energy Directive II (RED II).

Within the Hydrogen Guidelines, the Ministry of Economic Development forecasts that the development of hydrogen production and consumption cycle will imply: (i) the saving of the production of 8 Mton of CO2; (ii) the installation of 5 GW of power capacity for hydrogen production; (iii) the production of €27bn GDP; and (iv) the creation of more than 200.000 temporary jobs and up to 10.000 permanent jobs.

In addition, a bill of law to incentivise the use of hydrogen in Italy is currently under discussion by the Parliament. The proposal seeks to foster the production of green hydrogen. In order to do so, some incentives have been recognised such as:

  • investments in demonstration projects amounting to €10bn;
  • the introduction of a carbon tax (€56 per each ton of CO2 emission in 2020 and €100 per ton emissions in 2030);
  • exemption from taxes and charges for the system and distribution of hydrogen production plants; and
  • incentives for the progressive replacement of combustion vehicles with electric vehicles.
Part 5

Hy-ly Volatile? making it safe, sustainable and transportable

Currently Italy has not adopted comprehensive and harmonised legislation regulating the production, transport and use of hydrogen. Essentially, from a regulatory perspective, hydrogen is still considered as a gas used for industrial purposes. However, according to the Integrated National Plan for Energy and Climate, the Italian Government is expected to launch a regulatory programme aimed at developing the hydrogen industry to attract new investments.

Pursuant to the Italian Recovery Plan, it is necessary to simplify and reduce the regulatory obstacles to the spread of hydrogen use by adopting the following measures:

  • technical safety standards applicable to production, transport, storage and use of hydrogen through Ministries of the Interior and of the Ecological Transition Decrees;
  • simplification of the authorisation procedure for the construction of small green hydrogen production plants;
  • regulation of the access and connection of hydrogen production plants to network services, to be issued by the Regulatory Authority for the Energy Grids and Environment (Autorità di Regolazione per Energia, Reti e Ambiente - ARERA);
  • system of guarantees of origin for renewable hydrogen issued by ARERA and by the Energy Services Manager (Gestore dei Servizi Energetici S.p.A.); and
  • measures to allow the construction of hydrogen refuelling stations at service areas, logistics warehouses, ports, etc. through an agreement between the Ministry of Ecological Transition and the Ministry of Infrastructures and Sustainable Mobility.

The Italian Recovery Plan also hints at further regulatory efforts in terms of climate impact, for instance specific regulation on OEMs aimed at reducing emissions by 15% and 30% on new sales by 2025 and 2030, respectively.

Production

Based on the current regulatory framework, hydrogen production activity (whether through reforming or electrolysis) is included in the list of activities subject to the issuance of the IPPC authorisation (Autorizzazione Integrata Ambientale). More precisely, hydrogen production is listed among the activities included in “chemical industry” according to Annex VIII to Part 2 of the Italian Legislative Decree no. 152/2006 (the so-called “Environmental Code”). Thus, a hydrogen production and storage plant qualifies as an “industrial plant” and, consequently, it can be installed only in industrial areas in accordance with applicable town planning regulations. Hydrogen qualifies as a flammable gas, the production and management of which is subject to the authorisation of the Fire Department in order to ensure compliance with safety and fire prevention requirements.

In this respect, the Italian Recovery Plan provides the implementation of strong simplification of the authorisation procedure for the construction of hydrogen production plants, but the specific measures have not been clarified yet.

The above is in line with the Hydrogen Guidelines according to which about €5–7bn will be needed for hydrogen production between 2020 and 2030.

Transport

The legal framework regulating the use of hydrogen in Italy encompasses the Legislative Decree no. 257/2016 through which the Italian Government has adopted the Directive no. 2014/94/EU for the creation of an infrastructure for alternative fuels, in which hydrogen is officially included.

Except for specific pilot projects carried out by the gas transport operator, the injection of hydrogen into the gas grid is not generally allowed: specific regulation to allow the injection of hydrogen into the gas grid is currently under discussion. However, hydrogen production and handling for transportation purposes has been regulated by the Ministerial Decree of 31 August 2006 which posed extremely stringent safety measures on any plants for the storage of hydrogen. This Decree has been updated by the Ministerial Decree of 23 October 2018 “Technical rule of fire prevention for design, construction and operation of hydrogen distribution facilities for automotive applications”. As a result, most of the significant barriers of the Decree of 2006 have been largely overcome thanks to the effective co-operation between the Fire Prevention Department, several Ministries, the Italian Association for Hydrogen and Fuel Cell and others interested stakeholders.

The Hydrogen Guidelines highlights that about €2–3bn will be needed, between 2020 and 2030, in relation to hydrogen distribution and consumption structures and facilities (e.g., railways and trucks, refuelling stations).

Hydrogen as fuel for vehicles

The rate of installation of hydrogen fuel cells and refuelling stations has grown significantly in the last year as consequence of the implementation of Legislative Decree no. 257/2016. This applies the same regulations governing the construction and operation of traditional fuel stations to hydrogen distribution facilities, significantly simplifying the relevant authorisation procedures. As a consequence of the implementation of Legislative Decree no. 257/2016, starting from 2019, vehicles using hydrogen fuel cells can be registered and sold into the Italian market.

According to the Hydrogen Guidelines, the Italian Government expects that in the next decade hydrogen will be used in heavy transportation and, more specifically, in the railway and trucks sectors. In this respect, within 2030 the objective includes (i) the conversion of half of the non-electrified railways into hydrogen railway lines and (ii) the use of at least 2% of trucks fuelled with hydrogen by installing hydrogen refuelling stations at strategic road interconnection points.

Hydrogen as renewable energy

There is also a growing interest around the production of green hydrogen as an instrument to promote the revamping of renewable energy plants, as attested by the approval of Apulia Regional Law no. 34/2019 which provides, inter alia, for the renewal of the authorisations for photovoltaic/wind plants which are subject to the integration of hydrogen production and storage plants.

We expect that other Regions and the National Government will follow a similar approach, developing a comprehensive regulatory framework aimed to incentivise the use of hydrogen as an instrument to attract further investments into the renewable energy market, as confirmed by the inclusion in the Italian Recovery Plan of the objective to simplify the authorisation procedure for the construction of small green hydrogen production plants.

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