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 to implement the Regulation EU 1999/2018 which sets binding targets as energy efficiency, renewable sources and reduction of CO2 emissions to be achieved by 2030.

Currently, in Italy, hydrogen is mostly used in chemical and metallurgical industries. However, the main share of hydrogen production originates from the conversion of fossil fuels. The purpose of the Plan is to promote the use of green hydrogen. The main use case for hydrogen is the decarbonisation of commercial transportation. The Plan also mentions the role of hydrogen for energy storage, in particular power to gas. Furthermore, the Plan aims to employ hydrogen in the electric grid and gas infrastructure. In this regard, green hydrogen generated by electrolysis has the advantage of being usable in the existing gas infrastructure. The Plan's objectives in relation to the transition to green hydrogen would be facilitated by the higher availability of renewable energy plants and transportation pipelines connecting northern Africa to southern Italy for the importation of hydrogen at a lower cost.

In October 2019, the Minister for Economic Development delivered a speech at “The Hydrogen Challenge – 2019 Global ESG Conference”, an event organised by Snam and other stakeholders of the energy sector. The Minister stated that decarbonisation is the core element of the Italian energy strategy in which hydrogen will play a decisive role. The efficiency and conversion of the heat for buildings is fundamental to realise urban transformation. Furthermore, the Minister noted that different initiatives have been taken by the Government to implement the hydrogen strategy: a three-year system research programme for the electrical industry; international programme "Mission Innovation”; and a hydrogen roundtable. In all of them, the Government's purpose is to make hydrogen more convenient and bolster the use of green hydrogen.

In particular, the hydrogen roundtable outlines a set of objectives for the development, transport, storage and reuse of hydrogen. The group has also received 31 projects, of which nine are for transport use and 12 for storage and production. The final goal of the initiative is to create, alongside the relevant stakeholders, a national alliance for the use of hydrogen in industry.

Examples of demonstration/feasibility projects in Italy
Industry


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, a waste-to-methanol production plant in Livorno.
Transport

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.


Alstom: In June 2020, Alstom signed a five-year agreement with SNAM aiming to develop hydrogen-powered trains and related technological infrastructure . In light of this, for the first time, hydrogen fuelled trains will be introduced in the Italian rail network.

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.

Energy

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.

SGI: In March 2019, the National Agency for New Technologies, Energy and Sustainable Economic Development (“ENEA”) and the Società Gasdotti Italia (“SGI”), 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

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 to grant incentives to companies that rely on the use of blue hydrogen as it is not a ‘clean’ form of energy.

 

Part 4

Hy-Achieving – creating a suitable incentive regime

The Italian Government has not adopted a dedicated hydrogen development strategy plan. However, hydrogen plays a key role in the Integrated National Plan for Energy and Climate approved in December 2019, in order to reach the targets of energy efficiency and reduction of CO2 emissions to be achieved by 2030. Hydrogen is considered essential to contribute to decarbonisation of the 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 to increase 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.

In December 2019, a parliamentary proposal was put forward to incentivise the use of hydrogen in Italy. 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.

The proposal is currently pending in Parliament.

 

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, hydrogen is still considered from a regulatory perspective 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 in this strategic sector.

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 (i.e. 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 Legislative Decree no. 152/2006 (the “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.

Transport

The legal framework regulating the use of hydrogen in Italy encompasses the Legislative Decree n. 257 of 16 December 2016 through which the Italian Government has adopted the European Directive 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 involved, the Italian Association for Hydrogen and Fuel Cell and others interested stakeholders.

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.

Hydrogen as renewable energy

There is also a growing interest around the production of green hydrogen also as an instrument to promote the revamping of renewable energy plants, as attested by the approval of Puglia 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 the same approach, developing a comprehensive regulatory framework aimed to incentivise the use of hydrogen as an instrument to increase the renewable energy market.

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