The EU Hydrogen Strategy acknowledges that regulatory reform will need to be implemented to encourage the development of a hydrogen market across the whole value chain.
Currently, one of the main pieces of EU legislation relevant to clean hydrogen is the recast Renewable Energy Directive which requires Guarantees of Origin schemes (providing proof of “clean” production which can be traded separately from the physical commodity to which they relate) to be established by member states by 2021 for renewable gases, including green hydrogen.
However, as acknowledged by the Hydrogen Strategy, common low-carbon thresholds or standards for the promotion of hydrogen production installation based on their greenhouse gas performance remain to be developed. The Commission also notes that comprehensive terminology and EU-wide criteria for certification of green and blue hydrogen will be required. The private CertifHy scheme has sought to create a Guarantees of Origin scheme that is capable of running on an EU-wide basis, with a view to – as CertifHy itself puts it – avoiding “bottom-up developments of inconsistent national GO schemes that can hamper establishing an effective European market for Green and Low-carbon Hydrogen (as is currently the case for biomethane/biogas)”.
The Hydrogen Strategy also refers to the need for regulatory and financial support for networks that would benefit clean hydrogen. This may include a revision of the Trans-European Networks for Energy Regulation, which provides a framework for the selection of electricity, gas and CO2 infrastructure projects of common interest (“PCIs”) that can benefit from financial support through public funds, a review of the internal gas market legislation for competitive decarbonised gas markets and of the Alternative Fuels Infrastructure Directive.
The Hydrogen Strategy suggests that, for early phase projects, existing rules for closed distribution systems or direct lines may be relevant – in other words, some of the regulatory requirements on unbundling (which would restrict investors in hydrogen projects participating in multiple parts of the value chain) and third party access, could be disapplied to allow initial projects to be developed. However, the strategy does acknowledge that third party access rules will need to be developed in time to ensure hydrogen infrastructure is accessible on a non-discriminatory basis (though it does not explore whether or how developers can be incentivised to develop projects that design-in redundant capacity so as to avoid future inefficiencies from unnecessary duplication of infrastructure). The Hydrogen Strategy does not address the longer-term view on the application of unbundling rules to hydrogen projects.
The Commission notes that a regulatory framework for a liquid hydrogen market will be needed. This includes the possibility of blending hydrogen into the existing gas network, though the Hydrogen Strategy notes that blending is less efficient and diminishes the value of hydrogen. This will therefore require some controls on the technical requirements and gas quality standards to ensure that different Member States do not accept different levels of blending, thereby hindering cross-border flows. A review of the internal gas market legislation for competitive decarbonised gas markets will be needed, to ensure interoperability of markets for pure hydrogen, common quality standards or cross-border operational rules. However, there is currently little clarity on what this may entail. Some guidance on the future regulation of hydrogen transport may come from the European Commission’s legislative proposal for an amendment of the EU gas legislation due to be announced in December 2021.
On 14 July 2021 the Commission announced its “Fit for 55” package which included a number of legislative and policy proposals to enable the EU to meet its commitment to reduce greenhouse gas emissions by at 55% by 2030 in comparison with 1990 levels. Although not exclusively focussed on clean hydrogen, the Fit for 55 package contained a number of proposals that could significantly boost the development of the European Union’s clean hydrogen economy, including:
- targeted 50% share for renewable fuels of non-biological origin (RFNBO) in the industrial sector by 2030. Hydrogen would classify as an RFNBO;
- targeted 2.6% share of RFNBOs in the transportation sector as part of the amended Renewable Energy Directive (RED);
- free allowances under Emissions Trading Scheme (ETS) extended to producers of renewable hydrogen;
- member states allowed to reduce or eliminate taxes on renewable hydrogen under the Energy Taxation Directive (ETD);
- a target of one hydrogen refuelling station available every 150 km along the TEN-T core network and 100 km along the TEN-T comprehensive network; and
- maximum carbon intensity proposals on the shipping sector and minimum blending requirements for sustainable aviation fuels (SAFs) in the aviation sector, both of which would promote the update of renewable hydrogen in the shipping and aviation sectors.
Click here for further information on the current thinking on regulations in the EU.