News 3

Council adopts position on H2 and decarbonised gas market package

Today (28th March), the Council adopted its position (general approach) on the hydrogen and decarbonised gas market package, the regulation and directive that will shape the market for hydrogen transmission, storage, and distribution.

Hydrogen Europe welcomes the plan to set up a dedicated organisation of hydrogen network operators, named ENNOH (European Network of Network Operators for Hydrogen), to oversee infrastructure planning at the European level and to develop future network codes. The rules proposed on vertical unbundling will allow a faster uptake of hydrogen infrastructure because they allow various unbundling models to co-exist in the hydrogen sector, enabling today’s gas operators to invest into hydrogen infrastructure too. We also welcome the flexibility for member states to decide between regulated and negotiated third-party access (TPA) to hydrogen pipelines, salt caverns, aquifers, depleted gas fields, and terminals.

“This general approach on the hydrogen and decarbonised gas market package is a good start for the future of a truly European hydrogen market enabled by a common and interconnected infrastructure. However, we are concerned by the absence of a separate regulatory structure for transmission and distribution operators and the emphasis on horizontal unbundling, which places hydrogen at a disadvantage compared with natural gas and electricity,” said Daniel Fraile, Chief Policy Officer at Hydrogen Europe.

“We call on legislators to replicate the existing rules for the distribution of natural gas to the hydrogen sector. We also encourage policy makers to accelerate the process to define low-carbon hydrogen by retaining the six-month deadline for the adoption of the Delegated Acts on low-carbon fuels methodology, in line with the parliamentary position,” he added.

Hydrogen Europe would also like to highlight that exemptions to regulated TPA and unbundling applicable to major green field hydrogen infrastructure will only apply from 2026, creating uncertainty for projects with an earlier commissioning date. Finally, a clearer distinction should be made between hydrogen derivatives and carriers; for instance, by removing the reference to LOHC from the definition of hydrogen supply and hydrogen derivatives.

We now look forward to the European Parliament adopting its final position so that the trialogue process may start in earnest among the three institutions.

For more information:

Council Press Release

ITRE votes for fast transition to H2 infrastructure (February 2023)

News 2

H2 is cornerstone of EU’s Renewable Energy Directive

Today (30th March), the European Parliament, Council and Commission reached a final agreement on the review of the renewable energy directive (RED3) after two years of intense negotiations, following the reviewed directive presented by the Commissions in July 2021 as part of the FIT for 55 package.   

Renewable hydrogen will have a central role in meeting the EU binding target of 42.5% renewable energy by 2030. Industry must procure at least 42% of its hydrogen from renewable fuels of non-biological origin (RFNBOS) by 2030, though countries that can achieve a fossil-free hydrogen mix of at least 77% by 2030 can see that target reduced by 20%. This provision provides flexibility to countries aiming to develop a strong nuclear hydrogen policy and serves as an incentive to move from fossil-based to clean electrolytic-based hydrogen production.

In transport, fuel suppliers must achieve either a 14.5% reduction in greenhouse gas (GHG) emissions associated with their fuels or achieve at least a 29% renewables share in the fuel supply. In addition, at least 5.5% of the fuel mix must be composed of advanced biofuels and RFNBOs (combined binding target). Fuel suppliers will be free to choose their preferred fuel, but they must guarantee at least 1% is sourced from RFNBOs – which will lead to approximately one million tons of RFNBO demand.

“We finally have clear investment signals through binding targets for renewable hydrogen in both industry and transport,” celebrates Jorgo Chatzimarkakis, CEO of Hydrogen Europe.

“Hydrogen Europe welcomes the adoption of this key piece of legislation, which forms the foundation for a solid clean hydrogen economy in Europe. This directive solves one of the largest pieces of the hydrogen puzzle, setting a predictable market volume for renewable hydrogen,” he added.

“The flexibility on the ambitious industry target is much appreciated because the very restrictive rules on RFNBOs (adopted in February) will make it challenging for industry to meet their obligations, especially those located in countries with limited access to renewable energy,” explained Daniel Fraile, Chief Policy Officer at Hydrogen Europe.

“On the transport sector, we welcome the binding character of the RFNBO obligation although we would have preferred a higher target, while the introduction of a review clause of the RFNBO Delegated Act will be pivotal once the hydrogen market gets going,” he added.

For more information:

Council Press Release: Council and Parliament reach provisional deal on renewable energy directive

News 3

Portugal to launch Europe’s first auction for piped hydrogen

LISBON, March 27 (Reuters) – Portugal will launch a pioneering auction in the second half of this year for rights to sell hydrogen for injection into the national gas grid, which some see as a key step in kickstarting Europe’s fledgling hydrogen market.

Under the terms of the auction, energy group Galp Energia will contract to buy hydrogen mixed with natural gas from producers and resell it to meet demand, a system designed to boost investment in production by giving suppliers a guaranteed buyer.

The first auction for transporting hydrogen to consumers in Europe via pipeline is being watched to see if it can resolve one of the sector’s stickiest conundrums – balancing producers’ need for a demand pickup with clients’ desire for supply and price guarantees before making costly technology switches.

Investors have pledged about $76 billion to build green hydrogen plants, according to the Hydrogen Council and McKinsey & Company, but just $6 billion had reached the final investment decision stage as of May 2022.

The auction is designed to foster the development of hydrogen technology in Portugal, “ensuring that there is a firm offtaker at a time when private demand is still at an early stage”, Environment Minister Duarte Cordeiro’s office said in written responses to Reuters.

The Portugal solution could be an effective way of resolving the “chicken and egg” situation of waiting for demand to justify investment, said Dilara Caglayan, senior research associate for hydrogen at Aurora Energy Research.

Blending hydrogen into the existing gas network could help generate demand to get the market up and running, she said. Hydrogen auctions in other countries are targeting heavy industry. Germany is planning a “double auction” in which hydrogen or its derivatives are bought cheaply on the world market and sold to the EU’s highest bidder.

Portugal’s largest gas distributor Floene has since October been testing whether its polyethylene pipelines for gas can also carry hydrogen, providing 80 industrial and residential customers in Seixal, near Lisbon, with gas blended with 2% of hydrogen. Portugal eventually plans to lift that share to 20%.

Floene CEO Gabriel Sousa said the tests prove polyethylene is suitable to receive “100% hydrogen without any gas leaks”.