Green hydrogen is
expected to play a
key role in achieving
the Green Deal objective
of making the EU climate
neutral - with net-zero
greenhouse gas emissions
- by 2050.
The EU Hydrogen Strategy
sets an ambitious target
of 40GW electrolyser
capacity by 2030. One of the
challenges in expanding the
roll-out of green hydrogen
is that its production is not
yet cost-competitive with
blue and grey hydrogen
(produced from fossil fuels),
due to high production,
conversion, transport and
storage costs. The European
Commission (EC) is trying to
stimulate use of and demand
for green hydrogen, for
example by making use in
industry mandatory, and by
including new targets for 2030
in proposed amendments to
the recast Renewable Energy
Directive (RED III).
RED III is part of the EU ‘Fit
for 55’ package, presented
July 14, 2021, and imposes
an EU-wide reduction
target of at least 55% in net
greenhouse gas emissions
by 2030, compared to 1990
levels. Green or renewable
hydrogen was first recognised
as a so-called Renewable
Fuels of Non-Biological Origin
(RFNBO) in the 2018 recast
Renewable Energy Directive
(RED II), but its use was
limited to the transport sector.
In the proposal for RED III, RFNBOs are defined as “liquid
and gaseous fuels, the energy
content of which is derived
from renewable sources
other than biomass.” The
use of RFNBOs is extended
from transport to the industry
sector (e.g. iron and steel,
aluminium, chemicals,
cement) in order to promote
green hydrogen in hard-todecarbonise
sectors. For
2030, a target of 2.6% applies
to the transport sector, while
in industry 50% of grey
hydrogen must be replaced
by green hydrogen.
In December 2021, the EC
presented the Hydrogen and
Gas Markets Decarbonisation
Package, including proposals
for a Gas and Hydrogen
Directive and for Gas and
Hydrogen Regulation. The
package aims to facilitate a
regulatory framework that
removes barriers to the entry
of hydrogen and promotes
a level playing field, and EU
infrastructure for the uptake
of renewable and low-carbon
gases. Moreover, it reduces legal uncertainty by including
definitions of renewable and
low-carbon hydrogen, in
line with those of the RED
III proposal (e.g. adhering
to the 70% greenhouse
gas reduction threshold).
Finally, the package imposes
certification requirements
for renewable and lowcarbon
hydrogen in line
with methodologies of the
expected Delegated Acts
under RED II and under the
proposed Gas and Hydrogen
Directive respectively.
“Although various
details need to be
worked out...most
jurisdictions consider
latest developments a
positive sign for the
development of green
hydrogen projects”
With this package, the EC
chose to regulate the green
hydrogen sector based on
common regulatory principles
applicable to the gas market,
but adapted to the stage of
development of hydrogen
markets. It introduced key
principles for regulating the
hydrogen market, taking into
account the future hydrogen
value chain. These principles
concern non-discriminatory
third-party access (‘TPA’),
(vertical) unbundling
requirements for hydrogen
network operators, an EUwide
hydrogen quality (purity)
standard and cost-reflective
and market-compatible
network tariffs. The idea is
that these principles provide
hydrogen market participants
– in particular investors and
operators – with insight into
what the regulatory framework
will look like in the longer term,
while offering them flexibility in
the short term. An example of
this flexibility is that negotiated
TPA is considered a possibility
until 2030, while thereafter,
regulated TPA and tariffs to
hydrogen networks apply.
Tariff regulation and tariff
discounts are imposed from
2030 to encourage uptake of
renewable and low-carbon
gases.
Across much of Europe,
there is widespread ambition
to develop the potential of
green hydrogen, given its
favourable starting position
(e.g. the potential for offshore
wind energy and existing
natural gas infrastructure can
be repurposed for hydrogen
use). The Netherlands, UK,
Germany, Spain, France and
Italy are striving to become
major players in the emerging
international hydrogen market.
Although various details
need to be worked out
from an EU and local
regulatory perspective,
most jurisdictions consider
the latest developments
as a positive sign for the
development of green
hydrogen projects.
This article was initially published for Gastech Conference 2022