This article was written in collaboration with Partner, Nayantara Nag and Counsel, Ipshita Ahuja of Trilegal
Introduction
The EU's Renewable Fuels of Non-Biological Origin (RFNBO) regulations are part of the broader effort by the EU to decarbonize the energy sector and achieve climate goals.
This note explores the intricacies of the EU RFNBO regulations and their potential impact on green ammonia production for export in India and examines the regulatory framework to provide a roadmap for how India can navigate these regulations to become a leader in the global green ammonia market.
What are the EU RFNBO regulations?
The RFNBO rules are embedded within the Renewable Energy Directive (EU) 2018/2001, also known as RED II. This directive sets the framework for promoting renewable energy sources across the EU. RED II was amended in October 2023 by Directive (EU) 2023/2413 (RED III).
The RFNBO rules aim to support the EU's decarbonization objectives, particularly in sectors that are hard to electrify, such as aviation and maritime transport. By setting clear standards for renewable fuels, the EU seeks to reduce reliance on fossil fuels and promote cleaner alternatives.
The European Commission has adopted two delegated acts to define and regulate RFNBOs:
- The First Delegated Act (Commission Delegated Regulation (EU) 2023/1184) defines the conditions under which hydrogen, hydrogen-based fuels, or other energy carriers can be considered RFNBOs. It emphasizes (among others) the principle of "additionality," ensuring that renewable hydrogen is produced from new renewable energy sources.
- The Second Delegated Act (Commission Delegated Regulation (EU) 2023/1185) provides a methodology for calculating the life-cycle greenhouse gas emissions and emissions savings of RFNBOs. This includes emissions from electricity consumption, processing, and transportation.
These rules aim to provide regulatory certainty for investors and support the EU's goal of producing 10 million tonnes of domestic renewable hydrogen and importing another 10 million tonnes by 2030.
These Delegated Acts are crucial for ensuring that hydrogen and other RFNBOs are produced from renewable electricity and meet the EU's renewable energy targets.
While the RFNBO rules provide a clear regulatory framework, they also present challenges for producers, especially those outside the EU and in markets such as India. The strict production requirements can make it more difficult and expensive to meet the standards, but they also ensure the credibility and sustainability of the fuels.1
The RFNBO legislation does not stand alone. Europe continuously focuses on the roll out of the green hydrogen economy, as a fundamental part of its economic strategy. In February 2025 this was reiterated in the context of the Clean Industrial Deal.
How are RFNBOs defined in RED III?
RFNBOs are defined in the RED III as being liquid and gaseous fuels the energy content of which is derived from renewable sources other than biomass. “Energy from renewable sources” or "renewable energy” means energy from renewable non-fossil sources, namely wind, solar (solar thermal and solar photovoltaic) and geothermal energy, osmotic energy, ambient energy, tide, wave and other ocean energy, hydropower, biomass, landfill gas, sewage treatment plant gas and biogas.
Hydrogen produced from biomass or biogas cannot qualify as RED III compliant RFNBO.
What are the three criteria that RFNBOs needs to satisfy to be RED III compliant?
The EU RFNBO legal framework covers the following requirements in relation to production of RFNBOs:2
- Source of electricity and “additionality”: The RED III requires that renewable electricity be used to produce RFNBOs and that such renewable electricity is “additional”, i.e. that bringing RFNBO production facilities into operation is combined with bringing additional renewable electricity capacity into operation. As we will see below, it is also possible to use electricity from the grid that is partly renewable and still be RED III compliant. Additionality is not a requirement if the share of renewable electricity in the grid is higher than 90%.
- GHG emission savings: the RFNBOs produced must reduce greenhouse gas emissions (via avoided emissions) by at least 70% compared to the fossil fuel reference as set out in the RED III and the Second Delegated Act (which is 94 grams of CO2 equivalent per mega Joule (MJ)).
- Mass balance and traceability in the supply chain: The RFNBO sustainability information must remain physically linked to the RFNBO. This requirement also applies when hydrogen is sold by a producer to an end-user (possibly through intermediaries) and when hydrogen is converted into ammonia, methanol etc.
In addition to these three requirements, the RFNBOs must meet the definition of RFNBO in the RED III described above.
If fuel produced cannot qualify as RED compliant RFNBO, it is still possible for that fuel to qualify as ‘low carbon fuel’. In the Clean Industry Deal, the European Commission announced that it will adopt a delegated act in relation to low carbon hydrogen in the first quarter of 2025.
Electricity used for the production of RFNBOs
There are three options to produce RFNBOs from renewable electricity (details of these are set out in the RED III and the Delegated Acts referred to above):
Grid mix: It is possible to produce fuel that counts as (partly) RFNBO with electricity from the grid, without a power purchase agreement (PPA) being entered into between a renewable electricity plant and a fuel producer. In this respect, the part of the produced fuel that counts as RFNBO will be based on the share of renewable electricity of the public grid in the respective country. So , for example, if the percentage of renewable electricity in the grid is 50%, the fuel produced will count as 50% RFNBO.3 If only electricity is taken from the grid to produce RFNBOs, the percentage of renewable energy in the grid should be 80% or higher in order to achieve the 70% GHG emission saving requirement. Such a high average share of renewable electricity is not anticipated in India in the immediate years to follow. It is however possible to produce RFNBOs by electricity sourced from both the public grid and through a PPA.
Direct line: A ‘direct line’ is defined in the First Delegated Act to mean an electricity line linking an isolated electricity generation plant with an isolated RFNBO producer or the renewable electricity production and RFNBO production takes place within the same installation. An additional requirement is that the renewable electricity installation should have not come into operation (i.e. start commercial production) more than 36 months before the RFNBO production installation comes into operation (this is to ensure the “additionality” referred to above). Where additional production capacity is added to an existing installation producing RFNBOs, the added capacity will be considered to be part of the existing installation, provided that the capacity is added at the same site and the addition takes place no later than 36 months after the initial installation came into operation. It is still permissible under the direct line option for an RFNBO production installation to be connected to the grid, however electricity offtake from the grid to produce RFNBOs is not allowed although electricity from the grid could be used to power the remaining parts of the RFNBO production installation (i.e. balance of plant). In this case at least two electricity meters would be required to measure if any electricity has been taken from the grid to produce RFNBOs.
If the RFNBO production installation has a grid connection in addition to a direct line, it would also be possible to produce RFNBOs by using only grid electricity. In this case, the applicable criteria would be those under Article 4 of the First Delegated Act instead of Article 3 of the First Delegated Act (these are set out in the grid connection section below).
Grid connection: There are four sub-categories set out under the First Delegated Act, through which a grid connected RFNBO production installation can satisfy the requirement of producing RFNBOs through renewable electricity:
- a share of renewable electricity in the grid that is higher than 90%;
- an emission intensity of electricity in the grid of less than 18 grams of CO2 equivalent per mega Joule (MJ);
- the renewable power sources were curtailed and the electricity consumed to produce RFNBOs reduced the need for curtailment by a corresponding amount; and
- buying renewable power through a PPA.
The rest of this section focusses on option (iv) (i.e. buying renewable power through a PPA) as it is the most likely scenario that would apply to green hydrogen production facilities in India that are looking to comply with the RFNBO requirements under the RED III. As mentioned above, it is permissible to account for the electricity in such a way that the electricity for the balance of plant (compressor, gas cleaning, fans for cooling etc.) is not fully of renewable origin and that all the electricity for the actual production of the RFNBOs themselves within the production installation is sourced directly from a PPA. However, the CO2 content of electricity sourced from the grid should be taken into account in this case to calculate the GHG emissions savings achieved by the RFNBO produced.
For a grid-connected RFNBO production installation to satisfy the renewable electricity criteria through purchase of renewable energy through a PPA:
- a PPA must be entered into;
- the requirements on “additionality” must be satisfied;
- “temporal correlation” must be demonstrated; and
- “geographical correlation” must be demonstrated.
We look at these requirements in a bit more detail below:4
- Signing a PPA: A PPA with a renewable energy developer must satisfy the following criteria:
- the PPA must be signed directly by the RFNBO producer with the renewable energy generator. The PPA does not need to be with another entity; it can be with the same company in another location;
- the installations producing renewable electricity that is used to produce RFNBO must be clearly identified in the PPA;
- the production of RFNBOs based on the renewable PPA can only be claimed if the electricity contracted under the PPA has effectively been produced; and
- the owner of the renewable electricity production installation(s) must send production data to the RFNBO producer. These must be monthly or hourly data depending on whether the temporal correlation should be demonstrated on a monthly or on an hourly basis.
- Demonstrating “additionality”: This requirement is to prove that new renewable energy sources were installed to feed the RFNBO production installation. The renewable electricity installation should have not come into operation (i.e. start commercial production) more than 36 months before the RFNBO production installation comes into operation. As well, it must be demonstrated that no financial support has been granted for the renewable electricity production, i.e., the renewable electricity generation installations have not received financial support in the form of operating aid or investment aid, which would include any benefits received from public authorities for the production of renewable electricity including feed-in tariffs, contracts for difference, or any direct payments linked to the production of renewable electricity.5 However, this excludes obligations or restrictions placed on energy consumers, producers or suppliers such as renewable energy obligations, financial support received by installations before their repowering, any financial support for land or for grid connections; and support that does not constitute net support (e.g. support that is fully repaid), and support for installations generating renewable electricity that are supplying installations producing RFNBO used for research, testing and demonstration.
In the case of India, it may be the case that the waiver of Inter-State Transmission System (ISTS) charges (i.e. charges payable by an electricity consumer in one Indian state purchasing electricity generated in another Indian state) put in place by the Indian government for green hydrogen/green ammonia projects commissioned on or before 31 December 2030 which utilise renewable energy from projects commissioned after 8 March 2019 would be considered as operating aid or investment aid.
The requirement to demonstrate “additionality” does not apply to RFNBO manufacturing facilities that will come into operation before 1 January 2028. Given the relatively long construction period for green hydrogen/ammonia production facilities (2-3 years), it is expected that most green hydrogen/ammonia facilities in India will become operational only by 2029-30 and thus would not be able to enjoy the benefit of this exemption.
- Demonstrating “temporal correlation”: This is a requirement to prove that:
- RFNBOs were produced at the same time as the renewable electricity was produced under a PPA; or
- the production of such RFNBOs was through renewable electricity from a new storage asset located behind the same grid connection point as the RFNBO production installation or at the renewable electricity installation that has been charged at the same time as when the electricity under the renewable PPA has been produced.
It is not clear yet how this requirement would be satisfied if the renewable electricity is sourced from (for example) a pumped hydro project which is not co-located with the green ammonia production facility (as may be the case for such projects in India).
Prior to 1 January 2030, the requirement of temporal correlation needs to be satisfied monthly. After 1 January 2030, an hourly correlation will be required. The operator of an RFNBO production installation would need to make sure it has metering data of the RFNBO production installation input and the renewable electricity output of the PPA contracted supplier. The RFNBO producer can prove the temporal correlation by comparing the electricity use in the RFNBO production plant with the electricity produced from the renewable electricity production installations with which a PPA is signed to demonstrate that the former is equal to or lower than the latter.
As most green hydrogen/ammonia facilities in India are expected to become fully operational only by 2029-30, these will need to comply with the hourly temporal correlation requirement. This poses a significant challenge for Indian green hydrogen/ammonia producers looking to comply with RED III requirements, as such producers will need to procure round-the-clock (RTC) power (i.e., from solar-wind hybrid projects coupled with energy storage).
It should be noted though that temporal correlation is automatically fulfilled at a low electricity price. As per the First Delegated Act, temporal correlation will always be considered complied with if the RFNBO is produced during an hour in which the day-ahead electricity price is lower than EUR 20/MWh or lower than 0.36 times the EU emissions trading system (ETS) price. Recent solar and wind energy tariffs in India have been observed to be around INR 2 to 2.50 per kWh, which translates to approximately EUR 22 to 27 per MWh; however some competitive bidding processes have resulted in even lower tariffs, occasionally dipping below EUR 20 per MWh.
- Demonstrating “geographical correlation”: This requirement is straightforward for European countries where the bidding zones are clearly identified. A “bidding zone” here means a geographical area in which bids and offers from participants in an electricity market can be matched without cross-zonal capacity. For example, if a country is one bidding zone, then the geographical correlation requirement is automatically complied with if both the RFNBO production plant and the renewable electricity production installations are located in the same country. However, for non-EU countries such as India, this requires an analysis of the electricity market to determine the equivalence of a bidding zone. Guidance from the European Commission suggests that certifiers would need to assess what constitutes a ‘bidding zone’ in countries where this concept does not exist (such as India), and that if the electricity grid of the country is integrated and there are no geographically differentiated electricity prices, the whole country could be considered as one bidding zone.
In the absence of clear rules, it is not entirely certain if India will be considered to constitute one bidding zone6 even though it is one of the largest synchronous interconnected electricity grids in the world.7 This lack of clarity creates challenges for green hydrogen/ammonia producers looking to comply with RED III requirements.
In theory, to comply with this geographical correlation requirement, Indian green hydrogen/ammonia producers could choose to either co-locate renewable energy installations with the green hydrogen/ammonia production plant or develop green hydrogen/ammonia production facilities near renewable energy installations. In practice, however, locating green hydrogen/ammonia production plants in close proximity to renewable energy installations is challenging due to complexities and costs associated with land acquisition. Green hydrogen/ammonia manufacturing plants in India are being developed near ports to allow for easy access to maritime transportation for exporting green hydrogen/ammonia as well as reducing capital costs (and resultant carbon emissions) associated with developing pipeline infrastructure to transport hydrogen from the generation facility to the port. Both green hydrogen/ammonia manufacturing plants and renewable energy installations require significant amount of land. Acquiring additional land or obtaining right of use for land near ports (with existing transmission infrastructure) for renewable energy installations is difficult and cost intensive. Thus, generally, it may be challenging to set up renewable electricity production installations in the same location as the green hydrogen/ammonia manufacturing plants, which could potentially result in non-compliance with the geographical correlation requirement if India is not recognised by the relevant certifier as a single bidding zone.
The requirement on geographical correlation can also be complied with if the RFNBO production installation is located in one bidding zone and the renewable electricity production installations are located in interconnected bidding zones. However, the electricity provision is then limited by the interconnection capacity and by the extra requirement that compliance can only be demonstrated for the hours during which the day-ahead electricity price in the bidding zone where the renewable electricity generation installation is located is equal to or higher than the day-ahead electricity price in the bidding zone where the RFNBO production installation is located.8
GHG emission savings
As noted above, the RFNBOs produced must reduce greenhouse gas emissions by at least 70% compared to the fossil fuel reference as set out in the RED III. The method to calculate whether this is the case is set out in the annex to the Second Delegated Act. To become certified under an RFNBO voluntary scheme (see note on certification below), a RFNBO producer must make the RFNBO GHG emissions savings calculations, thereby demonstrating that it is capable of producing RFNBOs. These calculations will be checked by the auditor from the relevant certification body.
To assess whether the 70% threshold is met, the GHG emissions intensity may be calculated as an average for the entire production of fuels occurring during a period of, at most, one calendar month but may also be calculated for shorter time intervals.
The Second Delegated Act provides that if RFNBOs are produced with electricity that can be qualified as fully renewable by virtue of the RED III (generally sourced through a PPA), the time interval for the GHG calculations should be in line with the time interval of temporal coordination mentioned in the First Delegated Act (elaborated on above), i.e. the GHG calculations must currently be made on a monthly basis and from 1 January 2030 on an hourly basis.
Mass balance and traceability in the supply chain
The mass balance rules require strict accounting for produced, incoming (purchased) and outgoing (sold) volumes of RFNBO.9 A mass balance should be made on a monthly or quarterly basis. The mass balance concerns the production, purchase and sale of RFNBOs that comply with the three RED III requirements and hence for which Proofs of Sustainability (POS) can be issued.
A POS is a declaration by the RFNBO producer certifying compliance of the quantity of the RFNBO with the sustainability and greenhouse gas emissions savings criteria set out in the RED III. A POS must contain detailed information on the sustainability of the RFNBO delivered and on the delivery itself (e.g. details of the seller and the buyer must be included).
The mass balance must include the production, purchase and sale of all hydrogen (and derivatives such as ammonia) i.e. including RFNBOs that do not meet the RED III requirements and also non-RFNBO hydrogen and derivatives. The mass balance should indicate which hydrogen is RFNBO and which is not, and which RFNBO is RED III-compliant and which is not.
How can compliance with the RFNBO requirements in the RED be demonstrated using certification
Compliance with the RED III requirements in relation to RFNBO must be demonstrated by certification through an RFNBO voluntary scheme.
Such voluntary schemes/certifiers and national certification schemes of EU countries help to ensure that RFNBOs are sustainably produced by verifying that they comply with the EU sustainability criteria, as well as the relevant methodologies for RFNBOs. While the schemes are run privately, the European Commission can recognise them as compliant with the rules included in the RED III. For a scheme to be recognised by the EU, it must fulfil criteria such as:
- feedstock producers comply with the sustainability criteria and the criteria for RFNBOs production set out in the RED III and its implementing legislation;
- information on the sustainability characteristics can be traced to the origin of the feedstock;
- all information is well documented;
- companies are audited before they start to participate in the scheme and retroactive audits take place regularly;
- the auditors have both the generic and specific auditing skills needed regarding the scheme’s criteria.
The decision recognizing a voluntary scheme has usually a legal period of validity of 5 years. By way of example, through the Commission Implementing Decision (EU) 2024/3180 the EU recognized the “CertifHy” voluntary scheme for demonstrating compliance with the requirement for RFNBOs.
The steps for certification under CertifHy involve (i) a pre-certification, i.e. the initial step which helps identify potential compliance gaps and prepares the facility for the full certification process; (ii) full certification, i.e. once precertification is complete, the facility undergoes a detailed audit to ensure all criteria are met; and (iii) ongoing compliance, i.e., regular audits and updates ensure continued compliance with evolving standards.
