The European Council has agreed on its general approaches towards the hydrogen and gas markets decarbonisation package, including the creation of a new body for hydrogen network operators to manage dedicated hydrogen infrastructure and interconnections.

Before the establishment of the new body, to be called the European Network of Network Operators for Hydrogen (Ennoh), the European Commission will set up a temporary platform with the EU’s Agency for the Cooperation of Energy Regulators, the European network of transmission system operators for gas and electricity (Entsog and Entsoe, respectively), and the EU’s Distribution System Operators entity. Entsog will be responsible for the development of EU-wide network development plans, including hydrogen networks.

The package of proposal calls for Ennoh to be in place before 2026 in order to publish its first ten-year development plan to inform the EU’s eighth list of Projects of Common Interest (PCI).

The EU has published its list of PCIs every two years and is assessing which projects will be included in the latest PCI and Projects of Mutual Interest (PMI) list, due to come into force by Q1 2024. Hydrogen infrastructure saw 147 submissions for PCI or PMI status.

147 – Hydrogen project applications for PCI or PMI status

“The development of an interconnected pan-European hydrogen system—building on a large extent on the repurposing and retrofitting of existing gas infrastructure, but also on new assets—is a cornerstone of the EU’s goal to achieve climate-neutrality by 2050,” says Boyana Achovski, secretary-general of trade group Gas Infrastructure Europe (GIE). GIE argues that a regulatory framework must be in place to facilitate these projects, calling for discussions around the hydrogen and gas markets decarbonisation package to be concluded as quickly as possible.

However, the proposed PCIs and PMIs have also drawn criticism from environmental NGO Bellona which, in its consultation response focused on German projects, found that most did not provide enough information around climate safeguards. The NGO calls on the Commission to grant PCI or PMI status only to “projects contributing to a no-regret hydrogen infrastructure; meaning such hydrogen corridors that link European industrial clusters with no alternative decarbonisation pathways to hydrogen production and strategic storage sites”, Bellona says in its response.

Bellona also urges the Commission to be cautious when awarding PCI or PMI status to projects run by gas network operators, advocating for unbundling of gas and hydrogen network operators. The NGO opposes projects that involve or do not explicitly exclude hydrogen blending.

Blending

The Council has revised the package to lower the limit of hydrogen blending into the natural gas system to 2pc from a proposed 5pc.

The Council sets different tariff discounts of 100pc for renewable gases and 75pc for low-carbon gases, as well as a 100pc discount to capacity-based transmission and distribution tariffs for underground gas storage facilities and LNG facilities. While the delegated acts defining renewable hydrogen have been criticised as overly restrictive, low-carbon gases including hydrogen are defined as having 70pc lower greenhouse gas emissions compared with equivalent fossil fuels.

“Europe is on a journey to shift away from natural gas to renewable and low-carbon gases, and we have to create the right market conditions for that to happen, in a way that promotes competitiveness, protects consumers and advances our climate-neutrality objective for 2050,” says Ebba Busch, Sweden’s minister for energy, business and industry and chair of the European Council meeting that discussed the package.

However, the package may not be enough to provide certainty for the industry.

“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,” says Daniel Fraile, chief policy officer at trade association Hydrogen Europe.

“We call on legislators to replicate the existing rules for the distribution of natural gas to the hydrogen sector. We also encourage policymakers 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 adds.

The European Parliament in late March voted against a motion objecting to the delegated acts defining renewable hydrogen—a relief to an industry that has already seen significant delays during the acts’ drafting and consultation process.

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Author: Polly Martin