Category: European Union Electricity Market Glossary

Published: 08 June 2019

Last Updated: 20 August 2023

The EU legislation does not define power-to-gas (P2G) installations. This is about to change, for example, the definition of 'power-to-gas demand unit' is proposed by the ACER in the process of public consultation announced on 17 July 2023 for the Network Code on Demand Connection (NC DCC) revision: 'power-to-gas demand unit' means a demand unit that converts electricity to gases (such as hydrogen or, with subsequent methanation, synthetic methane or other gases.

15 December 2021 Commission proposes new EU framework to decarbonise gas markets, consisting of: - Proposal for a Directive of the European Parliament Parliament and of the Council on common rules for the internal markets in renewable and natural gases and in hydrogen, COM/2021/803 final - Proposal for a Regulation of the European Parliament Parliament and of the Council on the internal markets for renewable and natural gases and for hydrogen (recast), COM/2021/804 final   11 February 2021 Regulatory Treatment of Power-to-Gas, “European Green Deal” Regulatory White Paper series (paper #2) relevant to the European Commission’s Hydrogen and Energy System Integration Strategies, ACER, CEER

 

Technically, P2G are electrolysers that convert electricity to gas - hydrogen or, with subsequent methanation, synthetic methane (Regulatory Treatment of Power-to-Gas, “European Green Deal” Regulatory White Paper series (paper #2) relevant to the European Commission’s Hydrogen and Energy System Integration Strategies, ACER, CEER, 11 February 2021, p. 1, 4). 

Electricity Directive (EU) 2019/944 includes power-to-gas activities under the definition of ‘energy storage’ in the electricity system. The aforementioned Regulatory White Paper of 11 February 2021 mentions the EU legislation does not have a definition for gas storage in terms of hydrogen or synthetic methane - nevertheless, power-to-gas installations are not in themselves storage installations, although they may be pivotal to support energy storage. Hence, according to the said Regulatory White Paper, the definition of electricity storage might be modified in order to better clarify its application to power-to-gas.

Regarding electricity tariffication, power-to-gas producers are generally treated as consumers and, as such, they are charged with the same tariffs and levies as any other consumer of the same size and features (Regulatory Challenges for a Sustainable Gas Sector, CEER Public Consultation Paper, Ref: C18-RGS-03-03, 22 March 2019, p. 18, 19).

The said CEER Public Consultation Paper of 22 March 2019 differentiates the two diverging, from the regulatory (and technical) point of view, situations with the involvement of power-to-gas installations:

- first, when power-to-gas plant produces gas taking electricity from the network, and this gas is exclusively stored and used to locally re-generate electricity which is then re-fed into the electricity network, and

- second, when gas produced through power-to-gas installation is injected in the gas network.

In the first case, power-to-gas installations only use the electricity network. Hence, in the CEER’s opinion, those installations can be considered as electricity storage infrastructures and they could be treated as such in terms of tariff settings. CEER invokes in this regard the examples of some countries where pump storages are not charged with network tariffs for the electricity used to pump water in order to avoid double charging. According to the CEER, similar provisions could also be applied to power-to-gas plants. 

In the second configuration, power-to-gas installations make use of the gas network and, in case electricity is taken from the network, they also use the electricity network (there may be also the configuration where the power-to-gas installation is directly connected to renewable power plants and do not make use of the electricity network). In this situation the said power-to-gas installations need to be considered differently from the gas sector point of view on the one hand, and the electricity point of view, on the other.

In the former perspective they could be treated as gas producers that inject gas into the network, in the latter, they are high-intense consumers, where the electricity is the main input of production (if there are special provisions for high-intense consumers, they could be applied also to power-to-gas installations).

European Gas Target Model review and update, ACER, January 2015, p. 33 Power to gas (P2G) technologies P2G technology acts as a link between the electricity and the gas systems. P2G is a technology – water electrolysis combined with hydrogen methanation – that takes electricity as an input and transforms it in either hydrogen or synthetic methane. The output of a P2G unit is injected into the existing natural gas network, thus facilitating the storage and transport of energy. P2G particularly aims to profit electricity curtailed RES generation, but also aims to act as a balancing tool in the electricity market. The advantages of this technology include the ability to separate supply from demand, improved stability in the electricity network and better predictability of renewable energy production. Germany is leading the way in P2G, with currently around 15 operational pilot and demonstration projects. However, the current lack of large scale P2G applications - and of a clear business case - does not facilitate a clear insight into the future technology’s economics in the EU. Several key issues need to be tackled before a large-scale integration of P2G solutions in the network becomes possible. The structure of the electricity markets, their system management rules, and the role of RES producers are the key factors affecting the supply chain of P2G.

 

TSOs' role

 

The Council of European Energy Regulators (CEER) in the aforementioned document of 22 March 2019 (Regulatory Challenges for a Sustainable Gas Sector, CEER Public Consultation Paper, Ref: C18-RGS-03-0, p. 13) expressed an opinion that the involvement of Transmission System Operators (TSOs) in power-to-gas plants activity is not possible.

This is due to the facts that:

• power-to-gas plants are usually classified as gas production plants;
• in principle, network operators are not allowed to operate any gas production plants based on the current legal provision in Article 9 (1) of Directive 2009/73/EC (Gas Directive);
• this prohibition is addressed not only to gas TSOs but also to electricity TSOs (this follows from Article 9 (3) of the Gas Directive, according to which a competitive activity of the other sector is also relevant to unbundling). 

This stance has been also upheld in the Market Monitoring Report (Gas Wholesale Market Volume) of 14 July 2021 where ACER and CEER jointly underline that the main principles that govern the internal EU gas market, i.e.:

See also:    Hydrogen use in the energy sector   Gas target model

- unbundling,
- third-party access,
- non-discrimination,
- absence of cross-subsidies,
- clear separation between regulated network activities and market-based production and supply activities;
are to be maintained for low-carbon gases.

Power-to-gas production facilities are in principle a competitive activity and the role of TSOs, as well as Distribution System Operators (DSOs), is to be limited to foster research in early phases – on top of reliable network operation – rather than owning or operating production plants.

However, if no sufficient market interest is detected, larger roles could be assigned to TSOs under controlled conditions.

 

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