Hydrogen was deemed to constitute in 2020 less than 2% of the EU total energy system, but projected to grow to circa 15% in long-term decarbonisation strategies.
The European Commission hydrogen strategy of 8 July 2020 ambitions at least 40 GW of renewable hydrogen electrolysers installed by 2030 in the EU plus other 40 GW in Europe’s neighbourhood with export to the EU (ACER Market Monitoring Report 2019 – Gas Wholesale Market Volume, 23 September 2020).
The same strategy makes also the following prediction as regards the electrolysers costs:
"Costs for renewable hydrogen are going down quickly. Electrolyser costs have already been reduced by 60% in the last ten years, and are expected to halve in 2030 compared to today with economies of scale. In regions where renewable electricity is cheap, electrolysers are expected to be able to compete with fossil-based hydrogen in 2030. These elements will be key drivers of the progressive development of hydrogen across the EU economy".
Some of the EU Member States have established guarantees of origin (GOs) for renewable gases.
The Directive (EU) 2018/2001 of the European Parliament and of the Council of 11 December 2018 on the promotion of the use of energy from renewable sources (RED II) stipulates that the EU Member States may arrange for guarantees of origin to be issued for energy from non-renewable sources (Article 19(2) of the RED II).
According to Recital 59 of the RED II:
"Guarantees of origin which are currently in place for renewable electricity should be extended to cover renewable gas. Extending the guarantees of origin system to energy from non-renewable sources should be an option for Member States. This would provide a consistent means of proving to final customers the origin of renewable gas such as biomethane and would facilitate greater cross-border trade in such gas. It would also enable the creation of guarantees of origin for other renewable gas such as hydrogen."
However, the energy market regulators (CEER Public Consultation Paper of 22 March 2019, Regulatory Challenges for a Sustainable Gas Sector, Ref: C18-RGS-03-0, p. 19) explicitly underline “black electricity cannot be converted into green gas”.
This stance is based on the RED II definition of a “renewable energy source” - decarbonised gases, e.g. hydrogen derived from natural gas through steam methane reforming or thermal methane pyrolysis, “would not be considered as renewable gas but could be included in the national GO systems as decarbonised gas, thereby making transparent to gas customers the low-carbon nature of this gas”.
The European Commission's EU Hydrogen strategy characterises low-carbon hydrogen as encompassing blue hydrogen and electricity-based hydrogen with significantly reduced full life-cycle GHG emissions compared to existing hydrogen production (European Parliament Briefing, EU hydrogen policy, Hydrogen as an energy carrier for a climate-neutral economy, February 2021, p. 3).
ACER Market Monitoring Report 2019 – Gas Wholesale Market Volume of 23 September 2020 (p. 18 - 20) refers to the following facts on the hydrogen's use in the EU as of 2019:
- production efforts have been mainly focused on biogas, which on average accounts for 15% of EU gas domestic production and 4% of EU gas consumption,
- Germany, the UK and Italy are the frontrunners in absolute terms, while the relative weight of biogas and biomethane over final gas demand varies between the EU Member States; in Sweden, Denmark and Germany, its consumption reached 10% in 2019,
- most biogas continues to be produced and consumed close to the production site, either for heating or electricity generation,
- upgraded biomethane volumes injected into the network are still low – 5% of biogas production on average – due to higher production costs, gas quality and other technical constraints, the notable exceptions are Denmark and the Netherlands, where injections exceed 15% of biogas production,
- in absolute terms, Germany is the largest biomethane producer with more than 1 bcm in 2019,
- hydrogen is an established traded commodity in its own right, primarily produced on-site and consumed in certain industrial processes, in the refinery sector and for ammonia production – where its market value is higher than for electricity generation.,
- absolute hydrogen consumption is the highest in Germany and the Netherland,
- it is estimated that 95% of EU hydrogen production in 2018 originated from steam methane reforming (without carbon capture storage - CCS) and coal gasification, while only 5% came from electrolysis (for the latter, with a limited use of RES),
- large scale methane reforming to hydrogen with CCS is moving ahead only in the UK, a key limiting factor is the availability of suitable carbon dioxide storage structures,
- in the area of electrolysis, there are quite a few pilot and small-scale plants in operation, chiefly in Germany, France and the Netherlands.
As regards the price competitiveness of the various carbon neutral gas production technologies the said ACER Report of of 23 September 2020 acknowledges that the cost of low-carbon gases was three to more than five times higher than the price of conventional gas in 2019 - therefore, together with further technological developments and RES prices, a central element for determining the future competitiveness of all decarbonised energy technologies, including carbon-neutral gases, will be the price of carbon emissions under the EU ETS system.
Network infrastructure for the transport of pure hydrogen is not covered by Gas Directive 2009/73/EC "as the natural gas system does not include pipelines or network infrastructure dedicated to the transport of pure hydrogen" (When and How to Regulate Hydrogen Networks? “European Green Deal” Regulatory White Paper series (paper #1) relevant to the European Commission’s Hydrogen and Energy System Integration Strategies, ACER, CEER, 9 February 2021, p. 2).
Article 1(2) of the Gas Directive 2009/73/EC states in fact that the rules established by Directive for natural gas, including LNG, also apply in a non-discriminatory way to biogas and gas from biomass or other types of gas in so far as such gases can technically and safely be injected into, and transported through, the natural gas system.
Therefore, while pure hydrogen transport is not subject to the Gas Directive 2009/73/EC, hydrogen production can be considered to be subject to it since a certain amount of hydrogen can be safely blended into the gas infrastructure.
Blending of hydrogen into the gas network is addressed in ACER’s 2020 Report of 10 July 2020 on NRAs Survey: Hydrogen, Biomethane, and Related Network Adaptations.
As is underlined in the European Commission document of 10 February 2021 "Inception Impact Assessment, Hydrogen and Gas markets Decarbonisation Package" (Ref. Ares(2021)1159348 - 10/02/2021) "the Gas Directive and Regulation are designed for the organisation and functioning of the current fossil-based natural gas sector. They do neither anticipate the emergence of alternative methane gases, such as bio- or synthetic-methane, or other gaseous fuels, such as hydrogen, nor different production patterns. For instance, they do not integrate the distributed production of renewable and low-carbon gases and they do not prevent disruptions caused by changing gas quality. This focus on natural gas may lead to a situation in which it is more difficult to switch consumption from natural gas to renewable and low-carbon gases leading to lock-in effects or delays in a more significant deployment of renewable and low-carbon gases".
Other shortcomings of existing legal framework listed in the European Commission document of 10 February 2021 are:
- Elements of the existing gas rules, focusing on natural gas mainly imported from outside the EU, do not address the specific characteristics of decentralised renewable and low-carbon gases production within the EU. The vast majority of today’s bio-methane plants in the EU are connected at the distribution level. However, the current regulatory framework does not anticipate decentralised gas injections, meaning that the tradability and access of renewable and low carbon gases to markets and the gas grid is not on a level playing field with fossil natural gas, affecting the business case of renewable and low carbon gases producers and the costs for achieving the EU’s climate objectives. Likewise LNG terminals are not necessarily fit for receiving renewable and low-carbon gases and granting access in a transparent way.
- In comparison to the electricity sector, the gas market framework lags behind on consumer protection. The growing volumes of bio-methane and hydrogen affect gas quality (i.e. the physical characteristic of gas) and thereby the design of gas infrastructure and end-user applications and entail the risk of market fragmentation.
It is noteworthy, in the Joint letter of 29 June 2021 the major European energy market players (including ENEL, EDF, Iberdrola) called for the inclusion of the hydrogen sector in the carbon border adjustment mechanism regulation (CBAM) with the intention to avoid fossil based and highly emitting hydrogen imports, which would be similar to carbon leakage for hydrogen production.
Fit for 55 amendments
On 14 July 2021 the European Commission presented the Renewable Energy Directive revision (European Commission Proposal for a Directive of the European Parliament and of the Council amending Directive (EU) 2018/2001 of the European Parliament and of the Council, Regulation (EU) 2018/1999 of the European Parliament and of the Council and Directive 98/70/EC of the European Parliament and of the Council as regards the promotion of energy from renewable sources, and repealing Council Directive (EU) 2015/652, COM(2021) 557 final).
The proposal includes the requirement for the EU Member States to ensure that the contribution of renewable fuels of non-biological origin used for final energy and non-energy purposes is 50 % of the hydrogen used for final energy and non-energy purposes in industry by 2030.
Calculation of that percentage is to be made in accordance with the new Article 22a of the RED II.
The EU ETS proposal will include the production of hydrogen with electrolysers under the EU emissions trading system, making renewable and low-carbon facilities eligible for free allowances.
16 July 2021
14 July 2021
European Commission Proposal for a Directive of the European Parliament and of the Council amending Directive (EU) 2018/2001 of the European Parliament and of the Council, Regulation (EU) 2018/1999 of the European Parliament and of the Council and Directive 98/70/EC of the European Parliament and of the Council as regards the promotion of energy from renewable sources, and repealing Council Directive (EU) 2015/652, COM(2021) 557 final, new Article 22a of the RED II
29 June 2021
16 June 2021
28 May 2021
10 February 2021
- Revision of Directive 2009/73/EC of the European Parliament and of the Council of 13 July 2009 concerning common rules for the internal market in natural gas and repealing Directive 2003/55/EC
- Revision of Regulation (EC) No 715/2009 of the European Parliament and of the Council of 13 July 2009 on conditions for access to the natural gas transmission networks and repealing Regulation (EC) No 1775/2005
9 February 2021
When and How to Regulate Hydrogen Networks? “European Green Deal” Regulatory White Paper series (paper #1) relevant to the European Commission’s Hydrogen and Energy System Integration Strategies, ACER, CEER
1 October 2020
10 July 2020
8 July 2020
Communication from the Commission to the European Parliament, take Council, the European Economic and Social Committee and the Committee of the Regions, A hydrogen strategy for a climate-neutral Europe, COM(2020) 301 final
ACER Market Monitoring Report 2019 – Gas Wholesale Market Volume, 23 September 2020