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Establishing the framework for a European hydrogen market: Commission adopts set of proposals

The European Commission has adopted a set of legislative proposals to decarbonise the EU gas market by facilitating the uptake of renewable and low carbon gases, including hydrogen and to ensure energy security for all citizens in Europe.

All to help the EU reduce greenhouse gas (GHG) emissions by at least 55 per cent by 2030, as outlined in the European Climate Law and become climate-neutral by 2050.

“Europe needs to turn the page on fossil fuels and move to cleaner energy sources,” said Executive Vice-President for the European Green Deal, Frans Timmermans. “This includes replacing fossil gas with renewable and low-carbon gases, like hydrogen.”

Mr Timmermans reminded that hydrogen is in many ways front-and-centre to the Commission’s efforts: by 2030, the goal is to have 40 gigawatts (GW) of electrolyser capacity in the EU.

Despite their minor contribution to the current EU energy mix, biogas, biomethane, renewable and low carbon hydrogen as well as synthetic methane would represent some 2/3 of the gaseous fuels in the 2050 energy mix, with fossil gas with CCSU representing the remainder.

“To deliver those volumes to end-users in the most effective and low-cost manner, we need competitive markets and infrastructure to connect production and consumption,” he said.

How to create the ground for a competitive European hydrogen market

Indeed, the Commission’s proposals (both the regulation and the directive) create the conditions for a shift from fossil natural gas to renewable and low-carbon gases, in particular, biomethane and hydrogen and strengthen the resilience of the gas system.

“A key element of this transition is establishing a competitive hydrogen market with dedicated infrastructure,” added Commissioner for Energy, Kadri Simson. “We want Europe to lead the way and be the first in the world to lay down the market rules for this important source of energy and storage.”

Hydrogen is expected to be used mainly in the areas where electrification is not an option, including today’s energy-intensive industry (for example, refineries, fertilisers, steel making) and certain heavy-duty transport sectors (maritime transport, aviation, long-distance heavy vehicles).

Mrs Simson explained that first, a framework for a European hydrogen market will be established, enabling the development of a dedicated infrastructure network.

“By 2030, we want Europe to have a competitive, open and dynamic hydrogen market, with hydrogen produced where it’s most affordable, traded in liquid markets and easily accessible to consumers,” she highlighted.

While aiming for a maximum of renewable hydrogen from 2030 onwards, in the short and medium-term other forms of low-carbon gases in particular low-carbon hydrogen can play a role, primarily to rapidly reduce emissions from existing hydrogen production and support the parallel and future uptake of renewable hydrogen. In line with the EU hydrogen strategy, the production of renewable hydrogen in the EU should reach one million tonnes by 2024 and up to 10 million by 2030. From then onwards, renewable hydrogen should be deployed at a large scale and replace low-carbon hydrogen.

“We will establish a new dedicated governance structure for this new hydrogen sector – the European Network for Network Operators of Hydrogen, or ENNOH,” Mrs Simson noted.

Second, the proposals aim to make it easier for renewable and low-carbon gases to access the existing gas network, by removing any cross-border tariffs for green gases and significantly reducing other tariffs at the entry point of the networks. It will also create a certification system for low-carbon gases and hydrogen, complementing those for renewable gases proposed in July with the revised Renewable Energy Directive (RED II), which aims to accelerate the penetration of renewables in the energy system.

Its proposed amendment increases the target for renewable sources in the EU’s energy mix to 40 per cent and promotes the uptake of renewable fuels, such as renewable hydrogen in industry and transport, with additional targets. In relation to this initiative, the RED II defines renewable hydrogen as ‘renewable fuels of non-biological origin’ and ‘biomass fuels’ that meet a 70 per cent GHG emission reduction compared to fossil fuels setting specific sub-targets for the consumption of renewable hydrogen (50 per cent of total hydrogen consumption for energy and feedstock purposes in industry by 2030 and 2.6 per cent of the energy supplied to the transport sector).

The proposals also complement the TEN-E Regulation by introducing hydrogen infrastructure as a new infrastructure category for European Network Development.
Third, the proposals will ensure a progressive phase-out of fossil gas with long-term gas contracts that should not extend beyond 2049. Finally, the package places the consumer at the centre.

Lessons learnt from the current situation on the gas markets

“We will ensure that people are empowered with the right information and tools to make green choices and participate in the market,” added Commissioner Simson. “Meanwhile, Member States must put measures in place to protect vulnerable consumers.”

High energy prices in recent months have drawn attention to the importance of energy security, especially in times when global markets are volatile. The Commission has proposed to improve the resilience of the gas system and strengthen the existing security of supply provisions, as promised in the Communication and Toolbox on Energy Prices of 13 October.

In case of shortages, no household in Europe will be left alone, with enhanced automatic solidarity across borders through new pre-defined arrangements and clarifications on controls and compensations within the internal energy market. The proposal extends current rules to renewables and low carbon gases and introduces new provisions to cover emerging cybersecurity risks. Finally, it will foster a more strategic approach to gas storage, integrating storage considerations into risk assessment at the regional level.

Criticism by environmentalists

However, these proposals have raised eyebrows among environmentalists as they encourage the uptake of so-called low carbon gases. For them, the Commission’s package will boost the uptake of hydrogen as an energy carrier, including hydrogen produced from fossil or nuclear energy. 

“This is a regrettable decision even if only meant as a transitional solution for the short- to medium term,” read a statement signed by 19 NGOs and associations.

“The Commission’s proposal also allows for the blends of up to 5 per cent hydrogen in cross-border gas transmission networks,” it continued. “This opens the door to continued fossil gas use and fossil gas dependency.”

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