13 February 2023
The Green Hydrogen Organisation (GH2) broadly welcomes the adoption of new rules defining renewable green hydrogen as part of the EU Renewable Energy Directive.
Following over a year of delay these rules, which are contained in two Delegated Acts on so-called renewable fuels of non-biological origin (RFNBOs), contain the key elements which define green hydrogen and its derivatives such as green ammonia or green methanol produced in, and imported to, the European Union in the years ahead.
The rules require that new additional renewable electricity is deployed to produce green hydrogen and that the renewable electricity is matched with electrolysers in terms of timing and location. The rules include a transition period where “additionality” and a number of state aid restrictions are waived for projects which begin production before 2028, and hydrogen production only needs to be matched with renewable electricity on a monthly basis until 2030, at which point it will shift to hourly matching.
The carbon intensity of green hydrogen produced in this way must also be no greater than 3.4 kg of CO2e per kg of H2 on a full life-cycle basis in order to be compliant. GH2 considers this level of carbon intensity as too high and believes all production routes will need to achieve verifiable low-carbon intensities that trend towards near zero by 2030 in line with the recommendations of the Glasgow Breakthrough Agenda 2022 report.
These new rules provide certainty to green hydrogen producers both inside and outside the EU and some lead time for the sector to ramp up ahead of more stringent requirements in the years ahead. This is important given the ambition for the EU to produce 10 million tonnes of green hydrogen domestically and import the same amount by 2030 from almost nothing today.
For non-EU countries which plan to import green hydrogen into the EU, particularly developing and emerging economies, GH2 looks forward to working with governments and producers to ensure they are able to comply with these requirements. For example, provision is made in the rules for an equivalent concept to be used for geographical matching where the concept of bidding zones do not necessarily exist. However, more is likely to be required from the EU to ensure that it does achieve at least 10 million tonnes of imports of green hydrogen by 2030. More in terms of demand signals and in de-risking and concessionary financial arrangements, unleashing the private capital needed for the many very large scale renewable energy and green hydrogen projects required.
GH2 accreditation and certification under the Green Hydrogen Standard (GHS) includes an opt in for green hydrogen producers to demonstrate their alignment with national or regional regulation such as today’s Delegated Acts. Pending approval from the European Commission, the GHS expects to be recognized as a voluntary scheme under the Renewable Energy Directive.
Furthermore, the Green Hydrogen Standard provides a way for producers to demonstrate that their green hydrogen is produced according to additionality and matching criteria ahead of any formal requirement to do so. In this way, consumers which demand green hydrogen with the lowest climate and sustainability impact can have confidence in their supply.
The European patchwork of rules and financial benefits for green hydrogen is starting to come together. Through these new rules, we have a clear European definition of what renewable green hydrogen is. Through the establishment of the European Hydrogen Bank, the recently announced auctioning scheme, amendments to state aid rules and the FuelEU Maritime proposals, the European Union is actively seeking to catalyse the green hydrogen economy.
It is hard to compare the EU framework with the approach in the US under the Inflation Reduction Act 2022 and Hydrogen Hubs programme. The simplicity of tax credits in the US are likely to establish predictable rules with rapid impact. The EU framework is more unwieldly.
Some industry bodies feel the initial flexibility in the EU rules should be extended further, while NGOs have lamented the long transition period in particular. The pace in the coming months and years of large renewable and green hydrogen projects taking financial investment decisions and the overall impact on the grid will indicate whether the Commission has got the balance right.
KEY PROVISIONS IN THE DELEGATED ACTS
A) electricity powering electrolyser is taken from a RE asset via a direct line that has been built within 36 months before electrolyser. Exemption from this requirement until 2028 for production from any RE assets that have received any form of subsidies up to 2038. OR
B) electricity is taken from the grid fulfilling one the following options:
i) renewable PPA with contracted asset built within 36 months before electrolyser unit + no OPEX or CAPEX subsidy received. Exemption from this requirement until 2028 for production from any RE assets that have received any form of subsidies up to 2038.
ii) renewable share of bidding zone >90%
iii) emission intensity of electricity < 18 gCO2eq/MJ
iv) consumption during RE curtailment periods
Temporal correlation: monthly until 2030 / hourly from 2030
Geographical correlation: - grid-connected electrolyzers must prove that RE asset is located either:
A) in same bidding zone or
B) in interconnected bidding zone, including in another Member State, if day-ahead market price in this zone is equal or higher
Imported hydrogen: all of the above applies equally (some flexibility on third country bidding zone / imbalance settlement concepts).
Carbon intensity: 70% greenhouse gas emissions saving compared to fossil fuels comparator of 94 gCO2e/MJ. This equates to approximately 3.4 kgCO2e/kgH2 across the full lifecycle of the fuels, including upstream emissions, emissions associated with taking electricity from the grid, from processing, and those associated with transporting these fuels to the end-consumer.
Next steps: Following adoption by the European Commission, the Delegated Acts will now be transmitted to the European Parliament and the Council, which have 2 months to scrutinise them and to either accept or reject the proposals. At their request, the scrutiny period can be extended by 2 months. There is no possibility for the Parliament or Council to amend the proposals.
Further information is available here
Director of Strategy and Communications
+44 77 7575 1170