The European Commission has proposed detailed rules to define what constitutes renewable hydrogen in the bloc. This involves the use of coal and gas in the transition phase, and the use of nuclear as a low-carbon fuel.
- The European Commission is clarifying what constitutes renewable hydrogen in the bloc in new proposals under the Renewable Energy Directive.
- The measures are based on the principle of ‘additionality’ to incentivise an increase of renewable electricity in the grid.
- Projects coming online before 2028, however, will be allowed to use electricity produced from coal and gas as long as the operators sign contracts with renewable electricity providers.
The Commission has proposed two Delegated Acts under the Renewable Energy Directive. The European Parliament and the Council have two months to scrutinise them and to either accept or reject the proposals, which cannot be amended.
Why has the Commission made new proposals?
The Acts are intended to ensure that all renewable liquid and gaseous fuels of non-biological origin (RFNBOs), such as hydrogen, are produced from renewable electricity. The proposals are expected to provide regulatory certainty to investors, as the EU plans to reach 10 million tonnes of domestic renewable hydrogen production and 10 million tonnes of imported renewable hydrogen, in line with the REPowerEU Plan.
It comes as part of a Hydrogen Strategy, adopted in 2020, setting out a vision for the creation of a European ecosystem. The bloc is betting on the fuel to decarbonise hard-to-abate sectors such as industry and heavy-duty transport.
In fact, the ‘Fit for 55′ package introduced several incentives for its uptake, including mandatory targets for the industry and transport sectors. Hydrogen is also considered a key tool to wean the EU off Russian oil and gas following the war in Ukraine.
When can hydrogen be considered an RFNBO?
According to the first Delegated Act, electrolysers producing hydrogen will have to be connected to new renewable electricity production. This follows the principle of ‘additionality’, whereby the generation of renewable hydrogen will incentivise more availability of renewable energy to the grid, compared to what exists already. In this way, hydrogen production will be supporting decarbonisation and complementing electrification efforts, while avoiding pressure on power generation, according to the Commission.
While initially there will be little electricity demand for hydrogen production, it will increase towards 2030 with the mass rollout of large-scale electrolysers. The Commission estimated that around 500 TWh of renewable electricity is needed to meet the targets set by REPowerEU. Indeed, the 10 million tons ambition in 2030 corresponds to 14% of total electricity consumption in the bloc.
The first Delegated Act set out how producers can demonstrate that the renewable electricity used for hydrogen production complies with the rules.
To take into account existing investment commitments and allow the sector to adapt to the new framework, the rules will be phased in gradually, and designed to become more stringent over time. The transition period, ending in January 2028, is intended to allow electrolysers to be scaled up and come onto the market.
The requirements for the production of renewable hydrogen will apply to both domestic producers as well as importing countries.
Nuclear and fossil fuels are included in the mix
The second Delegated Act provided a methodology for calculating life-cycle greenhouse gas (GHG) emissions for RFNBOs, taking into account the GHG footprint across the full lifecycle of the fuels. The methodology also clarified how to calculate the GHG emissions of renewable hydrogen or its derivatives in case it is co-produced in a facility that produces fossil-based fuels.
Projects during the transition phase will be allowed to use electricity produced from coal and gas, as long as the operators sign a long-term power purchase agreement (PPA) with local renewable electricity suppliers. Hydrogen produced from an electricity grid that uses nuclear power was deemed renewable. This was considered a win for France, whose grid is heavily reliant on nuclear power, in a battle against Germany on the matter.
Geert Decock, electricity and energy manager at NGO Transport & Environment, said: “The EU has provided clarity on what makes hydrogen green or not. This will kickstart investments in hydrogen and e-fuels, which are crucial for decarbonising our ships, planes and heavy industry. And by coupling green hydrogen generation with additional renewable capacity, the Commission will avoid the potentially disastrous consequences of creating new demand for already limited supplies of renewable electricity.”
He warned, however, that hydrogen should not be considered the only way to address the green transition: “Hydrogen is not a silver bullet, it still requires significant amounts of electricity to produce. It should only be used in sectors that need it. It makes no sense to use hydrogen whenever direct electrification is possible.”