The hydrogen sector has broadly welcomed the clarity brought by the EU’s delegated acts defining renewable hydrogen, but many groups warn the strict criteria will make production more expensive than initially anticipated.

The rules have been three years in the making and are key to almost all aspects of the development of the hydrogen supply chain.

The intervention of the European Parliament led to the softening of some of the initial criteria for what can be defined as renewable hydrogen as set out by the European Commission—mollifying an industry that said the initial rules would be a barrier to investment.

“This act brings much-needed regulatory certainty to unlock investments and deploy a new industry in Europe,” says Francois Paquet, impact director of the Renewable Hydrogen Coalition, one of a number of industry bodies that broadly welcomed the progress of the delegated acts.

“This act brings much-needed regulatory certainty to unlock investments and de-ploy a new industry in Europe” Paquet, Renewable Hydrogen Coalition

“We are glad to finally see the proposed rules that define which green electricity to use for green hydrogen production. Herewith, Europe’s hydrogen economy has a regulatory basis for ramping up projects,” says Sopna Sury, COO of hydrogen for German utility RWE Generation.

However, fellow lobby group Hydrogen Europe warns that, although an improvement on the previous iteration, the rules would still make projects expensive and limit their potential for expansion.

In terms of temporal and geographical correlation, the rules are still similar to those previously criticised by the industry, although there is now a longer transition period before they will be enforced.

RWE has previously argued that correlation rules would make it hard to produce green hydrogen in large volumes before 2030. In particular, temporal correlation “[makes] it almost impossible to ensure a continuous supply to industry”, according to RWE, because if intermittent renewables are not generating, backup power from the grid cannot—without specific exceptions under the rules—be used to make green hydrogen.

“And still, the level of prescriptive details after the initial years will burden hydrogen production costs and hamper European industry’s competitiveness in international comparison,” Sury adds. “Limiting the use of electricity to newly built unsubsidised renewables after 2028 or switching from monthly to hourly temporal correlation after 2029 is constraining the solution space.”

Hydrogen Europe argues that the strict criteria in the delegated acts will make “the role of governments… crucial in supporting this sector and closing the price gap between renewable and conventional hydrogen”.

In practice, this would require governments to bring in hydrogen contracts for difference (CfDs). A number of national governments and the European Commission itself are already looking at introducing CfDs, which will help the business case for green hydrogen projects.

Free ride until 2028

NGO Bellona argues the long transition period before additionality principles—meant to ensure that new hydrogen capacity does not have the adverse effect of recarbonising member states’ electricity mixes—come into effect could undermine the new rules.

“The additionality principle will enter into force only in 2028, allowing for all the electrolysers connected to the grid in the coming five years to free-ride on the renewables that were deployed for the energy transition for over ten years,” the NGO says.

Bellona also criticises a derogation allowing countries with a low-carbon electricity mix—including those with a high proportion of nuclear—to abstain from the additionality principle, provided they can demonstrate an equivalent amount of renewable generation was used via power-purchase agreements. The derogation is likely to apply only to France and Sweden.

“This poses a long-term challenge as no additional capacity will come online to cover the increased need for decarbonised electricity,” says Bellona.

“With no requirement for additional renewable energy sources, any gaps in the supply for the increasing demand could be filled with gas and coal.”

Imports

The definitions for renewable hydrogen will also apply to governments and producers looking to import the fuel into the EU. The RepowerEU initiative foresees 10mn t/yr of imports and 10mn t/yr of domestic production by 2030.

Provisions are made in the rules for an equivalent concept to be used for geographical correlation in non-EU exporting countries where a system of bidding zones does not exist.

Given the EU’s high import target, the EU definition of green hydrogen is likely to become a standard for global exporters. Some standards bodies, including Geneva-based non-profit the Green Hydrogen Organisation, are already offering to accredit projects that show alignment with EU definitions of renewable hydrogen.

One of those exporters could eventually be the US. But the US—although it has passed subsidies for ‘clean hydrogen’ production on the Inflation Reduction Act—has still not provided a definition for what it means by that term.

“The US Treasury is going through exactly the same additionality debate that the European Commission just went through,” one developer in the US supply chain tells Hydrogen Economist.

The US Treasury closed its public comment period for the guidance on renewable hydrogen at the start of December and is subject to the same opposing pressures from project developers on one side and NGOs on the other. Should the US allow hydrogen to be created from grid electricity, two separate markets could form for different classifications of green hydrogen.

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Author: Tom Young