Proposed stringent EU rules on green hydrogen ‘would put the brakes on development’

The European Commission plans to put strict limits on what constitutes “fully renewable” hydrogen, by requiring H2 Producers — including those exporting to the bloc — to prove the provenance and “additionality” of the green power used to make their product, according to a newly published public consultation on the long-awaited Delegated Acts (DAs).

The publication of these rules follows last week’s REPowerEU announcement, in which the Commission outlined plans to produce ten million tons of green hydrogen within the EU by 2030, and import a further ten million by the same date — all of which would need to meet the finalized DA criteria.

In addition to defining renewable hydrogen and its derivatives as “produced in an electrolyser that uses renewable electricity propose”, the DAs that the green power used to make “fully renewable” H2 must be sourced from dedicated new capacity, or from curtailed purchased renewable energy or from green electricity from the grid via strictly regulated power purchase agreements (PPAs).

The rules put a large administrative burden on H2 producers. Even those with dedicated connections must prove the provenance of the electricity they use for hydrogen production at each step of the process.

For example, green hydrogen producers using a dedicated renewable plant to power an electrolyser but have a grid connection for other purposes must demonstrate that no grid electricity is being used to power the electrolyser.

The use of curtailed power would require supporting evidence from the national transmission system operator, while the use of a PPA would have even more stringent regulations.

Article continues below the advert

Hydrogen producers would have to prove that the electricity they are buying via a PPA is from a renewables project that has been operational for no more than three years longer than the H2 plant, and that it hasn’t received EU funding. However, these two rules do not apply until 2027, leaving open the possibility that existing wind and solar facilities could be used before then, which would be allowed to continue operating after 2027.

“[This] last-minute addition of a grandfathering clause for renewable hydrogen-producing installations pre-2027 that can contract existing [renewables] capacity could result in a shopping spree for electrolysers within the next five years,” said Michaela Holl, senior associate at German climate think-tank Agora Energiewende.

“Facilities under the grandfathering rule can profit from existing renewables that taxpayers and consumers paid for over the past 20 years.”

In addition, until 2027, the producer must also demonstrate that any renewable power bought via PPA is used to manufacture green hydrogen is generated in the same month as the electrolyser is in operation — or that power was sourced from energy storage charged during the same month the renewable power was produced.

From 2027, the “same month” will change to the “same hour”. This would have significant implications for the economics of green hydrogen production, as it means electrolysers would only be allowed to operate when the wind is blowing and/or the sun is shining.

The more hours per day an electrolyser is in operation, the lower the levelised cost of hydrogen, so decreasing the hours of operation would increase its price.

“An hourly temporal correlation as currently suggested will strongly limit the ability of hydrogen producers to produce above 40% of the time for most parts of Europe (or 3,500 hours) unless the projects are extremely oversized (eg, 1,200MW of renewables for a 200MW). electrolyser) and incorporate large batteries, leading to significantly higher costs of hydrogen,” said trade body Hydrogen Europe.

The German utility RWE says that such rules would effectively delay the production of green hydrogen in large volumes until 2030.

“Instead of accelerating the ramp-up of the hydrogen economy, the regulation puts unnecessary shackles on it,” the company said in a statement.

“The proposal that electrolysers may only produce hydrogen when electricity is almost simultaneously being produced by these new wind and solar farms is also problematic,” it added. “This temporal correlation means that electrolysers would have to sit idle during any extended calm period. The result would be an unnecessary increase in the price of hydrogen due to more complex operations, and would make it almost impossible to ensure a continuous supply to industry.”

The comments echo those made by Jorgo Chatzimarkakis, head of trade association Hydrogen Europe in a recent interview with Recharge, in which he said that the DA rules seen in an early leaked draft made “no sense”. He recommended the EU follow India’s example and allow green hydrogen to be derived from any renewable-energy source, including clean electricity bought from power exchanges.

The Delegated Acts also offer two exceptions to the aforementioned rules. The first seems to allow the use of any grid electricity when the wholesale market price drops below €20/MWh, with the relevant DA stating “during a one-hour period where the clearing price of electricity resulting from single day-ahead market coupling in the bidding zone… is lower or equal to €20 per MWh, or lower than 0.36 times the price of an [EUA] allowance to emit one tonne of CO2 equivalent.”

The other exception is if an electrolyser is located in an area where renewable electricity has a 90% share or more of the power mix. At present, only hydro-rich Norway — with its 98% renewable electricity mix — would meet such criteria in Europe.

On Tuesday, Chatzimarkakis described the Delegated Acts as “the starting point of an intensive debate on how hydrogen can support the acceleration of additional renewables while speeding up the immediate uptake of hydrogen projects”.

“Our industry, the hydrogen industry, is dedicated to reducing emissions and is not the backdoor to continued use of fossil fuels,” he said. “We stand ready to work to further improve the Delegated Acts to ensure climate action is at its core.”

Different standards

The EC’s definitions of “fully renewable” hydrogen go significantly further than the recent Green Hydrogen Standard launched last week by the Green Hydrogen Organization (GH2)which firmly defined green H2 as “hydrogen produced through the electrolysis of water with 100% or near 100% renewable energy with close to zero greenhouse gas emissions (less than or equal to 1kg of CO).2e per kg H2 taken as an average over a 12-month period).

Additionality requirements under the GH2 standard are expressed as an “expectation” rather than a firm rule.

“Where the evaluation concludes that the project may lead to a significant utilization of renewable energy from the electricity grid and/or increased greenhouse gas emissions from the electricity grid, there is an expectation that the project operator has identified and implemented technically feasible and cost- effective measure to support the deployment of additional renewable energy capacity,” the standard says.

The GH2 definition, which came after a lengthy industry-wide consultation, does allow some flexibility on the requirement for 100% renewable power, allowing for non-renewables to be used for back-up systems, for example, and for power used for associated processes such as water treatment and desalination. However, emissions from these systems must not push the production of the fuel over the average annual 1kg CO2e mark if it is to qualify as “green hydrogen” under GH2’s rules.

It also imposes environmental, social and governance (ESG) obligations on producers.

For example, producers will be expected to demonstrate that they have engaged with local communities and stakeholders on their projects, as well as considering the social and environmental impacts of new developments. They will also need to show they have considered and complied with international standards of human rights in the development and operation of their projects.

The European Commission proposals are out for public consultation until 17 June.

This story was updated to include comments from Hydrogen Europe.

Leave a Comment