February 16, 2023 • Paul Rodden • Season: 2023 • Episode: 190
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In episode 190, The European Union sets out their rules for renewable hydrogen. I'll go over the announcement and give my thoughts on today's hydrogen podcast.
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The European Union sets out their rules for renewable hydrogen. I'll go over the announcement and give my thoughts on today's hydrogen podcast.
So the big questions in the energy industry today are, how is hydrogen the primary driving force behind the evolution of energy? Where is capital being deployed for hydrogen projects globally? And where are the best investment opportunities for early adopters who recognize the importance of hydrogen? I will address the critical issues and give you the information you need to deploy capital. Those are the questions that will unlock the potential of hydrogen, and this podcast will give you the answers. My name is Paul Rodden, and welcome to the hydrogen podcast.
In a press release on February 13, commission sets out rules for renewable hydrogen. Today, February 13. The commission has proposed detailed rules to define what constitutes renewable hydrogen in the EU, with the adoption of two delegated acts required under the renewable energy directive. These acts are part of a broad EU regulatory framework for hydrogen which includes energy infrastructure investments and state aid rules and legislative targets for renewable hydrogen for the industry and transport sectors. They will ensure that all renewable fuels have non biological origin, also known as RFNBO's are produced from renewable electricity.
The two acts are interrelated and both necessary for the fuels to be counted towards member states renewable energy target that will provide regulatory certainty to investors as the EU aims to reach 10 million tonnes of domestic renewable hydrogen production and 10 million tonnes of imported renewable hydrogen in line with the repower EU plan. The first delegated Act defines under which conditions hydrogen hydrogen based fuels or other energy carriers can be considered as an RF NBO. The Act clarifies the principle of additionality for hydrogen set out in the EU's renewable energy directive. Electrolyzers to produce hydrogen will have to be connected to new renewable electricity production. This principle aims to ensure that the generation of renewable hydrogen incentivizes an increase in the volume of renewable energy available to the grid compared to what already exists. In this way, hydrogen production will be supporting decarbonisation and complementing electrification efforts, while avoiding pressure on power generation. While initial electricity demand for hydrogen production will be negligible, it will increase towards 2030 with the mass rollout of large scale electrolyzers.
The Commission estimates that around 500 terawatt hours of renewable electricity is needed to meet the 2030 ambition and repower EU of producing 10 million tons of RFNBO'S. The 10 million tonne of ambition in 2030 corresponds to 14% of total EU electricity consumption. This ambition is reflected in the commission proposal to increase the 2030 target for renewables to 45%. The Delegated Act sets out different ways in which producers can demonstrate that the renewable electricity used for hydrogen production complies with additionality rules. It further introduces criteria aimed to ensure that renewable hydrogen is not only produced when and where sufficient renewable energy is available, known as temporal and geographic correlation. 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. Specifically, the rules foresee a transition phase of the requirements on additionality, for hydrogen projects that will start operating before the first of January of 2028. This transition period corresponds to the period when electrolyzers will be scaled up to come onto the market.
Furthermore, hydrogen producers will be able to match their hydrogen production with their contracted renewables on a monthly basis until the first of January of 2030. However, member states will have the option of introducing stricter rules about temporal correlation as early as July 1 of 2027. The requirements for the production of renewable hydrogen will apply to both domestic producers as well as producers from third countries that want to export renewable hydrogen to the EU to count towards the renewable targets. A certification scheme relying on voluntary schemes will ensure that producers whether in the EU or in third countries can demonstrate a simple and easy way that they're compliant with the EU framework and trade renewable hydrogen within the single market. The second delegated Act provides a methodology for calculating lifecycle greenhouse gas emissions for RFNBO's. The methodology takes into account greenhouse gas emissions 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. The methodology also clarifies how to calculate the greenhouse gas emissions of renewable hydrogen or its derivatives in case it is co-produced in a facility that produces fossil based fuels.
Following today's adoption, the acts will now be transmitted to the European Parliament and the Council, which have two months to scrutinize them and to either accept or reject the proposals. At their request, the scrutiny period can be extended by two months, there is no possibility for the parliament or council to amend the proposals. And also just for some background in 2020, the Commission adopted a hydrogen strategy setting out a vision for the creation of a European hydrogen ecosystem. From Research and Innovation to production and infrastructure and development of internal standards and markets. Hydrogen is expected to play a major role in the decarbonisation of industry and heavy duty transport in Europe and globally. As part of the Fit For 55 package. The commission has introduced several incentives for its uptake, including mandatory targets for the industry, and transport sectors. Hydrogen is also a key pillar in the repower e plan to get rid of Russian hydrocarbons.
The commission has outlined a hydrogen accelerator concept to scale up the deployment of renewable hydrogen. In particular, the repower EU plan aims for the EU production of 10 million tons and import 10 million tons of renewable hydrogen by 2030. On top of the regulatory framework, the commission is also supporting the emergence of the hydrogen sector in the EU via important projects of the common European interest or IPCEI's, the first IPCEI called IPCEI HY2Tech, which includes 41 projects and was approved in July of 2022, aims at developing innovative technologies for the hydrogen value chain to decarbonize industrial processes and the mobility sector with a focus on end users. In September of 22, the Commission approved an IPCEI Hy2Use a second project which complements IPCEI Hy2Tech, and which will support the construction of hydrogen related infrastructure and the development of innovative and more sustainable technologies for the integration of hydrogen into the industrial sector. Okay, so we finally have insights from the European Union about their hydrogen plan, and just what constitutes their clean hydrogen.
And it comes as no surprise that really the only thing that they're interested in is renewables driven hydrogen. What is interesting, though, is that a neither the first or the second delegated ask, do they mention anything about nuclear derived hydrogen? And with the internal battle going on right now, between France and Germany, it's going to be very important to see where nuclear hydrogen lands in their spectrum. And speaking of Germany, I'm going to be curious about the longevity of their latest plan to get blue hydrogen from Norway. Just how long can that last? Well, there are still obviously questions that will need to be answered. And so we'll still have to wait to see what the European Parliament and the Council will say in the next two months to see if they either accept or reject these proposals. I'm also going to be interested to see if this announcement results in any further investments in hydrogen in Europe, or if the money is still going to wait to see if either of these two proposals are rejected or accepted.
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