Renewable Energy Directive - Changes Afoot: Hydrogen Sustainability Requirements
The European Commission (EC) adopted on the 13th February 2023 two new Delegated Acts under the Renewable Energy Directive. The proposed Delegated Acts are intended to define what constitutes renewable hydrogen in the EU context. The changes contained in the Delegated Acts will be phased in gradually.
A regulatory framework already exists for hydrogen which covers infrastructure, investments, state aid rules, and legislative targets. The two new Delegated Acts will fit into this framework and provide clarity on renewable fuels of non-biological origin (RFNBO).
The EU’s REPowerEU plan to catalyze a green energy transition and quickly reduce dependence on fossil fuels from Russia, aims to produce 10 million tonnes of renewable hydrogen domestically and import 10 million tonnes of renewable hydrogen. The electricity generation capacity of this much renewable hydrogen could meet 28% of total EU electricity demand, helping EU member states achieve individual renewable energy commitments. The Delegated Acts are intended to attract investment by providing certainty and confidence through regulation.
Explaining the proposed Delegated Acts.
This Act requires installations producing hydrogen and hydrogen based fuels be directly connected to installations producing renewable electricity or that renewable electricity and hydrogen production take place in the same installations. Installations providing renewable electricity to hydrogen production facilities must be operational no more than 36 months prior to facilities producing RFNBOs. Where renewable energy production is added to an existing RFNBO facility for the purposes of additional capacity, the addition must not take place more than 36 months post operationalization of the initial installations
There are allowances for taking electricity from the grid in areas where average renewable energy contribution to the grid exceeds 90%.
These requirements will incentivize the growth of renewable electricity production and reduce reliance on fossil fuels in two ways. Firstly, and most obviously, by encouraging an increase in renewable energy installations and supply to the grid. Secondly, by sending a clear signal to markets that hydrogen produced using natural gas or other fossil fuels cannot be considered renewable. This would include Black, Grey, and Turquoise hydrogen. The Black hydrogen process uses coal to produce hydrogen via gasification while Grey and Turquoise hydrogen processes use natural gas for steam reforming and pyrolysis respectively.
It seems Blue hydrogen would also not be considered an RFNBO under this Delegated Act. This is important because the promise of carbon capture and storage (CCS) attached to hydrogen production facilities using natural gas has been presented as an important bridge in the transition from fossil fuels to renewable energy. This stance though has been criticized by many as a method of slowing the transition to renewable energy systems by prolonging and justifying the continued extraction of fossil fuels, in this case predominantly natural gas.
This Act is perhaps more functional in that it details a methodology for calculating and accounting for lifecycle greenhouse emissions associated with RFNBOs. This includes all upstream emissions, production emissions, grid electricity emissions, transportation and processing emissions. There is also clarification on calculation methodology for facilities that co-produce RFNBOs and fossil fuels.
The wait to see if these Delegated Acts will be accepted or rejected by the European Council and Parliament could take up to 2 months. So watch this space!