EU Proposes Mandate to Use Renewable Electricity to Produce Green Hydrogen
The rules will apply to domestic and international producers exporting to the EU
February 15, 2023
(The article updates to include more information from the proposed framework draft)
The European Commission has proposed a detailed new framework for green hydrogen producers within the EU and from other countries exporting to the region to ensure it is produced using renewable electricity.
The Commission has defined what constitutes renewable hydrogen in the EU region with the adoption of two delegated acts required under the Renewable Energy Directive.
The Acts will ensure that all renewable fuels of non-biological origin (RFNBOs), such as hydrogen used for industry and transport, are produced using renewable electricity.
A certification program will be implemented to ensure that producers, whether in the EU or in other countries, will be required to demonstrate compliance with the EU framework and trade renewable hydrogen within the Single Market.
The Commission expects the regulatory certainty through these Acts would help the region reach 10 million tons of domestic renewable hydrogen production and 10 million tons of imported renewable hydrogen in line with its REPowerEU plan.
Conditions for Renewable Fuels
The first Delegated Act defined the conditions for hydrogen, hydrogen-based fuels, or other energy carriers to be considered as RFNBO.
It clarified the principle of ‘additionality’ for hydrogen set out in the EU’s Renewable Energy Directive. Electrolyzers that produce hydrogen must be connected to new renewable energy sources. This would ensure that renewable hydrogen generation incentivizes an increase in the volume of renewable energy available to the grid.
The Commission estimated around 500 TWh of renewable electricity will be needed to meet the target set under REPowerEU of producing 10 million tons of RFNBOs. The target corresponds to 14% of total EU electricity consumption.
The Act outlined different ways producers could demonstrate that the renewable electricity used for hydrogen production complies with additionality rules.
The rules under the Acts would be phased in gradually to allow the sector some time to adapt and will be designed to become more stringent over time.
The transition phase of these requirements will first apply to hydrogen projects that will start operating before January 1, 2028.
The transition period will allow the electrolyzers to be scaled up and enter the market. It would also allow the hydrogen producers to match their production with their contracted renewables on a monthly basis until January 1, 2030. The Member States will have the option of introducing stricter rules about temporal correlation as of July 1, 2027.
The Act also states that the installations generating renewable electricity should have come into operation not earlier than 36 months before the installation producing the RFNBO.
The renewable energy produced from the said project must only supply to the green hydrogen-producing plant and not to any other consumer. It can be directly connected to the electrolyzer plant or can be derived from the grid.
Considering the intermittency issues of renewable energy sources, the Commission has set our rules to ensure that renewable hydrogen is produced at times and in places where renewable electricity is available.
The rules further add that the renewable project installation and the green hydrogen plant must be located in the same bidding location to avoid grid congestion issues.
Any extension of the installation producing renewable hydrogen that increases its production capacity may be considered to come into operation at the same time as the original installation. This is to avoid any potential need to conclude power purchase agreements with different installations everytime there is an extension.
Voluntary programs and national programs are expected to play an important role in the implementation and certification of the rules in third countries as Member States are required to accept the evidence obtained from recognized voluntary programs.
The second Delegated Act will provide a methodology for calculating lifecycle greenhouse gas (GHG) emissions for RFNBOs. It will take into account the GHG emissions across the entire lifecycle of the fuels, including upstream emissions, emissions associated with taking electricity from the grid, from processing and transportation of fuels to the end consumer.
The methodology also clarifies how to calculate the GHG emissions of renewable hydrogen or its derivative in case it is co-produced in a facility that produces fossil-based fuels.
The greenhouse gas emissions intensity of renewable liquid and gaseous transport fuels of non-biological origin or recycled carbon fuels shall be determined by dividing the total emissions of the process covering each element of the formula by the total amount of fuel stemming from the process and shall be expressed in terms of grams of CO2 equivalent per MJ (megajoule) of fuel.
The GHG emissions values shall be attributed depending on the number of total load hours the installation producing RFNBO, and recycled carbon fuels are operating.
The carbon equivalent emissions associated with renewable electricity (wind, solar, hydro, and geothermal) production are considered equal to zero.
The proposal for these Acts will be open for comments in the European Parliament for two months, with an optional extension for two more months. However, the Parliament or the Council will not be allowed to amend the proposals.
In December last year, the members of the European Parliament reached a deal to implement the Carbon Border Adjustment Mechanism effective 2023, to incentivize non-EU countries to enhance their climate goals.
The European Investment Bank recently signed a memorandum of understanding with India Hydrogen Alliance to provide €1 billion (~$1.1 billion) to develop large-scale green hydrogen hubs and projects across India.