In late November, the EU Council and Parliament reached a preliminary agreement on a directive establishing common rules for the internal markets for renewable and natural gases and hydrogen. The directive, part of the hydrogen and decarbonized gas market package aims to facilitate the penetration of renewable and low-carbon gases into the energy system.
The hydrogen and gas package is part of the Fit for 55 review of the shape of the EU gas market, which was proposed in December 2021. It envisions the gradual replacement of natural gas with renewable and low-carbon gases, including hydrogen, to achieve climate neutrality in 2050, as set out in the European Green Deal.
The gas and hydrogen package includes proposed amendments to the Gas Regulation and Gas Directive adopted in 2009 and amendments to the 2017 Security of Gas Supply Regulation.
Member states agreed on a common Council position (“general approach”) on the proposed legislation in March 2023. In November, an agreement was reached between the Council and the EU Parliament on, among other things, the separation of transmission system operators (TSOs) and distribution system operators (DSOs) for hydrogen.
According to the information, on the issue of protecting vulnerable groups, “Member States must ensure that the right to switch supplier or market participant is granted to customers in a non-discriminatory manner in terms of cost, effort and time.” Moreover, they have the right to decide how to protect vulnerable customers from disconnections and on issues related to how to support them. The interim agreement also addresses increased coordination of hydrogen, electricity, and natural gas network development plans, which will be based on sector integration and prioritization of hydrogen in sectors where decarbonization is difficult.
Hydrogen and decarbonized gas market package – Fit for 55 proposals
The Fit for 55 hydrogen and decarbonized gas market package proposes revised and new regulations aimed at reducing the carbon footprint of the gas market in Europe. The main idea is to phase out natural gas and spread the use of renewable and low-carbon gases by 2030 and beyond.
Renewable and low-carbon gases are defined as those with a smaller carbon footprint than fossil fuels. They are produced from organic sources – biogases and biomethane, as well as non-biological renewable sources – synthetic methane and renewable hydrogen. Because they are produced from renewable sources, over their life cycle they can emit min. 70% less greenhouse gases than natural gas.
The main goal is for them to account for 66% of Europe’s total gas use in 2050, compared to today’s 5%, where the remainder is dominated by natural gas exploitation.
Hydrogen and decarbonized gas market package – Creating a hydrogen market
The overall proposals included the creation of a hydrogen market in Europe by providing the conditions for the establishment and operation of a competitive market and dedicated hydrogen infrastructure, as well as the creation of a European network of hydrogen network operators and easier trade with non-EU countries.
The original 2030 targets called for 40 GW of electrolyzer capacity to produce 10 million tons of green hydrogen to meet European demand. However, the REPowerEU plan increased the target for hydrogen consumption from 2030 to 20 million tons, where half of the supply is to be imported.
Integrating renewable and low-carbon gases into the gas network
A further premise is to facilitate access to the existing gas network, establish a consistent certification system and common terminology, as well as regulations on gas quality (including blending), and monitoring of that quality.
Consumer involvement and protection
Consumer protection has also been considered by facilitating changes in energy suppliers, more transparent billing information, and access to smart meters.
Increasing security of supply and cooperation
This is to be done through the integration of sectors and planned electricity, gas, and hydrogen networks, certification of storage system operators, and strengthened solidarity agreements between EU countries, which is particularly important from the perspective of emergencies.
Further negotiations are currently underway on the final wording of the provisions of the hydrogen and decarbonized gas market package. These will be published at a later date.
