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Clifford Chance

Clifford Chance
Clifford Chance<br />

Clifford Chance

Focus on Hydrogen: The regulation of hydrogen transportation in Europe, Belgium and Germany

The development of a clean hydrogen ecosystem in Europe is critical to ensure that the projected increases in hydrogen supply and demand are realised which are needed to achieve EU and governmental climate objectives. A dedicated hydrogen transportation system is needed to bridge the gap between global supply and domestic demand.

This paper, originally published in the Belgian Annual Energy Law Review, considers the rationale for specific policy intervention for hydrogen transportation, the Belgian government's regulatory proposals and how these fit in with the European Commission's Hydrogen and Decarbonised Gas Market Package. We compare the regulatory framework in Europe and Belgium with the initiative that Germany has already adopted, a frontrunner in this space.

The EU proposals for a Hydrogen and Decarbonised Gas Market Package include tariff discounts for the injection of renewable and low-carbon gas into natural gas and hydrogen systems. Third-party access rules for existing gas infrastructure are being refined and extended to hydrogen networks and terminals. New rules are being introduced for hydrogen network, storage and terminal operators as well as interconnectors with third countries. The EU proposals entail fairly strict unbundling rules but allow Member States to derogate from these rules with respect to so-called "geographically confined hydrogen networks" as well as for existing hydrogen network owners during a transition period. The ultimate goal behind this transition period is that by 2030, the hydrogen market will largely resemble today's natural gas and electricity markets.

In Belgium, the development of a dedicated hydrogen transport network is one of the key ambitions expressed in the Federal Hydrogen Strategy. A Federal Consultation Paper and the outcome of a public consultation are currently being translated into a “draft bill on the transport of hydrogen by pipeline”. This initiative will – in anticipation of the EU reform proposals – already regulate a limited number of matters in detail, including the appointment and supervision of a single Hydrogen Network Operator (HNO) and its key regulated task and responsibilities, while leaving other issues to future implementing decrees in order to keep track with the EU developments.

Germany was the first EU Member State to enact specific legislation in the field of hydrogen transport. Its transitional regulation introduced rules of operation for HNOs and rules to facilitate the repurposing of existing natural gas infrastructure (for example on permits and rights of way). The regulation establishes rules on unbundling, third-party access and tariffs. However, HNOs are currently only required to comply with these rules if they voluntarily opt in. So far, not many HNOs have done so and it will be interesting to see if some of the rules that are being perceived as too strict by market participants will be relaxed and if the outcome of the ongoing EU reform process will allow for this.

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