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EU body proposes TEN-E rule fund hydrogen in Europe’s grids

22 June 2021 Cristina Brooks

An EU body has backed funding networks to use hydrogen blended with natural gas, prolonging gas' use for a decade despite the president of the European Investment Bank, Werner Hoyer, saying in January that "gas is over."

The Council of the European Union (Council), which represents member state executives and has veto power alongside the EU Parliament, overcame internal debates to reach a proposal for the revision of the TEN-E regulation that finances gas and electric networks, according to an 11 June statement.

The Council's proposal will serve as a basis for its negotiations with the European Parliament, in view of reaching a compromise that can be put into legislation.

Its plan presses forward with decarbonization by ending support for new natural gas and oil exploration, terminal, or pipeline projects and introducing mandatory sustainability criteria for all projects.

However, it would not only support hydrogen blending for most of the next decade, but it will also continue to fund natural gas grid interconnections in the case of non-connected states like Cyprus and Malta.

The hydrogen blending points of the proposal were praised by the European Network of Transmission System Operators for Gas (ENTSOG), but disputed by 11 countries and the EC, who all insisted funding for natural gas grids should end so the EU can comply with its 2050 climate neutrality objective.

Support for blending, smart hydrogen gas grids

The Council's proposal will see the EU finance natural gas assets' conversion to dedicated hydrogen assets, which could be used temporarily to store or transport hydrogen blended with natural gas or biomethane, although the blend ratio was not announced.

If passed, backers of natural gas projects seeking financial support from the EU would have to prove how the assets will cease to be natural gas assets and become dedicated hydrogen assets by 31 December 2029 and "not lead to the prolongation of the lifetime of natural gas."

Blending would gradually decarbonize grids and increase the share of renewable gases in pipelines, the Council said. Support for its position came from Croatia, Czechia, Poland, Hungary, Slovakia, Romania, Bulgaria, Malta, and Cyprus. Italy and France also supported a transitional period for blending.

The proposed revision of the TEN-E rule also updates the infrastructure categories eligible for EU financing, with a new focus on offshore electricity grids, hydrogen infrastructure, and smart grids.

For network operators represented by ENTSOG, installing smart gas grids will let them integrate more renewable and low-carbon gases such as biomethane and hydrogen in their networks.

ENTSOG agreed with the Council's view that existing EU gas infrastructure can play a key role in achieving EU climate goals efficiently and economically. "To this end, we welcome the Council's proposal and see it as an important stepping stone to the creation of the TEN-E regulation that reflects the challenges of the energy transition," said ENTSOG External Communication Manager Carmel Carey.

In addition, some executives believe the energy transition won't be possible without natural gas. Fortum CEO Markus Raumaro said 22 June that natural gas would be "indispensable" for Europe, especially in the short- and medium-term, as it seeks to meet decarbonization goals. The commodity offered multiple suppliers and flexibility, he told Reuters' Global Energy Transition 2021 conference.

According to ENTSOG calculations, blending would save the EU money. "Existing infrastructure can also be repurposed, at a fraction of the cost of new infrastructure construction, for the transport of hydrogen to support the creation of an EU-wide hydrogen market," Carey added.

Anise Ganbold, Research Leader, Commodities and Hydrogen at Aurora Energy Research, sees blending helping both grid operators and hydrogen newcomers. "For gas grid operators, this means there is now funding available to help refurbish their gas network to carry hydrogen after 2030. Grid operators are now planning for the new, net-zero world, and many have focused on hydrogen to limit stranded assets," she said.

Ganbold pointed out that most of the hydrogen pipelines in Europe would be in the northwest of the continent: Germany, the Netherlands, Britain, Denmark, and Norway. "Analysis we did in December showed that refurbished or new hydrogen pipelines will be the cheapest way to transport large volumes of hydrogen across land," said Ganbold.

For green hydrogen producers, hydrogen grid blending could open a way to sell and transport production to gas consumers who want to green their supply, she said. "The scheme would be similar to today's guarantees of original for renewable energy," she added.

"Even more beneficial to green hydrogen producers would be if certificates are recognized across Europe as a whole, meaning that green hydrogen producers can produce hydrogen where costs are lowest, and inject into their nearby gas grid, without needing to arrange for a physical offtaker nearby, or arrange to transport hydrogen by truck, pipeline, or ship to the consumer," said Ganbold.

However, the subject of renewable energy certifications for hydrogen, possibly competing with renewable energy power purchase agreements (PPAs) is controversial, and a much-watched element of the EU's upcoming reform of the Renewable Energy Directive.

Supporting green hydrogen markets is part and parcel of reaching 40 GW of installed hydrogen electrolyzer capacity by 2030 under the EC's proposed Hydrogen Strategy.

Opposition to blending hydrogen

On the other hand, Denmark published a statement—also signed by Austria, Belgium, Germany, Estonia, Spain, Ireland, Luxembourg, Latvia, the Netherlands, and Sweden—opposing hydrogen blending.

Danish and Dutch state-owned grid operators have proposed using Denmark's abundant wind power to supply international green hydrogen pipelines.

Think tank E3G also raised concerns about hydrogen blending in grids slowing progress on the EU's climate targets, pointing out that Energy Commissioner Kadri Simson had warned against it in the Hydrogen Strategy.

Proposals to finance hydrogen grid blending were a bad omen for the European Green Deal package of climate policies set to be debated this summer, E3G Senior Policy Adviser, Gas Politics, Raphael Hanoteaux said.

"The precedent it sets for the upcoming packages, and especially the 'Fit for 55%' and the December gas package, where we are likely to hear very similar discussions … shows that there is a number of countries still supporting gas as a transition fuel, regardless of the EU's own climate commitment and of the need to decrease gas use by roughly 35% in 2030 and 96% by 2050 relative to 2015 consumption," Hanoteaux said.

"In terms of climate ambition and clarity over the decarbonization pathway and the place of gas, this is worrying. The inclusion of blending has a high potential impact to delaying the decarbonization of gas infrastructure and support stranded assets," he explained.

If passed, the Council's proposal would open EU coffers for hydrogen grid blending projects as soon as next January, said Hanoteaux.

He echoed the criticism of the European Environmental Bureau (EEB) when he noted that unless the price of green hydrogen falls, blending could raise prices for consumers of domestic gas heating.

IHS Markit data shows the cost of green hydrogen in Europe ranged from about €4/kg to €9/kg in 2020.

Posted 22 June 2021 by Cristina Brooks, Senior Journalist, Climate & Sustainability, IHS Markit

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