Europe's ACER, CEER recommend 'gradual approach' in regulating pure hydrogen networks

The regulation of the nascent hydrogen transport sector should be tackled by using a gradual approach based on periodic market monitoring, the European Union Agency for the Cooperation of Energy Regulators (ACER) and the Council of European Energy Regulators (CEER) said in a public presentation of a white paper on the subject on Feb. 10.

"Regulation should address the actual risk of market foreclosure," ACER Policy Officer Riccardo Galletta said.

Although the hydrogen sector has a lot to learn from gas and power regulations, Galletta stressed the importance of understanding how hydrogen markets and transport networks -- which do not yet exist -- will evolve before deciding if there is a real risk of abuse of dominant position by grid owners and operators.

While existing gas and power networks are considered essential facilities controlled by natural monopolists and therefore in need of regulation, there is no certainty that hydrogen networks will be set up in a similar way.

"Under the essential facilities doctrine, infrastructure needs to be regulated if the following conditions apply: control of the facility by a monopolist; the competitor's inability to practically or reasonably duplicate the essential facility; abuse of dominant position, in the form of denying competitors access to the facility," according to the ACER and CEER white paper.

If the hydrogen network shows similar characteristics, for example with hydrogen pipelines stretching over longer distances, regulation would be needed.

But if the hydrogen network evolves in a different way, where no potential for market abuse emerges -- for example in the case of clusters or small industrial grids -- than no regulation would be needed, according to the paper.

A similar gradual approach has been used in the telecommunications sector, which like the hydrogen sector was evolving fast and needed both certainty and flexibility at the same time, Galletta noted.

A gradual approach would require national regulators to periodically check -- on the basis of pre-defined EU wide criteria -- how the situation is evolving and if cases of market abuse are emerging, according to ACER/CEER.

Repurposing gas pipelines

If gas grid operators decide to repurpose some gas pipelines to be used as hydrogen pipelines only, ACER/CEER white papers recommend the removal of these assets from the RAB of the regulated gas networks operators as well as the unbundling of gas operations from hydrogen operations.

The RAB -- or Regulatory Asset Base -- represents the vale ascribed by national regulators to the capital employed by a regulated transport network operator to expand or maintain its facilities.

"Unbundling rules should be applied in order to avoid the possible risk of cross-subsidies between users of the gas network infrastructure and of the hydrogen network infrastructure by, at least, separating activities, RABs, and costs (accounting unbundling) between the entities that own and operate the hydrogen infrastructure and the entities that own and operate the gas infrastructure," according to the white paper.

The ACER/CEER white paper doesn't address regulatory issues coming from pipelines used to transport blends of gas and hydrogen gases.