EU gas market decarbonization package to set out hydrogen market design rules: Simson

The EU's forthcoming hydrogen and gas market decarbonization package, due Dec. 14, will set out the market design for hydrogen, access to pipelines, infrastructure development and clear carbon intensity certification, European Commissioner for Energy Kadri Simson said Dec. 1.

Speaking at the EU's European Hydrogen Week conference, Simson said the package would "provide the market design for hydrogen, access to pipelines and the conditions for hydrogen to start replacing fossil fuels in a cost-effective manner."

"While the package covers all gases, there are a number of elements that are very important for hydrogen," she said.

The current regulatory framework was not well suited to the rollout of hydrogen via dedicated networks, Simson said.

"There are no rules on tariff-based investments in hydrogen networks or on the ownership, access and operation of dedicated hydrogen networks, and no harmonized rules on hydrogen quality exist."

"With this new proposal, we want to address each of these issues."

The market design rules for hydrogen would "draw inspiration from the market principles set out in the gas directive and regulation concerning third party access, ownership, unbundling and tariff setting," Simson said. "But we will adapt them to the reality of a market that is still emerging and needs scaling up."

For example, some industrial hydrogen users today own both the hydrogen networks and production facilities.

"To the extent that the network is confined and not connected to the grid, it makes sense that they get derogations from unbundling rules," she said.

Infrastructure and certification

Simson said cross-border hydrogen infrastructure would help to integrate renewable and low-carbon gases.

"This includes elements like mandatory discounts for renewable and low-carbon hydrogen or entry and exit tariffs," she said.

A third point the package will aim to address is fostering integrated network planning.

"We believe that hydrogen can truly contribute to the development of an integrated energy system, and it is possible to switch from electricity to gas and vice versa," Simson added.

Certification and clear definitions for hydrogen would be required for the successful development of a decarbonized hydrogen market in Europe, Simson noted, saying the European Commission would bring forward a delegated act to define the criteria for renewable hydrogen by the end of the year, and would launch a public consultation "in the near future."

The EC would also provide a definition and criteria for the production of low-carbon hydrogen, she said.

"All of these individual aspects together will mean that we have all the pillars in place to start enabling a truly European and even global market for hydrogen," Simson added.

Gas price spikes

Simson said that developing the production and use of hydrogen in Europe could help protect against volatile fossil fuel prices, such as those seen in natural gas markets recently.

"Hydrogen can play an important role to reduce such price spikes in the future by helping to reduce demand and enabling large-scale storage," she said.

The hydrogen and gas decarbonization package would help to reduce dependency on fossil fuel imports and improve the resilience of the European energy system, she added.

S&P Global Platts assessed the Dutch TTF day-ahead gas price at Eur90.80/MWh ($30.02/MMBtu) Nov. 30, down from a peak of over Eur100/MWh at the start of October, but up from below Eur20/MWh at the start of the year.