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EC proposes excluding gas projects from PCI funding, focus on hydrogen


Hydrogen from natural gas to be allowed under reforms

Gas supply security much less of a concern: EC

Gas assets can be converted to carry lower-carbon fuels: GIE

  • Author
  • Stuart Elliott
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  • Daniel Lalor
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London — The European Commission Dec. 15 published its proposals to reform regulation covering energy infrastructure projects that are eligible for financial support, including a plan to exclude natural gas infrastructure.

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In the proposed reform to the Trans-European Networks for Energy (TEN-E) regulation, the EC said non-abated natural gas projects were not compatible with the EU's carbon-neutrality goals and would no longer be eligible for funding.

However, funding could be made available for infrastructure projects for the supply and trade of hydrogen, which would also include assets converted from gas, it said.

That could see projects to convert or upgrade existing gas infrastructure, such as pipelines, storage facilities and LNG import terminals, given EU funding.

Environmentalist groups criticized the proposed reform, with Friends of the Earth Europe saying it opened a "backdoor" for gas companies to apply for subsidies for methane gas-based hydrogen projects.

But industry groups welcomed the move, with Gas Infrastructure Europe saying gas infrastructure remained a "pillar component" of the EU's ambition to achieve carbon neutrality by 2050.

Gas controversy

Under the TEN-E regulation, priority energy projects are compiled into the so-called Projects of Common Interest (PCI) list.

In the most recent PCI update approved earlier this year, high-profile planned gas projects were listed, including five LNG import terminals, five gas storage sites and significant pipeline projects such as the Interconnector Greece-Bulgaria (IGB), the TAP pipeline and the EastMed pipeline to link Israel and Cyprus to Greece.

PCI project developers were able to apply for funding from the Eur5.35 billion ($6.2 billion) Connecting Europe Facility, which runs until the end of 2020.

However, the decision to include gas projects was slammed by environmentalist groups.

Food and Water Europe last year lodged a complaint with the EU Ombudsman -- which investigates complaints about poor administration by EU institutions -- arguing that the sustainability of gas projects included on the PCI list had not been sufficiently considered.

The Ombudsman last month agreed, saying it had been "regrettable" that the EC did not attempt to improve the available data and the analytical methodologies applied earlier so that a ranking of candidate gas PCIs based on their sustainability would have been possible.

Under the proposed reform, the EC has now ruled out unabated gas projects from applying for funding completely.

"Concerning the future scope of TEN-E, a key question is whether to keep natural gas infrastructure as an eligible infrastructure category or not," it said.

The EC said that, based on its analysis, it had opted to exclude methane gas infrastructure "as the most effective and coherent approach."

In addition, it said, Europe no longer had such pressing gas supply security issues, meaning gas projects were not deemed as strategic as in the past.

"By the early 2020s, when the gas projects of common interest currently under construction will be in operation, Europe should achieve a well-interconnected and shock-resilient gas grid and all member states will have access to at least three gas sources," the EC said.

"Considering that the future natural gas demand is estimated to significantly decrease in line with the Green Deal objectives, natural gas infrastructure no longer needs support through the TEN-E policy."

The revised TEN-E, the EC said, reflected the "changing gas landscape" with an increased role for renewable and low carbon gases by creating a new category of infrastructure for smart gas grids.

"This would support investments at distribution and/or transmission level to integrate green gases (typically biogas and biomethane but also hydrogen) in the network and help manage a resulting more complex system, building on innovative technologies," it said.

Candidate projects could consist of a range of investments directed at "smartening" and decarbonizing a given gas network.

"To support the decarbonization needs of the hard to abate sectors, TEN-E will include dedicated new and repurposed hydrogen networks with cross border relevance," the EC said.

Those could include hydrogen transmission pipelines and related equipment such as compressors, storage facilities, and facilities for liquefied hydrogen.

"There is currently very limited dedicated infrastructure in place to transport and trade hydrogen across borders," it said, adding that new projects could consist of a "significant extent" of assets converted from natural gas.

Reform reaction

Tara Connolly, gas campaigner for Friends of the Earth Europe, said the EC had closed the front door to funding for fossil gas pipelines, "but has thrown open the backdoor to gas companies to win subsidies for fossil hydrogen projects".

"The gas industry will be delighted that energy chief Kadri Simson has bought into their pipe dream for a vast network of hydrogen pipes, and that European taxpayers are set to hand over yet more fossil fuel subsidies," Connolly said.

"Hydrogen may seem clean and futuristic, but 99% of hydrogen in Europe today is made by fossil fuel companies splitting gas and releasing carbon," she said.

Industry group GIE, on the other hand, said gas infrastructure could set the EU on track to climate and technological leadership while fostering "social and territorial cohesion".

"To deliver the ultimate decarbonization goal, a future-proof solution is needed," GIE Secretary General Boyana Achovski said.

GIE said the European gas transmission system can transport enormous quantities of green molecules over long distances with relatively few additional investments.

It said underground gas storage facilities could provide large seasonal storage of renewable and low-carbon energy, including hydrogen, while imports of liquid hydrogen through LNG terminals would be necessary to complement domestic hydrogen production in a similar way to natural gas imports today.