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EU energy ministers reach compromise deal over fossil gas funding

Highlights

Transitional period on gas/hydrogen blend till 2029

Four member states objected to agreement on blending

Malta, Cyprus gas projects to retain PCI status

EU energy ministers on June 11 agreed a "general approach" to the funding of European energy projects, ending support for new fossil gas and oil projects, but allowing a transitional period till end-2029 for gas infrastructure conversion to hydrogen.

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Ministers will next take the agreement on the revision of the Trans-European Networks for Energy (TEN-E) Regulation to the European Parliament for negotiations on the text.

There had been calls for all fossil gas projects to be excluded from eligibility for funding under the TEN-E process, which defines the projects to be allowed to be subsidized under the Projects of Common Interest (PCI) scheme.

The European Council, in its position, decided to end support for new natural gas and oil projects and to introduce mandatory sustainability criteria for all projects.

However, it said: "During a transitional period until Dec. 31, 2029, dedicated hydrogen assets converted from natural gas can be used to transport or store a pre-defined blend of hydrogen with natural gas or biomethane," it said.

Four member states -- Germany, Austria, Spain, and Luxembourg -- objected to the agreement on the blending issue.

"The EU Council just agreed on a common position on TEN-E regulation," Luxembourg's energy minister Claude Turmes said on Twitter.

"This is a step in the right direction but there are still too many uncertainties on blending smart gas grids. Therefore, Germany, Austria, Spain and Luxembourg could not support the general approach," Turmes said.

"We count on the Parliament to improve the text," he said.

The four countries were among 11 that had called for an outright ban on fossil gas from the TEN-E process.

The transitional period was included in the compromise deal after the European Commission had proposed funding could be made available for infrastructure projects for the supply and trade of hydrogen, which would also include assets converted from gas.

Gas 'prolongation'

The Council said that the transitional period should not mean an extension of the lifetime of gas assets.

"Selected projects shall demonstrate how, by the end of this transitional period, these assets will cease to be natural gas assets and become dedicated hydrogen assets," it said.

"The assessment of candidate projects will also ensure that the assets are designed in view of creating dedicated hydrogen assets by the end of the transitional period and do not lead to the prolongation of the lifetime of natural gas."

The purpose of this, it said, was to gradually decarbonize the sector and increase the share of renewable gases in the pipelines.

The agreement also made exceptions for Cyprus and Malta, which are still not interconnected to the trans-European gas network.

"Projects under development or planning that have been granted PCI status under the previous regulation will maintain their status until the interconnection is complete," the Council said.

"The purpose of this exception is to end the isolation of these two member states and to give them access to future energy markets, including hydrogen," it said.

The Council also decided to include certain types of electrolyzers that contribute to sustainability in the scope of the regulation.

"Those electrolyzers shall account for at least 100 MW capacity in a project. The production of hydrogen, particularly of renewable sources, from these electrolyzers, shall comply with a life-cycle greenhouse gas emission saving requirement of 70% relative to a fossil fuel comparator of 94 g CO2e/MJ," it said.

Carbon goals

In its statement, the Council said the objective of the revised TEN-E regulation was to "modernize, decarbonize and interconnect the EU's cross-border energy infrastructure in order to help the EU achieve its 2050 climate neutrality objectives."

Portugal's minister for environment and climate, Joao Pedro Matos Fernandes, who chaired the debate, said that the agreement invests in a "green and climate-neutral future that guarantees efficiency, competitiveness and security of supply, while leaving no one behind."

It identifies 11 priority corridors and three priority thematic areas to develop and interconnect.

"This will be done mostly through PCIs, financed by the Connecting Europe Facility for 2021-2027," it said.

"The revised regulation updates the infrastructure categories eligible for support with an emphasis on decarbonization and adds a new focus on offshore electricity grids, hydrogen infrastructure and smart grids."