EU finalises renewable hydrogen definition

The European Commission has finalised a legal definition of renewable hydrogen. It is more lenient than initial drafts and removes additionality requirements for electrolysers connected to grids that are largely decarbonised through nuclear power. But operators would still require power purchase agreements (PPAs) for renewable electricity in these grids.

The commission adopted a delegated act on 10 February, bringing an end to a long wait. While the commission had been due to finalise the legal definition of renewable hydrogen by the end of 2021, it only published a draft for consultation in May last year. And it subsequently received pushback from the European Parliament, member states and other stakeholders, leading to a delay in finalising it. Parliament and hydrogen industry participants had called for less stringent rules than initially proposed to facilitate the nascent sector's ramp-up. But others, especially environmental groups, urged strict rules to ensure that electrification efforts are not compromised and that the rules do not inadvertently support hydrogen production from fossil fuels.

In its final delegated act, the commission has made some concessions to those calling for more lenient rules. The much-debated additionality clause will apply from the start of 2028 instead of 1 January 2027, which had been envisaged in the draft. It specifies that hydrogen only counts as renewable if the installations providing it with renewable energy started operations not more than three years earlier. The measure is intended to ensure that new electrolysers coming on line do not "cannibalise" existing renewable power generation.

For electrolysers that are directly connected to a renewable energy source and not linked to the power grid, the additionality clause is the only condition that must be met. But the rules are more complicated for grid-connected electrolysers.

Temporal and geographical correlations

Hydrogen producers using grid-connected electrolysers would have to either produce their own renewable power or conclude PPAs for the renewable electricity and adhere to rules on temporal and geographical correlations.

But the commission has considerably relaxed the temporal correlation — which defines how closely the time of hydrogen output must match renewable energy production — compared with the previous draft. A monthly correlation will need to be demonstrated until the end of 2029, switching to an hourly correlation from the start of 2030. In the draft from May, the commission had envisaged that monthly correlation would only apply until the end of 2026, with hourly correlation to be implemented from 2027.

Rules on geographical correlations are largely unchanged from the draft, requiring electrolysers to be in the same bidding zone as the renewable installation that feeds them. An electrolyser can also be in an interconnected bidding zone, but only if the electricity price in that zone is equal to or lower than in the one in which the renewable electricity is produced. Bidding zones in the EU correspond to member states' borders in most cases.

Low-carbon grids

In the final delegated act, the commission has included a provision that additionality requirements will not apply to electrolysers in grids that have a carbon intensity of 18g of CO2 equivalent/MJ or less. This means that the rules would not apply even if the grid is largely decarbonised through nuclear power, rather than renewable energy. The rule is intended to reflect that in a largely decarbonised system additional demand from electrolysers would not raise emissions, enabling existing renewable sites to contribute to hydrogen production.

France, which has ample nuclear power generation, had long lobbied for exemptions to be applied, but an annex to the delegated act suggests that the emissions intensity of the country's grid was 19.6g of CO2e/MJ in 2020 — above the 18g of CO2e/MJ threshold. In any case, hydrogen producers connecting electrolysers to these grids would still have to conclude PPAs for renewable power and demonstrate temporal and geographical correlations.

Only for electrolysers in grids that are almost entirely decarbonised through renewable power will temporal and geographical correlation requirements not apply. For now, this applies to three out of four bidding zones in Sweden, but may be the case for more countries later in the decade, according to an EU document. The rules set out by the delegated act will apply to domestic production and imports alike. Parliament and EU member states normally have two months to accept or reject a proposal from the commission. But they cannot make amendments to the technical legislation.

By Stefan Krümpelmann