Hydrogen and decarbonised gas market

The European Green Deal established a roadmap for cutting greenhouse gas emissions, while also boosting a modern and resource-efficient economy. It paved the way for a set of initiatives, starting with the energy system integration strategy and the hydrogen strategy. They set out how to update the energy markets, including the decarbonisation of the production and consumption of hydrogen and methane.

As an energy carrier which can be easily stored, gaseous fuels offer flexibility to the EU’s energy system. While renewable power generation has been on a steady rise, natural (fossil) gas still makes up around 95% of the gaseous fuels consumed in the EU. Decarbonising its production and consumption and creating a hydrogen market in Europe is therefore essential to delivering the European Green Deal.

The hydrogen and gas decarbonisation package

The EU hydrogen and gas decarbonisation package, consisting of Directive (EU) 2024/1788 and Regulation (EU) 2024/1789, was adopted in May 2024, after the Commission proposed it in December 2021.

© (left to right) Adobestock_Scharfsinn86 / Adobestock PhotocreoBednarek/Noomcpk

It updates the rules on the EU natural gas market set out in the Gas Directive 2009/73/EC and the Gas Regulation 715/2009. It also introduces a new regulatory framework for dedicated hydrogen infrastructure.

EU countries have until mid-2026 to transpose the new rules into national law. When transposed, they will facilitate the uptake of renewable and low-carbon gases, including hydrogen, while ensuring security of supply and affordability of energy for all EU citizens.

A dedicated hydrogen infrastructure and market

Despite important progress, barriers still exist for the development of a cost-effective, cross-border hydrogen infrastructure and competitive hydrogen market, a prerequisite for the uptake of hydrogen production and consumption.

The revised rules create a level-playing field, based on EU-wide rules, for the hydrogen market and infrastructure and remove barriers that hamper their development.

It will also create the right conditions for some of the existing natural gas infrastructure to be repurposed for hydrogen, which will result in cost savings and support decarbonisation at the same time.

The European Network of Network Operators for Hydrogen (ENNOH) will ensure the necessary focus on developing a dedicated hydrogen infrastructure in the EU and facilitate the efficient transport of hydrogen across EU borders.

Additionally, the recast gas directive introduces a system of terminology and certification of low-carbon hydrogen and low-carbon fuels, complementing the revised Renewable Energy Directive (EU/2023/2413).

Renewable and low-carbon gases

The revised rules give renewable and low-carbon gases better access to markets and infrastructure, facilitating the increasing replacement of fossil gasses, in line with the objectives of the REPowerEU Plan.

More transparency and better use of free capacities at LNG terminals and gas storages will be ensured, allowing more flexible gas trade.

Long-term contracts for unabated fossil gases cannot run beyond 2049. These measures will pave the way to import renewable and low-carbon gases from outside the EU, enabling their entry into the existing gas grid and supporting the decarbonisation of the EU’s gas market.

Integrated network planning

As outlined in the Commission’s strategy on energy system integration in 2020, coordinated planning and operation of the entire EU energy system, across multiple energy carriers, infrastructures, and consumption sectors is necessary to achieve the 2050 climate neutrality objective.

The new package proposal aims to ensure a more integrated network planning between electricity, gas, and hydrogen networks to make the development of energy infrastructure more cost-effective and allow transnational exchanges of information on transmission systems usage.

Promoting consumer engagement

The recast gas directive strengthens consumer rights and protections in the gas market, aligning them with those already established in the EU electricity market rules. This is to guarantee that consumers enjoy a consistent, safe and user-friendly experience across both sectors and to ensure that consumers

receive better information on offers, as well as their contracts and bills, including information enabling them to make renewable and low carbon choices
will be able to choose the best deal by using reliable comparison tools, switch suppliers easily and gain greater control over their gas consumption through smart metering systems
are better protected in case of a dispute with their energy supplier – they can turn to out-of-court dispute mechanisms, such as an energy ombudsman, including when having problems with products or services that are tied to, or bundled with gas supply

Advice on sustainable heating options will be available to ensure a smooth transition to clean energy and EU countries will be required to provide timely information to consumers on the planned phase-out of fossil gas from the national energy-mix.

Stronger consumer protection is a key aspect of the revised rules. Vulnerable customers and those affected by energy poverty will be particularly protected from disconnections of gas supply, including during the planned phase-out of fossil gas. They also set clear criteria for when EU countries may intervene in price setting and define conditions in which EU countries may take swift action in case of a natural gas price crisis, ensuring enhanced protection for consumers.

Improve energy security and supply

Decarbonising the energy sector will only work if energy security is guaranteed. In some cases across Europe, disruptions along a single transport route can threaten the uninterrupted gas supply of an entire country.

Gas supply disruptions may result from technical or human failures, natural disasters, cyber-attacks or other emerging risks including geopolitical disputes. In 2022, the Russian invasion of Ukraine and a subsequent series of unilateral supply cuts by Russia triggered questions regarding security of supply, due to the interplay between high prices, lower storage filling levels and the availability of gas supplies.

The hydrogen and gas decarbonisation package amends the security of gas supply regulation (EU/2017/1938) and aims to extend the scope of the regulation to include renewable and low-carbon gases in the natural gas grid, while also adapting to new risks, such as cyber threats. Moreover, the amendments will operationalise and extend the solidarity mechanism, which ensures that EU countries will provide each other with ‘solidarity gas’ even in case of a severe emergency, by guaranteeing that a set of standard rules apply when EU countries have not signed bilateral agreements.

Ultimately, the changes to the existing regulatory framework will increase preparedness, resilience, and the EU’s strategic autonomy.