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Energy

Hydrogen and decarbonised gas market package

The revision of the EU gas market rules is needed to ensure that they contribute to reaching the EU energy and climate objectives.

The European Green Deal establishes a roadmap for cutting greenhouse gas emissions, while also boosting a modern and resource-efficient economy. It includes a set of initiatives to reach this goal, including the energy system integration strategy and the hydrogen strategy, which set out how to update the energy markets, including the decarbonisation of the production and consumption of hydrogen and methane.

Natural gas (fossil methane) constitutes around 95% of today’s gaseous fuels consumed in the EU. Next to being an energy carrier, gaseous fuels are also a key feedstock for industrial processes and are one of the sources of flexibility for an energy system increasingly based on variable supplies generated from renewable energy sources.

On 14 July 2021, the Commission adopted the first set of proposals to make the EU’s climate, energy, transport and taxation policies fit for reducing net greenhouse gas emissions by at least 55% by 2030, compared to 1990 levels. That package promotes the demand and production of renewable and low-carbon gases, including hydrogen.

The review and revision of the Gas Directive 2009/73/EC and Gas Regulation (EC) No 715/2009 is referred to as the Hydrogen and gas markets decarbonisation package, published in December 2021. It enables the market to decarbonise gas consumption, and puts forward policy measures required for supporting the creation of optimum and dedicated infrastructure, as well as efficient markets. It will remove barriers to decarbonisation and create the conditions for a more cost effective transition.

A dedicated hydrogen infrastructure and market

Barriers 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 proposed revision creates a level playing field based on EU-wide rules for hydrogen market and infrastructure and removes barriers that hamper their development. It also creates the right conditions for natural gas infrastructure to be reused for hydrogen. This brings cost savings and helps decarbonisation at the same time.

The proposal introduces a European Network of Network Operators for Hydrogen to ensure sound management of the EU hydrogen network and facilitate the trade and supply of hydrogen across EU borders. It also includes a proposal for a system of terminology and certification of low-carbon hydrogen and low-carbon fuels, complementing such rules proposed for renewable hydrogen under the proposal for a revised Renewable Energy Directive.

Renewable and low-carbon gases

The package aims to facilitate the integration of renewable and low-carbon gases into the existing gas network. This is why it proposes to ensure that such gases have access to the gas wholesale market abolish costs for cross-border tariffs facilitating trade and reduce injection costs for those gases by 75%.

In addition, harmonised rules on gas quality are proposed, allowing for the blending with up to 5% hydrogen and access to LNG terminals and gas storage is ensured for low-carbon and renewable gases. Equally more transparency and better use of free capacities at LNG terminals and gas storages allowing more flexible gas trade and use of the terminals and storages will be ensured.

Finally, long-term contracts for unabated fossil gases cannot run beyond 2049. These measures should open the way to import renewable and low-carbon gases from abroad and support the decarbonisation of the EU gas market.

Enabling the penetration of renewable and low-carbon gases into the existing gas grid contributes to the EU’s climate objectives.

Integrated network planning

As outlined in the Commission’s strategy on energy system integration, 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 objectives.

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.

Promote consumer engagement

The retail market rules empower customers to make renewable and low-carbon choices. The absence of common EU terminology and certification system for low-carbon fuels and gases, the concentration of the market and the low levels of new entry and innovation prevents customers from benefiting from the competition by making low-carbon choices.

To be able to make sustainable energy choices, customers need sufficient information on their energy consumption and origin, as well as efficient tools to participate in the market. Moreover, EU countries should take the necessary measures to protect vulnerable and energy poor customers. The decarbonised gas market should not be developed without them being able to fully benefit from it.

That is why the Commission proposes to include most consumer rights aspects of the Electricity Directive into today’s proposals. Such rights cover price regulation, support for vulnerable customers, and making it easier to switch energy providers.

Improve energy security and supply

Decarbonising the energy sector will only work if energy security is guaranteed and if the EU energy system is resilient. Disruptions along single transport routes can threaten the uninterrupted gas supply to some European countries. Gas supply disruptions may result from technical or human failures, natural disasters, cyber attacks, and other emerging risks, as well as from geopolitical disputes. Besides, in 2021, the energy price spike that we have witnessed triggered questions regarding security of supply, due to the interplay between prices, lower storage filling levels, and consistent availability of gas supplies.

This proposal amends the security of gas supply regulation and aims to extend the scope of the regulation to renewable and low-carbon gases in the natural gas grid, while also adapting it to new risks, such as cyber threats. Moreover, the amendments will adopt a regional approach to make more efficient use of storage, for example by agreeing on risks and measures in regional risk groups. The new storage provisions will also enable voluntary joint procurement of strategic stocks by Transmission System Operators, for example in times of emergency.

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

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