Network operators’ 2022 Hydrogen Report and Recommendations
Written By
Associate
Germany
As an associate in our Hamburg office and a member of the Commercial and Regulatory & Administrative practice groups, I advise German and international clients on the energy and utilities sector.
In September, the German gas transmission operators released their first Hydrogen Report, with an excellent overview of the current status of the German hydrogen network and two main recommendations for future hydrogen planning.
In July 2021, the Act on the Implementation of EU Requirements and the Regulation of Pure Hydrogen Networks in Energy Industry Act (“EnWG”) came into force. A key aim of the EnWG amendment was to introduce a legal framework to create a suitable framework for the development of the hydrogen economy and to enable rapid and legally secure entry into a hydrogen infrastructure.
Pursuant to Section 28q (1) EnWG, operators of hydrogen networks and transmission systems (“operators”) must submit a report to the Federal Network Agency (“BNetzA”) on the current state of expansion of the hydrogen network and the development of a future hydrogen network planning with the target year 2035 ("Report") like they first did in September 2022 (cf. fnb-gas.de/wp-content/uploads/2022/08/2022-09-01_FNB-Gas_Wasserstoffbericht.pdf). In this report the operators make recommendations to the BNetzA and the German legislature to begin and proceed the conversion of the gas networks and the development of the hydrogen networks swiftly. Two of these recommendations will be presented hereafter.
Recommendation #1: The operators recommend the introduction of a mandatory and integrated network development planning process for gas that takes methane and hydrogen into account. Currently, Section 28p EnWG provides for a system of needs assessment of individual hydrogen infrastructures (without taking methane into account) by the BNetzA. The purpose of this check is to prevent over- or undersizing of hydrogen networks and thus to avoid inefficiencies. Such an implementation plan could only emerge at the end of a long preliminary planning process, which would limit certainty during planning. Based on integrated planning, the hydrogen infrastructure should therefore be developed from the natural gas network as it is efficient and technically feasible to convert existing gas pipelines to transport hydrogen only and to determine the demand for hydrogen and methane together.
Recommendation #5: Furthermore, the report criticizes that the unbundling rules provided for in the EU Commission's draft "Hydrogen and Decarbonised Package" could become a "serious obstacle to the transformation of the gas network infrastructure". Unbundling rules between gas and hydrogen network operators envisaged there would counteract the development of a nationwide hydrogen network infrastructure in Germany. The operators recommend that existing unbundling regulations in the electricity and gas market should be used as a reference point, which provide for unbundling between the competitive activities of production and supply on the one and the non-competitive activities of distribution or transport on the other hand.
According to the operators, compliance with the objectives of Section 1 (1) EnWG (security of supply, economic efficiency and environmental compatibility of the energy supply) is crucially dependent on increasing the speed of the conversion of the gas networks, for which a consistent regulatory framework and the swift implementation of the recommendations made in the report are essential.
It remains to be seen when and how these recommendations will be implemented. In this context, the Federal Ministry for Economic Affairs and Climate Action’s concept for the further development of the hydrogen network (cf. Section 112b (1) EnWG) is eagerly awaited by the end of the year.
