Green hydrogen (legal and policy aspects)
This article was first published in the Energy ireland Yearbook, February 2022.
As an island with extensive renewable electricity generation resources, Ireland should be favourably positioned to take advantage of the significant opportunities offered by green hydrogen production, storage and usage in the decarbonisation of Ireland's energy system. 'Green hydrogen' is essentially a carbon free fuel produced by splitting water into its constituent parts (hydrogen and oxygen) using an electrolyser powered by renewable energy sources.
Proponents of the use of green hydrogen cite its ability to act as a clean source of fuel for back-up or buffer electricity generation required as a consequence of the significant increased penetration of variable renewable generation (such as wind and solar) in Ireland's generation mix. It is also commonly asserted that the development of green hydrogen has the potential to provide substantial volumes of a cost effective zero carbon fuel which can be utilised in areas which are less conducive to electrification and are more reliant on gases or fossil fuels. Such as domestic heating, industries such as agriculture and manufacturing, and transport for heavy vehicles (trains, buses, HGVs) aviation and shipping.
The EU's Green Deal outlines the EU's objective to being the first climate neutral continent by 2050. The EU has outlined various strategies to achieve this objective, including the EU Energy System Integration Strategy and the EU Hydrogen Strategy. The EU Hydrogen Strategy adopted in July 2020 outlines a target of achieving at least 6GW of green hydrogen electrolysers within the EU by 2024, with a longer term aim of installing at least 40GW of electrolysers by 2030.
EU policy recognises that driving hydrogen development and usage needs critical mass in investment, both on new production infrastructure, on making gas networks fit for hydrogen injection and on stimulating consumer demand. The European Clean Hydrogen Alliance is aimed at building up a robust pipeline of investments to facilitate coordinated investments and policies along the hydrogen value chain.
EU policy also recognises the importance of an enabling regulatory framework for hydrogen production and trading including incentives for both supply and demand in lead markets (for example discounts on network entry tariffs and elimination of cross-border tariffs), taxation, hydrogen certification rules and appropriate state aid rules. In this regard on 15 December 2021 the EU Commission released its Hydrogen and Gas Market Decarbonisation Package which provides for revisions of existing EU gas legislation to create some of this framework.
Private sector funding support, as well as EU funding support such as through EIB financing, the InvestEU programme and the ETS Innovation Fund, is recognised as necessary to bridge the investment gap.
Other important EU policy initiatives include:
- revisions to the EU Emissions Trading System (ETS) (Directive (EU) 2018/410) under the Fit for 55 proposals which proposes to include the production of hydrogen using electrolysers under the ETS, ensuring renewable and low-carbon facilities will be eligible for free allowances
- minimum requirements for the roll-out of alternative fuels infrastructure in the EU member states under revisions to the Alternative Fuels Infrastructure Directive 2014/94/EU, including proposing binding targets for hydrogen refueling points
The Irish Perspective
From a policy standpoint, Ireland's Climate Action Plan 2021 (CAP21) and the Climate Action and Low Carbon Development (Amendment) Act 2021 (Act) set the backdrop for Ireland's hydrogen policy.
CAP21 sets targets of identifying a route to deliver 1-3 TWh of zero emissions gas (including green hydrogen) by 2030 and the introduction of incentives for electrolyser production and grid connection of green hydrogen. CAP21 also sets out specific actions and corresponding completion dates relating to the development of green hydrogen. These include:
- Gas Networks Ireland testing the technical feasibility of safely injecting green hydrogen blends into the gas grid by Q4 2022 (as part of GNI's Vision for 2050)
- Department of the Environment, Climate and Communications (DECC) to assess the potential for energy system integration between the electricity and gas networks including the production, storage and use of green hydrogen by Q1 2023
- DECC to Develop a policy/ regulatory roadmap for green hydrogen use in the natural gas grid by Q1 2023
- National Transport Authority to complete pilot of hydrogen fuel cell double deck buses and review performance by Q4 2022
- Department of Transport to progress a study reviewing the profile, sustainability, and supply of renewable transport fuels in Ireland, such as biofuels, advanced biofuels, e-fuels, synthetic fuels, biogas, and green hydrogen by Q2 2022
Many commentators have commented that Ireland now needs to formulate a detailed hydrogen strategy to help realise the significant opportunity from green hydrogen and provide signals for investment in green hydrogen projects. It would seem that one of the significant requirements is to stimulate sufficient demand for green hydrogen, by incentivising industrial and commercial usage, repurposing of the network to ensure hydrogen can be injected into the grid, and creating export opportunities.
A&L Goodbody was pleased to advise Energia on its partnership with Translink to supply hydrogen from one of Energia's windfarms in Northern Ireland, to fuel public buses in Belfast. Let's hope that is the first of many hydrogen production and offtake transactions on the island of Ireland in the near future.
For more information on this please contact Ross Moore, Partner, Niall Hayes, Associate, or any memeber of the Energy, Infrastructure and Naural Resources team.
Date published: 19 May 2022