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EU Commission and Parliament reach agreement on future hydrogen and gas market

GO HYDROGEN

EU Commission and Parliament reach agreement on future hydrogen and gas market

The Council and the Parliament today reached a provisional political agreement on a regulation that establishes common internal market rules for renewable and natural gases and hydrogen. The purpose of the legislation is to facilitate the penetration of renewable and low-carbon gases into the energy system, in particular hydrogen and biomethane.

Source: European Council

This agreement will bring many benefits for consumers and for our planet. It will cut our use of fossil fuels and reduce our dependency on imported fossil fuels. It will enable a switch to renewable energy and strengthen security of supply. And importantly it will protect consumers.

Teresa Ribera Rodríguez, third vice-president of the Spanish government and minister for the ecological transition and the demographic challenge

The regulation is part of the hydrogen and gas markets decarbonisation package, which also includes a directive. Both the regulation and the directive are part of the Fit for 55 package. They are aimed at creating a regulatory framework for dedicated hydrogen infrastructure and markets and integrated network planning. They also establish rules for consumer protection and strengthen security of supply. The Council and the Parliament reached a provisional agreement on the directive on 27 November 2023.

Amendments to the regulation agreed by Council and Parliament

The provisional agreement provides for a separate new entity in the hydrogen sector: an EU entity for Hydrogen Network Operators (ENNOH). It will be independent of the existing European Network of Transmission System Operators for Gas (ENTSOG) and the European Network of Transmission System Operators for Electricity (ENTSOE), while taking advantage of synergies and cooperation between the three sectors.

Both institutions agreed to extend the demand aggregation/joint purchasing mechanism for gas adopted during the energy crisis, though participation by gas undertakings must be fully voluntary. Gas undertakings established in Energy Community countries may participate in the mechanism as purchasers, while supplies from Russia or Belarus are excluded. In addition, the Council and the Parliament agreed on creating a voluntary mechanism for support to market development for hydrogen, with the aim to facilitate the tasks carried out by the European Commission under the European Hydrogen Bank.

The regulation will contain provisions allowing member states to adopt restrictions to the supply of natural gas, including liquefied natural gas (LNG), from Russia or Belarus, with the aim of protecting the essential security interests of the member states or of the EU, while taking account of security of supply and diversification objectives.

On solidarity, the Council and the Parliament agreed to establish default provisions to operationalise the solidarity principle in case of a crisis, where bilateral agreements are not in place. The agreement also includes the establishment of a cross-border conciliation mechanism for an ex-post revision of compensation, the voluntary reduction of non-essential consumption by protected customers, and safeguards for cross-border flows. In addition, the provisional agreement provides a voluntary mechanism, whereby on the basis of a request for solidarity by a member state, another member state not directly connected may also provide volumes of gas by applying market-based measures.

Concerning network tariffs, both institutions agreed that for the hydrogen market every national regulatory authority must consult the neighbouring national regulatory authorities on the draft tariff methodology and submit it to the Agency for the Cooperation of Energy Regulators (ACER). Each national regulatory authority will maintain the right to set its own tariff. Moreover, upon request by a national regulatory authority, ACER may propose solutions by means of a non-binding factual opinion. ACER will also inform the Commission of the outcome of such a request.

Finally, the Council and the Parliament recognised the EU's ambition to increase production of biomethane.

Next steps

The provisional agreement reached today with the European Parliament now needs to be endorsed and formally adopted by both institutions.

Background

The regulation is part of the hydrogen and gas markets decarbonisation package, which also includes a directive. The Council and the Parliament have already reached on 27 November a provisional political agreement on the directive.

The Commission presented the proposals on 15 December 2021 as part of the second batch of proposals under the Fit for 55 package, which aims to align EU climate and energy laws with the EU's target to reduce greenhouse gas emissions by at least 55% by 2030 and its goal to become climate-neutral by 2050.

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