17.1 Introduction
Both the EUFootnote 1 and the NetherlandsFootnote 2 have recently announced their ambitions on the production and consumption of (renewable) hydrogen. The European Commission has proposed legislation on hydrogen by means of a recast of the Gas DirectiveFootnote 3 and the Gas Regulation,Footnote 4 the so-called Decarbonisation Package, in December 2021.Footnote 5 The EU has also taken other steps to increase the use of (renewable) hydrogen.Footnote 6 With its experience in hydrogen production, strategic location near the North Sea, potential for offshore wind energy production and extensive onshore natural gas (gas) pipeline network, combined with the expected substantial consumption of hydrogen domestically and in neighbouring countries, the Netherlands has a good starting position for developing a hydrogen economy both at home and in the wider EU.
A significant increase in hydrogen production and consumption in the Netherlands will require the development of large-scale hydrogen infrastructure such as hydrogen transport and storage infrastructure. This chapter examines the development of such infrastructure in the light of recent EU proposals for so-called third-party access to new and repurposed infrastructure. For clarity’s sake, when talking about the development of hydrogen infrastructure, we also refer to the later operation of such infrastructure, even when not explicitly stating so.
N.V. Nederlandse Gasunie (Gasunie), together with its group companies, is active in the development of hydrogen infrastructure in the Netherlands and northern Germany. Gasunie is wholly owned by the Dutch state and one of its group companies operates the Dutch high-pressure natural gas network. Gasunie also operates other natural gas infrastructure.
Below, we will briefly discuss the plans of Gasunie and the Dutch government for the development and operation of hydrogen transport, storage and import infrastructure (Section 17.2). Thereafter, we will give a concise overview of the current Dutch legal framework regulating the hydrogen infrastructure activities Gasunie is developing (Section 17.3). Finally, we will discuss the European Commission’s proposals on third-party access to the different forms of hydrogen infrastructure as well as its proposals for (possibly) exempting new hydrogen infrastructure (Section 17.4). In doing so, we will try and give a first assessment of how these proposals could impact the development of hydrogen infrastructure in the Netherlands, with a focus on hydrogen transport and storage infrastructure. We aim to give the reader an idea of how the different possible regimes for third-party access to hydrogen infrastructure could impact the development of such infrastructure and what challenges could arise for an energy infrastructure company like Gasunie.
17.2 Hydrogen Infrastructure Activities in the Netherlands
In the northern part of Germany and in the Netherlands, Gasunie acts as a transmission system operator of a high-pressure gas network as well as, through its group companies,Footnote 7 an operator of gas storage and gas import infrastructure. In the remainder of this chapter, we will refer to the activities of Gasunie group companies as Gasunie activities.
Besides its more traditional energy infrastructure activities, Gasunie partakes in the Dutch and EU energy transition by developing renewable hydrogen projects. Gasunie hydrogen activities consist of a wide set of initiatives for the development and operation of hydrogen transport, storage and import infrastructure, which will now be discussed in turn.
17.2.1 Transport
In 2021, a study conducted by several organisations in the Netherlands showed that it is possible and, from a societal point of view, desirable to reuse the Gasunie gas transport network for hydrogen transport.Footnote 8 The existing network could be reused to transport hydrogen and connect future hydrogen consumers, suppliers and storage.Footnote 9 The gas transport network would be gradually freed up to accommodate the increasing need for transporting hydrogen. This reuse would be more cost effective than the development of new hydrogen transport pipelines and would require an investment of around €1.5 billion.Footnote 10 The main recommendations of the study are displayed in Figure 17.1.Footnote 11
HyWay 27: Realisation of a national hydrogen network
Based on the HyWay 27 report, the Dutch State Secretary of Economic Affairs and Climate (State Secretary) indicated in a letter to the Dutch parliament that a hydrogen transport network would be necessary for a CO2-free hydrogen chain and that as far as possible it should be based on reuse of existing gas pipelines. The State Secretary also announced a plan for the rollout of the national hydrogen transport network and indicated the intention to request Gasunie to develop this network and free up gas pipelines for reuse.Footnote 12
In June 2022, the Dutch government proclaimed that HyNetwork Services, a Gasunie group company, is to develop and operate a dedicated nationwide hydrogen transport network. The investments would have to be made for the, yet to be developed, different hydrogen markets. However, it would not be an option to defer these investments to a later time, because the planned projects for hydrogen production, storage and import require such a hydrogen transport network to be available in order to be realised. The Dutch government has reserved a maximum of €750 million for the development of the hydrogen transport network. The network will connect the major Dutch industrial clusters and storage facilities, and with the neighbouring countries; it is expected to be fully operational by 2030, at the latest.Footnote 13
In July 2023, the Minister of Climate and Energy Policy informed the Dutch Parliament of the progress being made on the development of the hydrogen transport network. He indicated that several steps had been taken to centralise the permitting process (Rijkscoordinatieregeling). Furthermore, the planned routing of the hydrogen transport network had to be partly changed, due to two recent developments. First, the war in Ukraine changed natural gas flows, meaning that certain gas pipelines would only become available for reuse at a later time than initially planned. Second, the planned routing had to be aligned with a recently initiated project for the transport of several commodities (including hydrogen) from Rotterdam harbour to the Ruhr area in Germany (Delta Rijn Corridor).Footnote 14
The development and operation of the hydrogen transport network is expected to have a learning-by-doing character. This means that in the first period the network will be developed in stages and as a linear connection. The pipelines will have fewer connections to other pipelines than in the existing gas transport network. The hydrogen transport network will, at first, due to its linear setup, not have any rerouting possibilities. This means that the operational behaviour of the first hydrogen transport network users will have considerable influence on the integrity of the hydrogen transport network. For example: the consequences of the feeding in of hydrogen that does not comply with the quality specifications, as published, could be felt throughout the whole hydrogen value chain.
17.2.2 Storage
Hydrogen storage is considered an integral part of the development of the hydrogen value chain. The Dutch National Hydrogen Programme, a public–private hydrogen collaboration, foresees a hydrogen storage demand of 750–1,000 gigawatt hours (3–4 salt caverns) for 3–4 gigawatts (GW) electrolyser capacity in 2030 in the Netherlands.Footnote 15 In Germany, expectations of future demand for hydrogen storage are even higher.Footnote 16
Hydrogen storage activities focus on the development and operation of large-scale underground hydrogen storage connected to hydrogen transport networks in both the Netherlands and Germany. The idea is to create flexibility and provide hydrogen market players a tool for dealing with both short-term and long-term fluctuations in hydrogen supply and demand. Another function of hydrogen storage will be to increase the security of supply in the energy system as a whole and the socio-economic benefits by allowing the storage of electricity produced and its conversion to hydrogen in a period of over-production of electricity (from renewable sources) and to use that hydrogen to produce electricity in a period of under-production (from renewable sources).Footnote 17 The first Gasunie hydrogen storage will be developed in the north of the Netherlands and the first cavern is expected to be fully operational in 2028. Three more caverns are planned to be operational after 2030.Footnote 18
17.2.3 Import
Hydrogen import activities in the Netherlands consist of the development and operation of hydrogen terminal infrastructure for ships in both the Netherlands and Germany, currently with a focus on the ports of Rotterdam, Eemshaven (both in the Netherlands) and Brunsbüttel (Germany).Footnote 19 The import of renewable hydrogenFootnote 20 is seen by the Dutch government as essential for meeting expected future demand for such hydrogen.Footnote 21 By combining hydrogen with nitrogen to create ammonia, it can be transported, stored and converted into green hydrogen in larger quantities. Another possibility is to transport hydrogen via ships by use of so-called liquid organic hydrogen carriers (LOHC), which are essentially organic compounds that may store hydrogen as reversible chemical bonds.
17.2.4 Offshore
In May 2022, Denmark, Germany, Belgium and the Netherlands signed the so-called Esbjerg declaration, agreeing to develop the North Sea as a ‘green power plant’. This will consist of multiple connected offshore energy projects and hubs, centring around large-scale offshore wind energy production, and electricity and hydrogen interconnectors. By 2030, the four EU Member States intend to produce at least 65 GW of offshore wind energy, increasing to at least 150 GW by 2050; 20 GW of the targeted offshore wind energy for 2030 is to be earmarked for onshore and offshore production of green hydrogen and these four countries look to expand the production even further for 2050.Footnote 22
In December 2022, the Dutch government stated that it intends to assign to Gasunie the task of developing and realising an offshore hydrogen transport network.Footnote 23 This offshore hydrogen transport network will connect with the onshore network, thereby also connecting offshore infrastructure with onshore hydrogen storage infrastructure.
Having briefly sketched the different hydrogen activities, we will now turn to the Dutch legislative framework which regulates these activities.
17.3 The National Legislative Framework for Hydrogen Infrastructure Activities
Alongside the obvious areas of law such as spatial planning law and competition law, the Dutch legislative framework for hydrogen activities in essence consists of the Dutch Gas Act. In June 2023, a draft for a new Energy Act was submitted to the Dutch Parliament, aimed at amending and merging the Gas Act with the Electricity Act 1998, to form a new, all-encompassing act.Footnote 24
A two-stage process is foreseen, whereby in the current first stage the Gas Act and Electricity Act will be merged and in the second stage the amendments to the Gas Directive that the European Commission proposed in December 2021 in the so-called Decarbonisation PackageFootnote 25 will be implemented into Dutch law, very likely in the Energy Act.Footnote 26 The latter will be initiated after these proposals have gone through the complete EU legislative process and have been enacted as EU law.
Currently it is foreseen that Gasunie will, under national law, be given the statutory task of developing and managing a nationwide onshore and offshore hydrogen transport network (see Section 17.2.1). Considering that the legislative recast process for the Gas Act is ongoing, and the outcome is not clear, our focus here is on the current Gas Act.
As a so-called sector-specific regulation, the Gas Act represents the Dutch transposition of the various EU Gas Directives, such as the current Gas Directive.Footnote 27 The Gas Act determines which tasks the Dutch gas transport network operator, Gasunie Transport Services (GTS), is to fulfil and which activities it may perform. Since 2019, the Gas Act has also contained a provision on the activities that Gasunie group companies, which form part of the same group as GTS, are allowed to perform in areas other than gas transport.
According to this provision, the Gasunie group, within the meaning of the Dutch Civil Code, shall mainly perform the tasks assigned to GTS by the Gas Act or any act based on it.Footnote 28 It is to mainly focus on the regulated activity of gas transport.Footnote 29 However, Gasunie group companies are allowed to perform a limited number of listed activities other than gas transport, mainly in the energy transition field.Footnote 30
The Gas Act states that Gasunie group companies are allowed to develop and manage hydrogen pipelines or installations (leidingen of installaties voor waterstof), including the transport of hydrogen,Footnote 31 as long as the Dutch ownership unbundling rules are observed.Footnote 32 Even though the Gas Act speaks of pipelines or installations, the legislator’s intention clearly has been to allow Gasunie to be involved in both types of infrastructure.Footnote 33
Finally, the Gas Act gives the Minister of Economic Affairs and Climate Policy the authority to instruct GTS in case the provisions of the Gas Act, or any legislation based on them, are not adhered to.Footnote 34
In addition, the Dutch Minister of Climate and Energy Policy intends to assign to Gasunie, until the proposed changes to the Gas Directive have been implemented in the new Energy Act, the service of general economic interest of developing and managing a nationwide hydrogen transport network (see Section 17.2.1).Footnote 35
The concept of a service of general economic interest stems from EU state aid law.Footnote 36 The term refers to a service which cannot profitably be provided for by the market, but which an EU Member State would like to have carried out in the general (societal) interest.
Since the ruling of the European Court of Justice in the Altmark case, compensation from an EU Member State given to a company for providing a service of general economic interest does not constitute state aid within the meaning of article 107 of the Treaty on the Functioning of the EU, if four conditions are met.Footnote 37 One of these conditions is that the recipient has to have clearly defined public service obligations.
In a nutshell, at the time of writing, the Dutch legislative framework for hydrogen activities principally consists of the abovementioned provisions of the Gas Act, allowing companies belonging to the Gasunie group to develop and manage hydrogen pipelines and installations, including the transport of hydrogen itself. In addition, the Dutch Minister of Climate and Energy Policy will, through decisions on the hydrogen transport service of general economic interest, also determine part of the legislative framework for hydrogen transport activities, at least until the changes proposed by the European Commission in December 2021 have been transposed into Dutch law. As such, the service of general economic interest decision can be seen as a temporary elaboration of the broader framework of the Gas Act.
17.4 Third-Party Access to Hydrogen Infrastructure under the EU Decarbonisation Package
On 15 December 2021, the European Commission proposed several changes to both the Gas Directive and EU Regulation 715/2009 (Gas Regulation), in order to include hydrogen in the EU’s legislative framework on gas. These proposals have become known as the Decarbonisation Package.Footnote 38 As the European Commission’s proposals for including hydrogen in the EU gas regulation are extensively discussed in Chapter 2 of this book, ‘Hydrogen Regulation in Europe’ by Hancher and Suciu, we will not get into their full details here.Footnote 39 Having said that, this chapter will analyse one particular aspect, namely third-party access to hydrogen infrastructure, and the proposals for exempting new hydrogen infrastructure.
The European ParliamentFootnote 40 and the Council of Ministers (Council)Footnote 41 have adopted their respective starting position for the trialogue in spring 2023. Negotiations between the European Parliament, the Council and the European Commission have started and are, at the time of writing, still ongoing. No clarity yet exists regarding the final versions. We base our appraisal on the Commission’s original proposals only, paying attention to the starting position of the European Parliament and the Council where they differ from the Commission’s original proposal. In doing so, we will also try and have a look at the European Commission’s possible intentions behind the proposals.
The term third-party access refers to access to (energy) infrastructure by parties who do not control the relevant infrastructure. EU energy regulation traditionally differentiates between various third-party access regimes ranging from so-called regulated third-party access, whereby the national regulator sets the tariff and access conditions,Footnote 42 to so-called negotiated access, whereby the network operator and its customers are principally free to determine tariff and access conditions through commercial negotiations.
17.4.1 Third-Party Access to Hydrogen Transport Networks
Starting with the proposed third-party access regime for hydrogen transport networks, the European Commission proposes that as of 1 January 2031 (and the Council’s starting position is as of 1 January 2036), all EU Member States shall have a system of regulated third-party access in place based on published tariffs, which are applied objectively and non-discriminatorily.Footnote 43 In the amended preamble to its proposal for a new Gas Directive, the European Commission indicates that ‘as a result of the high capital expenditure required for their construction, hydrogen pipeline networks could constitute natural monopolies’.Footnote 44
Until 31 December 2030 (until 31 December 2035 in the Council’s starting position), EU Member States have the freedom to opt for a negotiated third-party access regime, whereby the network operator and its customers are obliged to negotiate ‘in good faith’. If the EU Member State opts to apply negotiated third-party access to the hydrogen transport network(s) until the end of 2030 (until the end of 2035 in the Council’s starting position), the regulatory authorities of the Member States need to provide guidance for the network operator’s customers as to how negotiated tariffs will be affected when regulated third-party access is introduced.Footnote 45
In the Netherlands, the Minister of Climate and Energy Policy has indicated his intention to make use of the option to introduce a negotiated third-party access regime until 2031 and to determine the framework within which the conditions and tariffs for access and services are set up and HyNetwork Services has to negotiate with parties.Footnote 46 This so-called hybrid negotiated third-party access regime, which will be a combination of a regulated and negotiated third-party access regime,Footnote 47 will be applied under the earlier mentioned service of general economic interest (see Section 17.3), in advance of the implementation of the Decarbonisation Package. Once the provisions of the Decarbonisation Package have been implemented in the new Energy Act, this hybrid negotiated third-party access regime will gradually be transformed into a regulated third-party access regime with an advisory role for the Dutch regulator, the Netherlands Authority for Consumer and Markets (ACM). Roughly, the foreseen planning is as shown in Figure 17.2.
Three-stage approach towards a full regulatory network.
Considering that nationwide pipeline infrastructure, such as the natural gas transport networks in the various EU Member States, often forms a natural monopoly, it is understandable that the European Commission seeks to, in the end, have a regulated third-party access regime.Footnote 48 It also makes sense not to require EU Member States to immediately introduce such a regime as the different national hydrogen transport markets are yet to develop or, at best, have only just started developing. Too deep regulation (in the form of detailed network codes) at too early a stage could slow or even hamper the development of these markets.
What is more, there would simply be very little infrastructure to apply the regulation to in the first place. Think, for instance, of the very detailed EU regulation on gas transport capacity allocation,Footnote 49 which would make no sense at all to apply to the hydrogen transport markets in the coming years as these markets will simply be too immature and not yet liquid enough for such regulation to have any effect. From that perspective, the European Commission’s approach seems sensible.
Nevertheless, for Gasunie, which is, as discussed in Section 17.2, in the middle of the development of a nationwide hydrogen transport network, it is also valuable to have sufficient legal certainty.Footnote 50 To be able to invest in such a network, Gasunie will need to have long-term financial commitments from customers. Such commitment usually comes in the form of long-term transport agreements, as has, in our experience, long been the practice in the EU gas transport sector.
The risk of a ‘simple’ negotiated third-party access regime, whereby Gasunie and its potential customers have almost complete commercial freedom in agreeing on tariff and access conditions, is that greatly (between customers) differing long-term hydrogen transport agreements are concluded which later (partly) prove not to be in line with the requirements of the then introduced regulated third-party access regime. This divergence could relate to the agreed tariff as well as to other conditions such as hydrogen quality, pressure and the like.
Therefore, a ‘hybrid’ negotiated third-party access regime that forms a step up to a fully regulated third-party access regime in 2031 seems to be a good option. By setting several of the key tariff and access conditions, the Dutch Minister of Climate and Energy Policy ensures a basic form of non-discriminatory third-party access to the hydrogen transport network while simultaneously providing both Gasunie and its customers some certainty that the long-term commitments accordingly entered into will not become obsolete as soon as a regulated third-party access regime applies. In addition, it provides for learning-by-doing experiences which can be used for the design and roll-out of the regulated third-party access regime as of 2031.
Nevertheless, considerable uncertainty remains for both Gasunie and its potential customers. Even though access conditions such as tariff and hydrogen quality are of great importance to both Gasunie and its potential customers, the exact roles of Gasunie and its potential customers are still to be developed, as are more detailed access conditions. This uncertainty will remain until a full-fledged regulatory third-party access regime has been introduced. Together with other, more external, uncertainties such as the availability of sufficient renewable wind energy for converting renewable electricity into ‘green’ hydrogen as well as the availability of sufficient subsidies, this will have an impact on the willingness to, on both sides, engage in long-term commitments in the current development phase.
17.4.2 Third-Party Access to Hydrogen Storage
The European Commission has proposed a system of regulated third-party access to hydrogen storages, which came as a surprise to companies active in the sector.Footnote 51 The European Commission notes the following in the proposed preamble to the revised Gas Directive:
The availability of large-scale underground storage facilities is limited and distributed unevenly across Member States. In view of the potentially beneficial role for the functioning of hydrogen transport and markets, the access to such large-scale underground storages should be subject to regulated third-party access in order to ensure a level playing field for market participants.Footnote 52
The European Commission’s proposal is remarkable in at least two respects.
First, for gas storage, the Gas Directive leaves the choice between either negotiated or regulated third-party access to the Member States.Footnote 53 As hydrogen storage markets currently seem to be developing, we have no reason to assume that the structure of these markets would be very different from that of the gas storage markets. In that respect, the difference between the access regime for the two categories of storage is striking. It would only make sense to introduce a system of regulated third-party access in the case of (perceived) problems with regard to the hydrogen storage market structure. To date, we have no indications that such problems are likely to arise.
Second, the European Commission’s argumentation as to large-scale underground (hydrogen) storage facilities being limited and distributed unevenly across EU Member States likewise holds for (potential) CO2 storage (for the application of carbon capture and storage – CCS). Nevertheless, Directive 2009/31/EC (CCS Directive) appears to leave EU Member States the choice between the two third-party access regimes.Footnote 54
The European Council has taken a more nuanced starting position. It would require negotiated third-party access in the start-up phase and would prescribe regulated third-party access only from 1 January 2036 onwards.Footnote 55
But there is also a point to be made concerning the development of hydrogen storage infrastructure. The timeline for the development of hydrogen storage infrastructure mentioned above (Section 17.2.2) is based on the expected demand for storage services. The lead time that is required for developing hydrogen storage is relatively long and can easily take 6–8 years, as considerable time is required for the permitting processes of the underground activities and the above-ground facilities, for the preparation of the underground infrastructure such as assessing and monitoring the geological details, leaching a salt cavern and removing brine with a first fill of hydrogen.
Developers of hydrogen storage infrastructure need to take development decisions soon in order for hydrogen storage to be fully developed by the time the developing hydrogen markets needs hydrogen storage infrastructure. They need to take these decisions, even though hydrogen markets are still nascent and only a limited number of market participants in the different parts of the value chain have sufficient insight into their specific demand for storage services and are able and willing to commit at this early stage.
For developers of hydrogen storage infrastructure, legal certainty is crucial to proceed with their projects. The more freedom the developers of hydrogen storage have to enter into storage agreements with initial storage customers and the longer-term the commitment of the latter, the better these developers can mitigate the financial risks associated with the cost-intensive development of hydrogen storage. Likewise, early commitment of the hydrogen storage developer is crucial for storage customers to mitigate part of their commercial risk through certainty as to the storage products they will receive and the tariffs they will have to pay.
A regime of negotiated third-party access, as would be the case under the starting position of the European Council, but not pursuant to the European Commission and the European Parliament, would support the early development of hydrogen storage infrastructure as the developers of such infrastructure would have sufficient freedom to agree on long-term contracts with storage customers at an early stage, while complying with the obligations of non-discrimination and open access. However, the European Commission’s proposal is rather aiming to apply a regulated third-party access regime. Such a strict regime may pose problems for the development of the hydrogen storage market, in particular due to the two following issues.
The first issue is that a regulated third-party access regime can only provide for a limited degree of certainty on the storage services and tariffs for the coming period. Only once the amended Gas Directive has been adopted and entered into force will the regulated third-party access regime be formally applicable and the regulator have the legal competence to approve the applicable tariffs for the storage services. Up to that moment, hydrogen storage developers and their customers will bear the risk that the tariff approved by the regulator at a later stage will differ from any agreement negotiated between the two at an earlier stage.
In this respect, developers of hydrogen storage infrastructure differ from hydrogen transport infrastructure developers. For the latter, the Member States may choose the negotiated third-party access regime for a transition period, but if they do so, ‘the regulatory authorities shall provide guidance to hydrogen network users on how the negotiated tariffs will be affected when regulated third-party access is introduced’.Footnote 56
Such guidance, as well as a transition period towards the regulated third-party access regime, will not be available for hydrogen storage infrastructure developers. This lack of certainty may result in potential storage customers delaying the contracting of storage services. A delay in the contracting of storage services may in turn delay the development of the hydrogen storage infrastructure. It may also create a bigger challenge for the developer to design storage infrastructure that will fully meet future market demand.
The second issue is that under a regulated third-party access regime the storage operator has limited possibilities to adapt the storage services to changing market demand. The storage operator can only provide a storage product once the tariff has been approved by the regulator. This limitation on the ability to quickly adapt to market needs may pose problems, in particular in the phase of the market ramp-up when the storage customers have yet to learn in practice whether their anticipated need for specific storage services is justified by market reality or not.
17.4.3 Third-Party Access to Hydrogen (Import) Terminals
For hydrogen (import) terminals, EU Member States are, according to the European Commission’s proposal to implement a system of negotiated third-party access, whereby the national regulators shall take the necessary measures for potential hydrogen terminal customers to be able to negotiate access to such terminals.Footnote 57 The term “hydrogen terminal” covers both an installation used for the transformation of liquid hydrogen or liquid ammonia into gaseous hydrogen as well as an installation used for the liquefaction of gaseous hydrogen.Footnote 58 The national regulators shall monitor access conditions and their impact on hydrogen markets and take measures where necessary to safeguard competition.
The starting position of the Council is less strict: it allows a Member State to apply a system of regulated instead of negotiated third-party access, without a compulsory end date for the negotiated third-party access.Footnote 59
From what we currently see, it is our expectation that some of the parties currently active in the liquified natural gas (LNG) (import) terminals market will also be active in the hydrogen terminal market. In our opinion, the LNG terminals market is competitive and, accordingly, we expect no fundamental problems with regard to market structure in the future hydrogen terminals market. Apparently, the European Commission is of the same opinion. It expects competition not only between the various future hydrogen import terminals, but also between different means of hydrogen import.Footnote 60
However, the European Commission leaves some leeway for national regulators to intervene by taking required measures should these markets not develop properly under a negotiated third-party access regime. This seems like a reasonable and prudent approach. Under the starting position of the Council, the Member State would be allowed to apply regulated third-party access.
17.4.4 Exemptions for New Hydrogen Infrastructure
The proposal for a revised Gas Regulation opens up the possibility of exempting certain new hydrogen infrastructure from specific rules of third-party access and unbundling.Footnote 61 This provision is similar to one in the existing Gas Directive for new gas infrastructure.Footnote 62 Several gas infrastructure projects have received such exemptions, such as the new floating terminal for LNG in Eemshaven, the Netherlands, and LNG terminals in Lubmin and Stade in Germany.Footnote 63
Under the European Commission’s proposal for the revised Gas Regulation, new hydrogen storage infrastructure may be exempted from the regulated third-party access regime, provided the conditions for exemptions are met. These are, in short, that the investment (1) enhances competition, (2) contributes to decarbonisation, (3) is of such a risk level that the investment would not take place without the exemption, (4) is undertaken by a person independent at least in legal form from the hydrogen system operator and (5) that the exemption is not detrimental to competition and other specified goals. The starting position of the European Parliament adds the requirement that demand-side solutions have been taken into account as possible alternatives.Footnote 64
It is commendable that the European Commission proposed the possibility of exempting certain new hydrogen infrastructure from the requirements of third-party access under the proposed new Gas Directive. However, one of the exemption conditions seems to form a barrier for exempting new hydrogen infrastructure for which the final investment decision was taken before entry into force of the amended Gas Regulation and thus the coming into existence of the exemption possibility. It is the condition that the level of risk is such that the investment would not take place unless the exemption was granted.Footnote 65 At first sight, this condition seems to make it very difficult to argue, in cases where the final investment has already been made, that the investment in question has such a level of risk.
Obviously, this limiting of the exemptions would not help with the quick development of hydrogen markets. If we take the example of hydrogen storage: A hydrogen storage developer who intends to be a frontrunner by taking the necessary investment decision at an early stage before the amended Gas Regulation has been adopted and has come into force will have great difficulties in getting the new infrastructure exempted and very likely remain faced with a regulated third-party access regime. A hydrogen storage developer who makes an investment decision at a later stage, after the amended Gas Regulation entered into force, may receive an exemption under the amended Gas Regulation. Thus, the front runner is put in a more problematic situation than the party that waits.
This barrier could be removed by introducing a transitional provision for the exemption of new hydrogen infrastructure, where the investment decision was taken prior to the entering into force of the exemption possibility of the proposed recast Gas Regulation. The barrier could also be removed, as a side note, if the Council adopted as a starting position that the Member State can apply negotiated third-party access to hydrogen storage until 2036 (see Section 17.4.2). However, should the European Commission’s proposal be adopted unchanged in this respect, this could prove to be a disincentive to the development of hydrogen storage markets at an early stage, which in turn could delay the development of hydrogen markets in general.
17.5 Conclusion
The regulatory framework for hydrogen infrastructure in general and the rules on third-party access in particular are in full development. Conducting business in a (rapidly) changing regulatory framework creates (legal) uncertainty and this uncertainty generally comes at a cost. Gasunie has chosen an early development (and consequent operation) of hydrogen infrastructure in the Netherlands to try and help kick-start the Dutch and EU hydrogen economy. The early development of hydrogen infrastructure against the backdrop of an outdated national legal framework and rapidly developing and highly uncertain EU rules creates several challenges.
When looking at the development of a nationwide Dutch hydrogen transport network and third-party access to such infrastructure, we see a gradual approach chosen by the EU and Dutch legislators trying to fill in the blanks until the network as well as a regulated third-party access regime develops. In general, we believe this is a sensible and workable approach from the perspective of the development (and subsequent operation) of such a network. The biggest challenge for Gasunie and its initial customers will be to create sufficient (legal) certainty on both sides as well as clear respective roles and divisions of responsibility, while reserving leeway for changes and adjustments.
As far as the development of hydrogen storage infrastructure is concerned, a different picture emerges. In contrast to the hydrogen transport infrastructure, there will possibly be no gradual transition to a regulated third-party access regime. Instead, hydrogen storage infrastructure could be governed by a regulated third-party access regime once the amended Gas Directive has been transposed into national law by the Dutch legislator. On the one hand, such a regime seems to offer too little flexibility and commercial freedom for both hydrogen storage infrastructure developers and their customers to ensure early development of such infrastructure. On the other hand, it will still take some time until such an access regime is fully in force. The lack of clarity concerning the precise content of the future regulated third-party access regime creates doubts, which may delay the development of hydrogen transport infrastructure. The lack of a transition provision for exempting new hydrogen storage infrastructure only adds to this uncertainty. This raises the question whether it would not be better to provide EU Member States with the option for a negotiated third-party access regime, as this is currently the case with gas and CO2 storage.
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