Brussels, 28th November 2023 – Yesterday, the European Parliament and Council only came to a partial agreement on the reform of Europe’s future gas and hydrogen market. The Directive has been brought over the finish line, but the Regulation is still in deadlock over governance.
The Directive had only one political issue to clarify, the unbundling rules, i.e. the need for a separation between hydrogen and gas system operators when it comes to future hydrogen network planning and development. The deal reached is an unsatisfactory agreement on unbundling rules solely for Transmission System Operators (TSOs), and this only under certain conditions. Distribution System Operators (DSO) will not have to obey any unbundling rules. Allowing gas operators at DSO level to take charge of developing the future hydrogen distribution network, they have free range to incentivise hydrogen use to heat buildings (instead of electrifying heating systems) and lead to important stranded assets and costs for consumers.
No deal could be reached on the Regulation regarding an independent European Entity for Hydrogen Network Operators (ENNOH) as the European Parliament, the Council and Commission refused to move from their positions. Negotiators will come back on this issue on December 8th.
“Globally speaking, this package is a missed opportunity to phase out gas and set clear gas demand reduction pathways. With the weakening of the unbundling rules, the keys to the development of hydrogen networks on distribution system level have been handed to the gas industry, at the risk of pushing hydrogen into heating homes and making consumers pay for future unused or overexpanded infrastructures. Failing to agree on an independent hydrogen operator, reflects the same conflict of interest and big influence of the gas industry over policy makers. Our call is clear, negotiators must not allow the gas industry to take on the planning of future hydrogen networks.” – Esther Bollendorff, Senior Gas Policy Expert at CAN Europe.
On a positive note, the Directive text recognizes that hydrogen needs to be targeted at hard to decarbonize sectors where highest cost savings, energy efficiency, and greenhouse gas abatement potentials can be achieved. Another important point is that Gas Distribution System Operators (DSOs) together with other stakeholders will need to develop network decommissioning plans, a first building block of a framework to dismantle or repurpose unused fossil gas infrastructure which will be more and more common as people disconnect from the gas grid to turn towards more efficient and sustainable heating solutions such as renewables based heat pumps or district heating.
In the absence of ENNOH, there aren’t any safeguards anymore to make sure that the gas industry doesn’t have free hands in the planification of future hydrogen networks, highlighting an obvious conflict of interest, and leading to excessive repurposing of gas infrastructure or the construction of unnecessary hydrogen-ready gas pipelines, increasing costs for already burdened end consumers.