Klima-, Energi- og Forsyningsudvalget 2023-24
KEF Alm.del Bilag 426
Offentligt
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Denmark’s position paper on supporting
the development of a well-functioning
European market for green hydrogen
Denmark’s main priorities to support the development of a well-functioning
European market for green hydrogen and derivatives
A well-functioning European market for green hydrogen and derivatives guided by the
following overarching principles:
The development of a European market for green hydrogen and derivatives should prioritise
cost-effectiveness and targeted use cases.
In the initial stages of market development, the EU should focus on implementing measures
and potentially introducing new well-grounded initiatives firmly based on strong principles
and evidence to complement ongoing efforts.
Supported by four main pillars:
Robust and reliable certification schemes enabling consumers to differentiate clearly
between gases and upholding the integrity of the RFNBO targets set out in the Renewable
Energy Directive, ReFuelEU Aviation and FuelEU Maritime.
Close alignment between the planning of electricity grids and hydrogen infrastructure to
ensure the most cost-efficient decarbonisation solutions.
Ambitious and transparent RFNBO targets to foster and incentivise the uptake of green
hydrogen and derivatives in hard-to-abate sectors.
Predictable and streamlined funding opportunities to support the realisation of announced
projects as well as the political ambitions of the EU.
The next European mandate is well-positioned to advance the development of a European market for green
hydrogen and derivatives. Building on the ambitious Fit-for-55 package and the legislative measures introduced
to establish an adequate policy framework, the mandate should zero in on addressing remaining needs to support
and facilitate timely market development. With a suitable policy framework emphasising targeted use cases and
strategic initiatives, green hydrogen and derivatives hold the potential to bolster a resilient, efficient and adaptable
European energy system. However, achieving this requires new initiatives to complement ongoing efforts and
address issues such as transparent and reliable certification schemes for hydrogen, improved infrastructure
coordination and planning, as well as enhancing production and boosting demand.
Implementing and bolstering the regulatory framework in a feasible and cost-
effective way
The Hydrogen and Decarbonised Gas Market Package will enable the uptake of renewable hydrogen in the EU
by establishing a market design, including rules on hydrogen infrastructure, access to hydrogen markets and
market integrity. Facilitating the uptake of green hydrogen is, however, highly dependent on reliable certification
schemes, enabling consumers to differentiate between gases, ensuring that hydrogen and derived fuels
contribute with significant, robust and traceable emission reductions compared to the fossil reference. The
overarching approach should be to avoid low-carbon hydrogen to be unduly counted towards the targets in the
Renewable Energy Directive, FuelEU Maritime and ReFuelEU Aviation. To this end, the forthcoming delegated
act under the Hydrogen and Decarbonised Gas Markets Package defining low-carbon hydrogen should be based
on a credible fossil fuel comparator and a robust traceability and transparency mechanism. This requires, among
other things, a full life cycle emissions assessment to measure the footprint of low-carbon hydrogen.
KEF, Alm.del - 2023-24 - Bilag 426: Non-papirer fra regeringen inden for klima og energi ifm. tidlig EU interessevaretagelse, fra klima-, energi- og forsyningsministeren
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Rolling out an integrated and cost-efficient European hydrogen infrastructure
The substantial decarbonisation of the European energy system necessitates a transformation of the existing gas
market structure with a more prominent role for renewable fuels and gases. Infrastructure connecting supply and
demand is at the core of the new gas market structure and will play a key role in developing a European market
for green hydrogen and derivatives. Developing a well-functioning and cost-effective market hinges on
cooperation in establishing hydrogen networks, thereby enhancing project economics. Such a cooperative
approach should be endorsed and reinforced within the newly established governance structure in the form of
the European Network of Network Operators for Hydrogen (ENNOH). Furthermore, ENNOH has a vital role in
aligning the planning and implementation of hydrogen networks and the development of electricity grids to ensure
the most cost-efficient decarbonisation solutions. To this end, ENNOH must cooperate closely with the European
Network of Transmission System Operators for Electricity (ENTSO-E) and the European Network of Transmission
System Operators for Gas (ENTSO-G) to foster efficient energy system integration. Additionally, establishing an
interconnected and cost-efficient hydrogen infrastructure across Europe requires providing appropriate incentives
for investments, benefiting both producing and off-taking countries. However, particularly in the early market
stages, producing countries face the highest risks, exacerbated by dependencies between the renewable
electricity built out and the green hydrogen production, often occurring within the same country. Addressing these
risks could be a crucial step towards facilitating the implementation of essential infrastructure and scaling up the
EU production capacity.
Boosting targeted demand and scaling up production of green hydrogen and
derivatives
The Fit-For-55 package sets short- and long-term targets for the use of renewable fuels of non-biological origin
(RFNBO). While the revised Renewable Energy Directive introduces sub-targets for the utilisation of renewable
hydrogen and derivatives in industry and transport, sector-specific targets and blending requirements follow from
the central legislative acts FuelEU Maritime and ReFuelEU Aviation. As guiding principles, these targets must be
firmly grounded, considering the market maturity and the need to mitigate risks and uncertainties during the initial
stages of the market development. The forthcoming evaluation of FuelEU Maritime and ReFuelEU Aviation
anticipated in 2027 should uphold these principles while ensuring that an ambitious approach is maintained.
Looking towards 2040, there is a broader call for a simpler target structure for RFNBOs to support Member State
compliance and foster simplicity for market actors. A simpler target structure is vital to send clear signals about
the direction of the EU energy sector decarbonisation. Achieving the targets outlined in the Fit-for-55 package
also requires ramping up the production capacity and fostering a comprehensive approach to the entire value
chain. Ensuring an efficient allocation of biogenic and atmospheric CO
2
resources is crucial, especially
considering that under EU regulation starting from 2041, these will be the only eligible CO
2
sources for the
production of RFNBOs. Over the coming years, the EU must tackle regulatory and economic barriers to establish
a transparent and unified European CO2 market enabling the trading of CO
2
as a commodity for utilisation and
storage purposes. This includes the timely development of certification methodologies for CCU activities to
support first-movers planning for operation before the finalisation of the certification methodologies for BEECS
and DACCS.
Improving the transparency and predictability of funding options for renewables
The cost of green hydrogen is a major barrier to its widespread adoption and deployment. To accelerate the green
transition in Europe, a dedicated focus on supporting predictable funding opportunities is needed. Currently,
funding opportunities for green projects, including hydrogen, are spread across various schemes, each with
individual dynamics regarding scope, timelines, and different possibilities for funding accumulation. Furthermore,
funding calls often appear unpredictable resulting in difficulties in aligning project development with upcoming
calls. As a result, the funding landscape appears complex and it is administratively burdensome to prepare
applications. This points to a general need to streamline the EU funding landscape. Funding calls, as well as the
terms and conditions for participation, should be announced in due time to ensure that the funding is fit for purpose
and eligible to support the realisation of announced projects as well as the political ambitions of the EU. The
Hydrogen Funding Compass originally developed by the Commission to foster simplicity and transparency could
be put into action to serve this purpose, if it was to be redesigned with simpler gateways to funding for the different
sector scopes, i.e. production, offtake, equipment manufacturers and infrastructure. Moreover, project developers
must be acquainted with and capable of forecasting potential funding schemes for the upcoming years. By
establishing a comprehensive understanding of forthcoming funding opportunities, developers can seek support
once projects have reached an adequate level of maturity.