In May, the EU Commission presented two long-awaited documents:
- the “REPowerEU” plan aims to rapidly reduce the EU dependency on imported fossil fuels from Russia and accelerate the energy transition
- the Renewable Energy Directive Delegated Acts sets out the framework for the production of renewable hydrogen and derived fuels (RFNBOs)
Both publications are amending major EU legislations, including the Fitfor55 package presented last summer, and will therefore play a decisive role in shaping the energy transition landscape, including in kickstarting the rise of hydrogen and its derivatives in the coming decade.
REPowerEU
The REPowerEU plan strengthens the objectives laid out in the FitFor55 package relating to energy savings, renewables deployment, and the reduction of fossil fuel usage. In particular, by 2030, the plan foresees the installation of 600 GW of new solar PV capacity and the yearly production of 10 mt of renewable hydrogen with 65 GW of electrolysis capacity. In parallel, the plan aims to diversify the European sources of imported fossil fuel and accelerate the development of renewable fuels imports, including hydrogen and its derivatives (green ammonia, e-methanol, eFuels) up to 10 mt/year by 2030, through the creation of supply corridors.
The Commission estimates the cumulated cost of these additional measures at 300 bn€ through 2030, to be added to the baseline cost of the FitFor55 package estimated at 1 trillion euros.
The plan also specifically lays out proposals to increase public funding by leveraging several existing EU facilities such as the Innovation Fund or Hydrogen Valley as well as by allowing the Member States to offer loans and grants under the Recovery and Resilience Facility for investment answering REPowerEU objectives
Delegated Acts
The European Commission has published two official drafts of the RED Delegated Acts on the definition and production of renewable transport fuels (RFNBOs), such as renewable hydrogen.
- The first proposal sets the electricity sourcing criteria for producing RFNBOs such as renewable hydrogen and its derivatives
- The second one defines the calculation methodology that shall be used to assess the lifecycle emissions of RFNBOs against the 70% GHG emissions reduction threshold set forth in RED2.
These Delegated Acts have been put to consultation before adoption and are expected to enter into force in autumn 2022 with immediate effect.
Combined with the provision already contained within RED2, those new pieces of legislation are furthering the creation of a compliance market for hydrogen and its derivatives and will result in massive demand for compliant products, at a premium price, in certain segments (refining, ammonia, steel, transport, etc.) to be served by capacities installed both on European soil and in regions of the World blessed with cheap and abundant renewables (Australia, Chile, MENA, etc.). A complex set of criteria will have to be factored in by developers very early on in the project cycle with considerable impact on, among others, their technical design, electricity procurement strategy and business model. Project developers failing to optimize their projects under this new set of rules will simply price themselves out of the market.
Hinicio has been heavily involved in matters relating to European policies and regulations since the creation of the company in 2006, helping leading market players navigate their way in this complex environment. We have recently upgraded our dedicated 3 Service Suites to further accelerate the learning curve of our clients:
- Hi-Regulate will help you understand the ins and outs of the rapidly evolving regulatory environment in Europe, including now RePowerEU and the Delegated Acts, and identify the relating risks and opportunities for your business
- Hi-Asset Strategy will assist you in optimizing the techno-economics of your project while ensuring the compliance of your product with the regulation
- PreCertifHycation, as an operational service aiming to ensure that your project is aligned with certification requirements, thus providing more certainty to your client as to the actual compliance of your future product and/or to your investors as to your ability to capture the associated price premium.
Want to know more about these services?
Feel free to get in touch with our experts at servicesuites@hinicio.com or paris@hinicio.com
