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Green hydrogen: regulatory challenges

| News | Public and Regulatory Law / Urban Planning and Environmental Law / Energy

Achieving the goal of decarbonisation of the European economy by 2050 will require the massive use of technologies based on the use of hydrogen from renewable sources over the coming decades

The potential of hydrogen is vast, as highlighted by the International Energy Agency in the report The Future of Hydrogen. Hydrogen is abundant, light, storable, reactive, with a high energy content per unit mass, which can be produced on an industrial scale from a wide range of low-carbon energy sources, non-polluting and with a foreseeable evolution of cost-competitive deployment in the short term.

Hydrogen is not a new energy carrier. Its industrial use from the reforming of natural gas goes back a long way and is well established in the chemical and refining industries. The novelty lies in the commitment to hydrogen produced through electrolysis driven by renewable energies, which means achieving a carbon footprint that is practically zero compared to traditional forms of its use.

The decrease in the cost of renewable energies, technological evolution (which, in a scenario of economies of scale, will in turn reduce the cost of hydrolysers by 40% in the coming years) and the political, climatic, economic and social urgency to drastically reduce greenhouse gas emissions are the reasons for the enormous growth expected in hydrogen over the next decade.

Its use is foreseen both as a fuel (as a substitute for natural gas in heating, in the propulsion of planes, trains or ships, or in its use in synthetic diesel, combined with CO2 capture technologies), and in the so-called "power-to-x" projects, for the generation, storage and use of hydrogen produced with surplus energy from renewable sources for use as a stabilisation mechanism in an energy mix dominated by renewable energies.

The EU's commitment and Next Generation funds

The environmental, economic and geopolitical benefits and hopes for green hydrogen have led the European Union to make a firm commitment to it. The European Hydrogen Strategy has set a target of installing at least 6 gigawatts of hydrogen electrolysers and producing up to 1 million tonnes of renewable hydrogen by 2024, with a second phase, from 2025 to 2030, of installing 40 gigawatts of electrolysers and up to 10 million tonnes of renewable hydrogen. The estimated cumulative investments could reach 470 billion euros by 2050. This is a bold gamble, which is reinforced by the catapulting role that Next Generation funds will have to play in achieving the climate targets.

Climate objectives are one of the backbone elements of the European Recovery Plan (Next Generation EU) and the European Recovery and Resilience Mechanism. States must soon present investment projects and reforms that support the transition to a carbon neutral economy in the fields of energy, transport, industry, circular economy, water management and biodiversity. Green hydrogen projects are the example of projects that the Commission has been urging Member States to include in recovery and resilience plans in its Communications on Sustainable Annual Growth Strategies.

The Spanish regulatory framework

The Spanish regulatory framework is not yet ready to govern this process in an efficient, accurate and safe manner. The Spanish legal system does not have a specific environmental, industrial or fiscal framework for hydrogen with a guarantee of renewable origin but is governed by the regulations applicable to any other inorganic gas obtained in the exercise of an activity inherent to the chemical industry.

Among other shortcomings, the Spanish legislation does not consider production thresholds, does not discriminate according to the renewable or non-renewable nature of the production source, does not contemplate its integration with other facilities (metallurgical or electricity generation) and does not consider self-consumption regimes, which, as HyLaw points out in the Report on legislative recommendations for the hydrogen sector in Spain, limits the places where this activity can be carried out, while implying significant entry barriers to its development.

Technology, ecology and economics have overtaken regulation. This is not bad news per se. On the contrary, it provides the regulator with the necessary elements to define an optimal, efficient model of legal, fiscal and administrative governance. A model, in short, far removed from a regulation that is alien to a reality that forces the latter to seek, without certainty, to adapt to a regulation that is sometimes "obligatory".

The regulatory framework will define the structure of hydrogen-related legal business. Its Roadmap, approved by the government last October, identifies some of the necessary, but not sufficient, areas in which work will have to be done.

The obligations incumbent on the promoters of these projects will differ substantially depending on the position adopted in terms of their tax treatment and the processing of the permits required for the start-up of a hydrogen production facility. The definition of permit management will be vital if the time and strategic objectives are to be achieved. The regulator has the ball in its court. Let us hope that, above the current short-termist hullabaloo that seems to dominate the public scene, the sense of a State policy and a national project will prevail, at least in this field. 

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