Gas package – agreement on future hydrogen and gas market

The Council and the European Parliament have reached a preliminary agreement on a regulation establishing common rules for the internal market in renewable gases and natural gas and hydrogen (the gas package). The new regulations are intended to facilitate the increase of renewable and low-carbon gases in the energy system, particularly hydrogen and biomethane. The gas package, as envisioned, will bring many benefits to consumers and have a positive impact on the environment. In particular, it will reduce fossil fuel consumption and dependence on fossil fuel imports, and enable a transition to renewable energy and strengthen security of supply.

Directive establishing common rules for internal markets in renewable gases and natural gas and hydrogen

The regulation on the future hydrogen and gas market is part of a package on decarbonized hydrogen and gas markets, which also includes a directive. The directive establishing common trading rules is intended to help increase the share of renewable and low-carbon gases in the energy system, enabling a shift away from natural gas with a view to the EU achieving climate neutrality by 2050. Council and European Parliament November 27, 2023. have reached a preliminary agreement on the matter.

Both the directive and the gas package are part of the “Ready for 55” initiative, which creates a regulatory framework for special hydrogen infrastructure and markets, as well as for integrated network planning. The documents also establish provisions for protecting customers and enhancing security of supply.

Gas package – assumptions

The gas package provides for the establishment of a new, separate entity for the hydrogen sector: European Network of Hydrogen Network Operators (ENNOH), which will be independent of the already existing European Network of Transmission System Operators for Gas (ENTSOG) and European Network of Transmission System Operators for Electricity (ENTSO-E), but will benefit from synergies and cooperation between the three sectors.

The adopted agreement also provides for the extension of the gas demand aggregation and joint purchasing mechanism, which was launched during the energy crisis, but companies’ participation in the initiative must be entirely voluntary. Gas companies based in Energy Community countries may participate in the mechanism as buyers, but deliveries from Russia or Belarus are not allowed.

In addition, the Council and the European Parliament have agreed to establish a mechanism to support the development of the hydrogen market. Its purpose will be to facilitate the tasks performed by the European Commission within the framework of the European Hydrogen Bank. Regulations on voluntary demand aggregation and joint purchases of natural gas will take effect on January 1, 2025. Following the extension of European Council Regulation 2022/2576, dated December 19, 2022. On increasing solidarity. This will work through better coordination of gas purchases, reliable price benchmarks and cross-border exchanges.

One of the main goals of the adopted gas package is to increase the scale of renewable and low-carbon gas use in coal and carbon-intensive regions. The adopted package also includes the EU’s drive to increase biomethane production. Member states, under the new rules, will be able to impose restrictions on the supply of natural gas, including in liquefied natural gas (LNG) form, from Russia and Belarus. The goal is to protect the security interests of EU member states, taking into account security of supply and diversification objectives.

As part of the gas package, the Council and the European Parliament decided to introduce provisions for the default application of solidarity in the event of a crisis if bilateral agreements are not concluded. The agreement also includes the establishment of a cross-border conciliation mechanism for ex-post changes in compensation, voluntary restrictions on non-essential consumption by protected customers, and safeguards for cross-border flows. In addition, the preliminary agreement provides for a voluntary mechanism whereby, based on a request for solidarity support to a member state, another member state that is not directly connected can also provide a certain amount of gas through market measures.

Gas package – impact on the hydrogen market

As part of the agreement reached, the European Commission was authorized to establish a pilot, voluntary support for the development of the hydrogen market. Its purpose will be to control the development of the market and assess the demand and supply of hydrogen, which will be implemented through the activities of the European Hydrogen Bank. The temporary mechanism will be in effect until December 31, 2029. Before the pilot expires, the Commission will submit a report to Parliament and the European Council.

The gas package stipulates that each national regulator must consult with the regulators of neighboring countries on the methods for calculating network tariffs in the hydrogen market, and must submit it to the Agency for the Cooperation of Energy Regulators. Energy Regulatory Cooperation (ACER). Each NRA will retain the right to set its own tariff. In addition, at his request, ACER may propose solutions in the form of a non-binding fact-based opinion. The agency will also inform the European Commission of the outcome of such a request.