Europex welcomes the Commission´s initiative to develop a dedicated EU hydrogen strategy. Scaling up markets for clean hydrogen will require a coordinated European approach in several areas, as well as the establishment of a European regulatory framework. We are convinced that traded markets can and will act as enablers for a future usage of hydrogen on a broader scale. To this end, it will be vital to ensure that hydrogen markets provide competitive, non-discriminatory and fair access to hydrogen, which will underpin the efficient use of hydrogen in all relevant sectors, including those where it still has very limited penetration such as transport, buildings and power generation. Given the importance and complexity of the topic, there should be strong stakeholder involvement in both the development and implementation of the EU hydrogen strategy.
Traded markets as enablers of a European hydrogen economy
Europex is convinced that traded markets will enable the widespread scale up of a European hydrogen economy by connecting diverse actors from different sectors. Building on significant experience in operating wholesale gas, electricity and emissions markets, energy exchanges will play a crucial role as orchestrators of the market by bringing together hydrogen supply and demand and by providing reliable price signals that are needed for efficient investment decisions into the sector.
Energy markets will play a pivotal role within an increasingly integrated energy system, with price signals providing incentives to further connect sectors. Already today, energy traders are active on the different trading platforms operated by Europex members, representing diverse business interests that are interlinked through a non-discriminatory market framework. Arbitrage between different energy types and carriers allows markets to overcome isolated solutions. With the right regulatory framework in place, hydrogen can become a tradable commodity that will help to accelerate the energy transition and ultimately reduce CO2 emissions.
In the future, connected energy markets will play an important role in the European production of (green) hydrogen on the basis of market price signals. With undistorted power prices and market-based emission prices, consumers can benefit from the coordinated production and usage of (green) hydrogen and its use in transport, heating, industry and other sectors. As an example, low or negative power prices caused by the availability of renewable energy incentivise increased hydrogen production through electrolysis. Integration of RES into the electricity market with full market-price exposure would allow for conversion assets to take full advantage of power price developments and contribute to the economically viable production of green hydrogen. Robust carbon pricing from the EU ETS will help to reflect the competitiveness of (green) hydrogen against other alternatives.
Scaling up markets for clean hydrogen is a huge task requiring significant investments in production capacity, transport infrastructure, as well as efforts to stimulate demand. We believe the following elements should be reflected in the EU hydrogen strategy, to ensure that well-designed, efficient markets are in place to support these efforts.
Transport of hydrogen and infrastructure use and access: Coordinated / harmonised EU rules for the transport of hydrogen are a prerequisite for the establishment of pan-European liquid trading markets for clean hydrogen – enabling all producers and consumers of clean hydrogen to benefit from lower transaction costs. As the production of hydrogen in larger volumes becomes economically viable, the use of hydrogen should be supported and enhanced by the well-developed existing gas transport infrastructure in Europe (either by blending hydrogen with natural gas or repurposing infrastructure for hydrogen use). Using the existing grid to the extent possible will help to pave the way for a more rapid ramp up of EU hydrogen production and usage. While we acknowledge that hydrogen-only networks should not be regulated prematurely or unnecessarily, they should in principle fall under the same rules as conventional gas networks to ensure a level playing field and to promote competition and open grid access (i.e. non-discriminatory third-party access).
Market-driven development of conversion assets (e.g. P2G) should be prioritised: This will offer the most efficient way to allocate resources, and determine where installations should be best located and when they should be operated. A role for TSOs and DSOs will be required to coordinate certain aspects, but direct involvement by network operators in the market activities of P2X should be avoided, respecting the principles of unbundling. Regulatory sandboxes should have clear objectives, high transparency and be subject to clear conditions (e.g. time-limited, phased out when the market is assessed as viable). Considerations for the inclusion of a project in a sandbox should include its contribution to the objectives of energy policy and the existence of a regulatory barrier. As a general principle, regulatory sandboxes should have oversight at EU level to ensure projects are not replicated, to encourage knowledge sharing between Member States and to establish clear conditions and guidelines.
The role of certificates / Guarantees of Origin (GoOs): While hydrogen will be traded as a commodity, its ‘climate’ value should be reflected in tradable certificates such as Guarantees of Origin (GoOs). Market-based certificates or GoOs are tools to generate transparency and trust among consumers and they might be an additional source of revenues for producers as they reflect consumer´s willingness to pay for “green” energy characteristics. Tradable certificates or GoOs for hydrogen shall complement liquid trading markets for hydrogen as a commodity. Harmonised European standards, including rules for issuing and cancellation (with mutual acceptance) are necessary for the development of liquid certificate markets. In addition, certificates need to be internationally transferrable. The price associated with hydrogen GoOs has the potential to provide producers with additional income streams and further means to finance investments. Beyond Europe, global trade of hydrogen and GoOs could also have an important role to play, as long as it is underpinned by common standards.
The development of markets to strengthen the international role of the Euro: With a coordinated European approach to scale up clean hydrogen markets, European hydrogen markets have the potential to develop into globally recognised benchmarks, as is the case for a number of contracts in other commodities. This will require a clear and stable regulatory framework and a robust market design to ensure European markets can become globally competitive.
