Electrical Equipment / Components & Telecoms

It is generally understood that hydrogen produced from renewable energy such as solar energy and wind energy (green electricity) is green hydrogen. However, a new regulation being formulated by the European Union has made stricter restrictions on "green" hydrogen. To sum up, only the hydrogen produced by "incremental" green electricity can be regarded as "green" hydrogen.

As we all know, the EU is determined to carry out energy transformation to get rid of its dependence on fossil energy as soon as possible. As for hydrogen, the European Union proposed in the latest repowereu plan that the annual capacity of 10million tons of renewable hydrogen should be achieved by 2030. The problem is that hydrogen production by water electrolysis requires a lot of green electricity. This conflicts with other green power demands, because the overall decarbonization of the EU economy also requires a lot of green power.

Therefore, EU policy makers worry that under the current situation of limited green power stock, vigorously developing hydrogen energy will lead to hydrogen production and other uses "competing for green power". If a large part of the green electricity in stock is used to produce hydrogen, there will be a gap in the supply of green electricity. In this way, traditional fossil energy power generation will inevitably take advantage of the situation to fill the supply gap, which will inevitably lead to a substantial increase in carbon dioxide emissions. In response to this problem, the European Commission has come up with a new rule - if the hydrogen produced by electrolyzing water in the future is to be recognized as "pure green" hydrogen, the green electricity used must be incremental. In other words, the new green hydrogen project must be supported by matching green power facilities, otherwise the hydrogen produced cannot be regarded as "pure green" hydrogen. Let's talk about this rule roughly.

Let's start with the context. At the end of 2018, the EU issued the revised renewable energy directive (Red II), which sets the proportion of renewable fuels used by the transport sector. This leads to an awkward special concept - "non biological renewable liquid and gas transportation fuels" (rfnbo for short). Green hydrogen is an important part of rfnbo. Therefore, the concept of rfnbo is replaced by green hydrogen in the following paragraphs. The renewable energy directive points out in its preamble that only hydrogen produced by green electricity can be regarded as "green" hydrogen, which is well understood. Further, only hydrogen produced from "fully renewable" electricity can be recognized as "fully renewable" by the EU (hereinafter referred to as "pure green"). This means that whether hydrogen can be labeled "pure green" depends on whether the electricity used is "pure green". For the "pure green" attribute of electricity, the renewable energy Directive requires the European Commission to formulate clear rules. On May 20, the European Commission published the draft rules.

The detailed rules of the European Commission stipulate that hydrogen production facilities use "directly connected" power and online power respectively.

Scenario 1 "direct connection" power: hydrogen production facilities are directly connected with power generation facilities, or both belong to the same facility. In this case, the power generation facilities shall not be connected to the power grid, or even if they are connected, there are metering measures to ensure that the hydrogen production facilities do not take electricity from the power grid, but only that the power generation facilities transmit surplus power to the power grid. In addition, the production time of the power generation facilities shall not be earlier than 3 years of the production time of the electrolytic cell. According to the requirements of the renewable energy directive, the time when the power generation facilities are put into operation cannot be earlier than the hydrogen production facilities. However, the European Commission made modifications when formulating the detailed rules, because the approval time of the scenery project was too long. Only when the above requirements are met can the electricity used for hydrogen production be regarded as "pure green" and hydrogen be regarded as "pure green".

Scenario 2 uses online power, which is subdivided into two sub scenarios. Sub scenario 1: hydrogen production facilities are located in the bidding zone (hereinafter referred to as the "bidding zone") where green electricity accounts for a high (> 90%), such as some places in northern Europe. In this case, the electricity used for hydrogen production is automatically calculated as "pure green" (hydrogen is the same). However, the full load hour of the electrolytic cell shall not exceed the green power ratio of the power grid.

Sub scenario 2: hydrogen production facilities use online power, and the proportion of green power in the price zone is less than 90%, which is the case in most regions. At this time, the electric calculation of hydrogen production as "pure green" should meet three requirements: 1 Additionality, 2 Time correlation, 3 Geographic association. The additionality requires hydrogen production facilities to purchase green electricity from new, unsubsidized power generation facilities through new energy power purchase agreement (PPA). New construction means that the power generation facilities shall be put into operation no earlier than 3 years before the hydrogen production facilities. Time correlation means that the power consumption for hydrogen production and power generation must match at the hourly level, that is, hydrogen production must use the green power generated in the same hour, or the green power stored at the hydrogen production side in the same hour. As an exception, grid power can be used during low tariff periods (i.e. the period of grid down rescheduling, when there is excess renewable power generation). There is a buffer period for time correlation requirements - it is sufficient to match the electricity consumption for hydrogen production and power generation monthly before the end of 2016. Strict time synchronization requirements bring challenges to the operation of hydrogen production facilities. Due to the particularity of new energy power generation, it is necessary to over match the power generation facilities to make the electrolyzer operate at full load. This can be solved by installing energy storage or hydrogen storage facilities, but it will undoubtedly increase the cost and inhibit the expansion of hydrogen energy. Geographical connection aims to avoid that hydrogen production facilities cannot physically obtain green power due to grid congestion. It requires that hydrogen production and power generation facilities be in the same price zone. If hydrogen production and power generation facilities are located in different adjacent price zones, the price of electricity in the price zone where the power generation facilities are located must be higher than the price zone where the hydrogen production facilities are located, or the power generation facilities are located in an offshore price zone adjacent to the hydrogen production facilities.

Next, on June 17, the public consultation stage of the European Commission will be over. At that time, the European Commission will submit a final draft to the European Parliament and the European Council for consideration. Since the nature of this rule is "delegated act", which authorizes the addition or modification of non core provisions of the parent law (i.e. the renewable energy directive, Red II), the European Parliament and the European Council have no right to propose amendments to the draft rules. If they object, they can only veto the draft by a majority vote. This means that the draft rules will probably enter into force automatically after the end of the review period.

According to the established hydrogen energy target to be achieved by the EU, the annual new power demand will exceed the annual power consumption of France in 2019 and the total wind power generation in Europe in 2019. Therefore, the development of hydrogen energy is likely to stimulate fossil energy power generation, which will not only reverse the climate benefits of hydrogen energy, but also undermine its role in strengthening European energy security. This is why the European Commission should formulate rules to ensure that the development of hydrogen energy must be synchronized with the corresponding green power facilities. The new rules of the European Commission define what can be counted as green hydrogen - green electricity must be used, green electricity must be added, and the increase of fossil energy power generation must be avoided. This new rule is mainly based on environmental considerations. Its core concept of "additionality" is borrowed from the carbon market of voluntary emission reduction, emphasizing that the results of voluntary emission reduction must be incremental.

However, the new rules of the European Commission still leave a certain buffer for the hydrogen energy industry. It allows hydrogen production projects put into operation before 2027 to use green electricity in stock. Environmental groups worry that this "back door" will stimulate a large number of hydrogen production projects in the next few years.

Some insiders believe that the EU's approach has something in common with China's policies on the integration of source, network, load and storage and the integration of solar hydrogen production. This is true from the point of view that hydrogen production and green power facilities are required to match each other. However, in fact, as the EU has a high proportion of green electricity, which is in the stage of carbon neutralization and sprint, China is still dominated by fossil energy and is still in the stage of carbon peak, so the two countries pay different attention. The EU's new rules are to solve the problem that green electricity cannot give way to fossil energy power generation after the "great leap forward" of hydrogen energy. However, our integration of source network, load storage and wind solar hydrogen production emphasizes on local consumption, so that hydrogen can play the role of energy storage. The European Union is worried that hydrogen production projects will grab green power from the power grid, while China hopes to guide green hydrogen projects to be located in areas with low power demand and weak export capacity.