EnWG amendment casts light and shadow: TSOs recognize improvements to the financing concept, but risks remain high

• Clarity on financing framework and integrated network planning for gas and hydrogen
• Assessment of remaining risks by investors decides on application
• Regulations on integrated grid planning lay the foundation for the second grid expansion stage and accelerate hydrogen market ramp-up

Berlin, April 10, 2024 – The forthcoming adoption of the amendment to the Energy Industry Act (EnWG) in the Bundestag creates the legal framework for financing the hydrogen core network and anchors integrated network development planning for gas and hydrogen. The decision on the financing concept closes the remaining gap in the legal framework for the hydrogen core network.

Barbara Fischer, Managing Director of FNB Gas, comments on the outcome of the negotiations: “The FNB stand by the core grid and remain convinced that it is a necessary prerequisite for the decarbonization of German industry and the economy. Unfortunately, key adjustments to the capital market-compatible design of the model, which were introduced by the FNB and the majority of the industry as well as the capital market and the Federal Council, were not adopted. These include the reduction in the amount of the deductible and the FNB’s interpretation of the lack of a legal option to book the residual values in the amortization account if the market ramp-up fails. Accordingly, the capital market viability of the financing framework appears questionable. On the other hand, we consider the changes regarding the liability risks of grid operators in the event of insolvency and the possibility of extending the timeframe for core grid projects until 2037 to be positive. We will now evaluate the model as a whole.”

A positive assessment of capital market viability is a prerequisite for triggering the necessary private investment and being able to submit the official application for the hydrogen core network to the Federal Network Agency on May 21. “The transmission system operators want to build the hydrogen core network. We have the many years of expertise to implement this infrastructure of the future quickly and professionally. The construction of the core network is also crucial for investment decisions along the entire value chain of the hydrogen economy. As part of the legislative process, we have always emphasized the importance of a financing model that is suitable for the capital market in order to raise the necessary investments from our shareholders. We will examine the law in detail together with our owners and lenders and decide on this basis whether to submit the final core network application to the Federal Network Agency, says the Chairman of the FNB Gas Board, Dr. Thomas Gößmann.

The transmission system operators view the regulations on integrated network planning for gas and hydrogen positively. “This lays the legal foundation for the further transformation of the gas grid and the further expansion stages for the hydrogen core grid. The first scenario framework for the NEP Gas and Hydrogen 2025 is to be presented by the newly created coordination office as early as the end of June. Work on this is already in full swing,” concluded Fischer.