EU conformity of joint network charges for natural gas/H2 March 2021 confirmed

On February 10, 2021, the German cabinet approved a draft law to implement EU requirements and regulate pure hydrogen networks in energy law. Contrary to the view held by the majority of the energy sector and industry that the natural gas network and the hydrogen network to be developed from it should be regarded as a single entity in terms of network planning and finances, the draft law provides for a strict separation of natural gas and hydrogen networks. The German government rejects joint financing of the development of the hydrogen infrastructure by natural gas and hydrogen customers with reference to EU law, without concrete proof.

Against this background, the FNB Gas has commissioned a legal opinion to investigate the compatibility of joint network charges for natural gas and hydrogen networks with EU law. The expert opinion by Prof. Dr. Pielow (Ruhr University Bochum) concludes that joint network charges for the transport of natural gas (and other gases) and hydrogen are compatible with EU law.

The main findings of the report can be summarized as follows:

The EU directive on the internal market in natural gas already points in the direction of common charges for natural gas and hydrogen networks. The directive is applicable to pure hydrogen networks because it is not limited to natural gas alone. Rather, in accordance with its scope of application, it also applies to other gases that can be safely transported in a gas network. The directive also requires EU member states to ensure that all types of gas have non-discriminatory access to the gas network. In the long term, the aim is to create a common European internal market for energy that ensures the supply of energy to as many customers as possible in the most secure, affordable and sustainable way possible.

In favor of the inclusion of hydrogen in the (entire) EU internal gas market legislation are, in addition to clear statements by the EU Commission, also various provisions in the recently revised Renewable Energy Directive (EU) 2018/2001 (“RED II”); which clearly refer to “gas from renewable sources such as hydrogen”.

The EU Network Code on Harmonized Transmission Tariff Structures (NC TAR) thus also applies to the tariff structures of hydrogen networks and does not prevent joint tariff regulation of natural gas and hydrogen networks. Contrary to what the German government argues, the network code leaves sufficient room for mixed calculation or for permitted cross-subsidization for natural gas and hydrogen networks.

Consequently, a joint network charge for natural gas and hydrogen also does not automatically constitute an impermissible cross-subsidization and thus a violation of the EU Network Code. A mixed calculation of network charges for natural gas and hydrogen networks can be justified, for example, by the fact that, from an economic point of view, network users of the natural gas infrastructure will benefit in the long term from the development of a hydrogen infrastructure. This applies not only to national (domestic) network users, but also to transits for foreign network users. This is because the current EU energy and climate protection policy (European Green Deal, EU hydrogen strategy, etc.) aims precisely at cross-border trade in hydrogen and the creation of pan-European hydrogen transport infrastructures.