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Part 2

Hy-Politics – political considerations shaping the evolution of clean hydrogen policy

Summary of the use case in Spain

The Spanish Government officially released the “Hydrogen Roadmap: a commitment to renewable hydrogen” in October 2020, which sets out a step plan and measures to implement hydrogen-based projects in Spain.

It is worth noting that there are now green hydrogen production projects in Spain for 15.5 GW, notably exceeding the initial 4 GW target in the Hydrogen Roadmap for 2030.

There is also a political will to create a major green hydrogen backbone network in Spain, including the H2Med Project: European Union’s first major hydrogen corridor, launched together with France and Portugal, capable of transporting 10% of the European Union's hydrogen by 2030 (i.e. around 2 million tonnes per year). The H2Med Project is expected to be commissioned in 2030.

Other examples of hydrogen projects being developed in Spain are the following:

Green fuels production (developed by Maersk): Maersk, one of the world’s largest container shipping lines, is working with the Spanish Government to explore the possibility of large-scale green methanol production for use as fuel for its cargo vessels. If the agreement is implemented in full, Maersk will source up to two million tons per year of e-methanol, made from renewable hydrogen per year from Spanish producers.
Andalusian Green Hydrogen Valley (developed by Cepsa): This is one of the most ambitious renewable hydrogen projects in Spain and one of the most important in Europe. An investment of EUR 3 billion has been made to create two new green hydrogen generation plants at the energy parks in Palos de la Frontera (Huelva) and San Roque (Campo de Gibraltar, Cádiz), which will have a total electrolysis capacity of 2 GW and come online in 2026 and 2027, respectively. These plants will produce up to 300,000 tonnes of green hydrogen per year, which will boost the production of second generation biofuels for aviation and heavy land and sea transportation. By-products such as green ammonia and methanol will also help our customers in the maritime sector in particular to decarbonize.
Shyine (developed by Repsol): Spain's largest multi-sectoral consortium aimed at promoting renewable hydrogen. Made up of 33 entities from different sectors, Shyine aims to promote renewable hydrogen projects in all areas of the Spanish economy. The consortium’s overriding goals are to promote renewable hydrogen and synthetic fuel production operations, installing 500 MW of hydrogen production in 2025 and 2 GW of hydrogen production in 2030. It also plans to build an ecosystem that connects major regional hydrogen initiatives already underway, such as the Basque Hydrogen Corridor (BH2C) and hydrogen valleys in Catalonia and the Murcia region, as well as to create two new innovation hubs. 
Project Catalina (developed by Copenhagen Infrastructure Partners and Enagás Renovable): The project comprises the development and construction of a solar photovoltaic project and an onshore wind project for sourcing a large-scale power-to-hydrogen facility including a 500 MW electrolyser, all located in the province of Teruel (Aragón). 
Basque Hydrogen Corridor BH2C (developed by Repsol): Large-scale project to develop a H2 economy in the Basque Country and surrounding regions, proving H2 as an enabler for the energy transition, with applications ranging from production to end users, and boosting technological and industrial competitiveness. 
Part 4

Hy-Achieving – creating a suitable incentive regime

Spain wants to be at the forefront of the race for energy transition, leading the development of renewable energies and striving to be a benchmark in hydrogen as well.

To achieve this goal, in October 2020 the Spanish Government approved the Hydrogen Roadmap, containing guidelines for the development of renewable hydrogen in Spain within the framework of the energy transition, towards decarbonization of the economy by 2050. A total of 60 measures cover the entire value chain, with specific targets for 2030. Note that the roadmap may be revised every three years, based on the outcomes of its objectives.

Moreover, in March 2021 the Spanish Government approved the Integrated National Energy and Climate Plan 2021-2030 (“PNIEC”, in Spanish). This contains targets for cutting emissions, rolling out renewable energy and energy efficiency, with lines of action aimed at maximizing the opportunities and benefits for the economy, employment, health and the environment. The plan is currently under review to make its goals more ambitious.

The PNIEC establishes hydrogen and associated technologies as major tools for demand management, storage and energy system flexibility. It promotes renewable gases because of their versatility. They can be used in power generation, to cover energy demand in industrial processes and transport or for production of synthetic fuels. They can also be used to promote electric vehicles, and integration of the gas market.

Other strategic documents completing the PNIEC have been subsequently approved in Spain, which also see green hydrogen as a key energy vector for achieving climate neutrality in 2050. These include the Climate Change and Energy Transition Act, Long-Term Decarbonisation Strategy 2050 and the Energy Storage Strategy.

Achieving the above targets will require a major investment agenda that will have to be led by the private sector, but also with considerable funding from public authorities. To this end, the Strategic Project for Economic Recovery and Transformation (PERTE, in Spanish) relating to renewable energies, renewable hydrogen and storage has been approved, with EUR 6.9 billion of public funds, 22% of which will be expressly dedicated to hydrogen.

More recently, in May 2023, as part of the above PERTE, the relevant Spanish Ministry launched the second edition of the Incentive Programme for pioneering and unique renewable hydrogen projects (H2 Pioneers II). A total of EUR 150 million has been set aside to encourage commercially viable and innovative projects for the production and local consumption of renewable hydrogen, especially in sectors where decarbonisation is more difficult, such as industry or heavy mobility.

H2 Pioneros II seeks to give continuity to the first edition. Also with funds of EUR 150 million, the first round of applications was completed in April, with incentives awarded  to 19 projects located in nine different regions of Spain.

 

Part 5

Hy-ly Volatile? making it safe, sustainable and transportable

Spain has an emerging regulatory framework which enables renewable hydrogen production, transport and supply. However, this is a complex framework given that green hydrogen production, transportation and supply cuts across several regulatory areas.

Production

Although green hydrogen production is not specifically regulated, this is no barrier to building plants dedicated to producing renewable gases, including green hydrogen, given that this is sufficiently covered by industrial and environmental regulations. 

However, there is a consensus in the public and private sector on the need for specific regulations on green hydrogen production, in order to facilitate its deployment.

Currently, renewable hydrogen production requires the following:

  • Renewable hydrogen producers must have either a contract in place with a producer or supplier of energy for the ordinary supply of renewable power, or a renewable power plant for self-consumption. Power plants that allow self-supply are generally solar or onshore wind plants that are subject to a specific authorisation process.
  • Green hydrogen production consists in a chemical process known as electrolysis, which involves using electrical current to separate the hydrogen from the oxygen present in water.

    From an environmental perspective, any facility that carries out chemical processes on an industrial scale will be subject to an environmental impact assessment, as well as the relevant environmental permits.

    Additionally, since its production requires the use of water, green hydrogen producers have to either obtain an abstraction licence from the relevant water authority (confederación hidrográfica) or sign an agreement with a water supply company.
  • Other than the above, and the relevant municipal licenses, renewable hydrogen production plants do not require any specific energy approvals.

Transportation and distribution

Two government decrees in 2022 made significant changes to Spain’s Hydrocarbons Act, affecting green hydrogen transport infrastructure. In short, two types of renewable gas pipelines are defined: direct lines and isolated pipelines. 

The main takeaways from the new regulations are below:

  • Isolated pipelines
  • Isolated pipelines are pipelines not connected to the natural gas system (i.e. they connect the electrolyser with the offtaker).
  • They are declared of public utility and thus benefit from the right to expropriation.
  • Third party access is to be negotiated and based on transparent, objective and non-discriminatory criteria. The Spanish Markets and Competition Commission (CNMC) may publish these criteria.
  • The owner will be considered the distribution/transmission company (depending on the maximum design pressure) for the purposes of rights and obligations, but this does not mean that the owner must be a natural gas TSO/DSO.
  • The relevant permitting authority is either regional or national (if the pipeline crosses more than one region).
  • A portion of the pipeline capacity may be reserved for renewable gas production facilities to be built at the same time as the pipeline or in the following three years.
  • Direct lines
  • Direct lines are pipelines that connect an electrolyser with the natural gas network, for blending purposes.
  • Direct lines connecting an electrolyser with the natural gas network are declared of public utility and thus benefit from the right to expropriation.
  • Third party access must be granted and if conflicts arise, the CNMC will be the competent body to resolve these.
  • Ownership of the direct line shall lie with the electrolyser company.
  • The relevant permitting authority is either regional or national (if the pipeline crosses more than one region).

Guarantees of origin

During 2022, several regulations were passed to introduce a guarantee of origin scheme for renewable gases, including green hydrogen (“GOs for Renewable Gasses”).

Find below the main takeaways from the regulations:

  • The Spanish Ministry for Ecological Transition and Demographic Challenge will be responsible for issuing GOs for Renewable Gasses. However, on a transitional basis, this role will be performed by the Gas Transmission System Operator (i.e. a subsidiary of the natural gas Spanish TSO).
  • GOs for renewable gases will be issued on the following terms:
  • They must be applied for by a gas producer whose facility has been previously registered as producing gas from renewable sources. 
  • GOs shall be of a standard size of 1 MWh. No more than one GO shall be issued in respect of each unit of energy produced.
  • They must be valid for all the produced renewable gas, including renewable gas not injected into the grid sold to third parties and self-consumed. 
  • They will be valid for a maximum of 12 months from the date the unit of energy has been produced. After 18 months, all guarantees of origin that have not been redeemed will expire.
  • GOs for renewable gases must specify at least the energy source, the process or technology used in the production of the renewable gas and details of the installation.

Whether hydrogen will be considered renewable or not will be determined by the European Commission delegated acts which are currently being discussed.

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