Push to hydrogen intensifies with MEP vote on which energy projects get EU cash

Europe’s energy strategy is becoming increasingly geared towards the embryonic hydrgen energy market, with the push now coming from MEPs who are supporting funding the development of hydrogen infrastructure, such as electrolysers, as well as carbon capture and storage.

MEPs in the Industry, Research and Energy Committee approved on Tuesday, by 50 votes to 13 and 12 abstentions, criteria for selecting PCIs such as high-voltage transmission lines, pipelines, energy storage facilities or smart grids, on the fast-track procedure for EU funds.

PCIs are considered essential for delivering on EU objectives in the energy field, including improved interconnection between national markets, greater competitiveness, security of supply and promotion of renewables.

The European Union has historically funded PCIs (projects of common interest) which have included gas plants.

But projects based on natural gas will no longer be eligible for EU funding, bar for a temporary derogation that allows, under strict conditions, natural gas projects from the fourth or fifth list of PCIs to be considered for a fast-track authorisation.

Malta obtained a derogation from the European Commission that will allow a proposed hydrogen-ready pipeline to be finally recognised as a Project of Common Interest by the EU, after failing to obtain funding earlier in the year.

The intention now is to move away from solid fossil fuels such as coal, lignite, peat and oil shale.

The European Commission had shut the door to any funding for Malta’s gas pipeline earlier in 2021, after informing the government that its proposal for a €400 million “hydrogen-ready” pipeline fell short of a sufficient justification.

Malta had already failed to obtain financing in 2019 from the Connecting Europe Facility (CEF) funds due to the Commission’s de-prioritisation of gas projects in its bid to move fast on climate change targets.

MEPs now want EU money to go to projects that repurpose existing natural gas infrastructure for hydrogen transport or storage.

The MEPs are saying that eligible projects must be in line with the “energy efficiency first” principle, which stipulates that energy savings are the easiest way to save money for consumers and reduce greenhouse gas emissions. The cost of projects should ensure that end-users are not disproportionately burdened, especially if that could lead to energy poverty.

“The objective of this revision is to align the TEN-E Regulation with the objectives of the European Green Deal. We should also bear in mind, however, that Energy Union priorities remain valid and should still be reflected in the rules governing the support for important energy infrastructure projects. Apart from the general sustainability criteria, the projects would still be evaluated based on their contribution to energy security, market integration and affordability for end users”, said lead MEP Zdzisław Krasnodębski, from the European Conservatives.

MEPs will now open negotiations with the Council.

A fifth list of PCIs is due to be selected in autumn 2021 under the existing rules, albeit under tighter sustainability criteria. The Commission updates the list of PCIs every two years.

Revision of TEN-E regulation

The Council will revise the Trans-European Networks for Energy (TEN-E) Regulation, but there will be no new natural gas and oil projects. An exception will be made for pipelines that can cease to be natural gas assets and become dedicated hydrogen assets.

In the case of Cyprus and Malta, that are still not interconnected to the trans-European gas network, PCIs from the previous regulation will maintain their status until the interconnection is complete. “The purpose of this exception is to end the isolation of these two member states and to give them access to future energy markets, including hydrogen,” the European Council said in its decision.

2020: change in priorities

Malta had originally planned to procure natural gas from the European mainland instead of the floating liquefied natural gas (LNG) vessel in Delimara.

But the Commission decreed that the Maltese proposal did not sufficiently substantiate the claim that a gas pipeline can improve security of supply in Malta, and even deemed that its hydrogen-ready design could not be considered innovative as the technology is available on the market.

Also in 2019, a European Ombudsman’s inquiry found that the EC’s assessment of gas projects had been “suboptimal due to a lack of data” – so under a proposed reform, the EC ruled out gas projects from funding.

This means that billions in Connecting Europe Facility cash will be spent on renewable and low carbon gases, such as smart gas grids, and green gases, typically biogas and biomethane, but also hydrogen transmission pipelines and related equipment.