On 21 May 2024, the European Council approved a regulation and directive establishing common internal market rules for renewable and natural gases and hydrogen (the “New Legislation”). The New Legislation recasts the EU’s 2009 Gas Regulation (Regulation (EU) 715/2009) and 2009 Natural Gas Directive (Directive 2009/73/EC), and makes certain amendments to the provisions of, inter alia, the 2017 Security of Gas Supply Regulation (Regulation (EU) 2017/1938), the 2011 Regulation on Wholesale Energy Market Integrity and Transparency (Regulation (EU) No 1227/2011); and the 2017 decision on intergovernmental agreements in the field of energy (Decision (EU) 2017/684).

The New Legislation forms part of the EU’s broader ‘Fit for 55’ legislative reform package to reduce greenhouse gas emissions by at least 55% by 2030, which was first proposed by the European Commission in December 2021, and is intended to facilitate the transition to renewable and low-carbon gases.

We have previously considered EU rules regulating the gas market, and the background to the New Legislation in our articles, ‘Hydrogen Regulations by Jurisdiction and Changing Transmissions Systems’ (link here), and ‘Hydrogen in tomorrow’s world’ (link here). 

The New Legislation incorporates the “energy efficiency first” principle, whereby consideration must be given to alternative, cost-efficient energy measures during planning and investment decisions. The New Legislation’s overarching aims are to:

• lower the carbon footprint of the gas market by incentivising the use of renewable gases, especially hydrogen, over natural gases; and
• strengthen supply security by reducing reliance on imported gas. 

The New Legislation also establishes the regulation of dedicated hydrogen networks. Notable provisions in the New Legislation include:

1. Ten-Year Network Plan 

A Union-wide, non-binding, ten-year network development plan for hydrogen will be published and regularly updated to ensure transparent and integrated network planning across the hydrogen, electricity and natural gas sectors. There will be specific focus on transport, supply, storage and infrastructure. 

2. New EU entity for Network Operators

A new, independent association, the European Network of Network Operators for Hydrogen (“ENNOH”), will be set up to coordinate and oversee network planning and to ensure fair representation across operators and Member States. ENNOH will cooperate closely with the ENTSO-E and ENTSO-G in the electricity and gas sectors, to facilitate energy system integration. 

3. Unbundling

The directive calls for “effective separation of networks from activities of production and supply” by disincentivising vertical integration between hydrogen transmission and hydrogen production or supply. This is referred to as ‘ownership unbundling’ and aims to avoid discrimination against competitors and new market entrants and to encourage independence from supply and production interests.

4. Respect for principle of energy solidarity 

The regulation amends the 2017 Security of Gas Supply Regulation to provide that the European Commission can exclude the provision of hydrogen or LNG supplies from Russia or Belarus for periods of up to one year from participation in the demand aggregation and joint purchasing of natural gas, as a “solidarity measure of a last resort” and in the interest of security of supply and the development of the hydrogen market.

5. Biomethane production

As part of supply adequacy efforts, progress on biomethane production is encouraged. However, production targets have been left to Member States to consider as part of national strategies. 

Once signed, both will be published in the Official Journal of the European Union. After publication, the regulation will be effective 6 months from the date of publication and the directive will be require adoption into national legislation within 2 years.