INES Suggests Adaptive Regulation for Hydrogen Network

The German Federal Network Agency (Bundesnetzagentur) closes a market consultation on the future regulation of hydrogen pipelines today. The Initiative Erdgasspeicher (INES) suggests an adaptive regulatory approach. This means regulation follows market development. Using this approach allows for the hydrogen sector and thereby the gas sector to develop step-by-step. And this development is necessary as a renewable electricity system will not be able to fulfill all flexibility needs. The availability of gas storage facilities, however, provides the gas sector with a massive flexibility resource. Gas storage facilities will be the missing link in a carbon-neutral energy system.

INES participated in the consultation of the Bundesnetzagentur, thereby outlining how an adaptive regulatory approach for hydrogen networks should be designed. “We must the bigger picture of developing a hydrogen infrastructure,” says Sebastian Bleschke, Management Director of INES. “To master the energy transition, we have to initiate an infrastructure transition as well. While the energy transition focuses on a larger share of clean energy, the infrastructure transition provides for a flexible system. All in all, the gas sector, more specifically, the hydrogen infrastructure complete the energy transition by sustaining flexibility.”

To reach that goal, INES suggests an adaptive regulatory approach:

Phase 1: At the moment, there is no need to regulate access or fees for hydrogen networks. To allow for new hydrogen producers to access existing pipelines (within the current three hydrogen clusters in Germany), it would suffice to adapt the Restriction of Competition Act in the near term.

Phase 2: Subsidiary provisions for hydrogen production will lead to a market where supply exceeds demand over the next couple of years. Production facilities that are based at larger distances will be connected to the existing hydrogen clusters via pipelines. At this stage, access regulation for Hydrogen Transmission System Operators (“Cluster Network Operators with Transmission Duties”) will have to be introduced.

Phase 3: Regulating fees should be the last piece of the puzzle at an even later stage of market development. This stage is defined by well-connected hydrogen clusters and an extensive pipeline infrastructure. As the connection of clusters ends the competition among different locations, a competition has to be simulated by regulation to ensure efficient network tariffs.

“Only adaptive regulation will lead to an integrated development of network and storage infrastructure in hydrogen markets and their alignment with flexibility needs. This is the only way to an infrastructure transition that leads to a successful energy transition”, Sebastian Bleschke comments.

Download INES position paper on an adaptive regulation for hydrogen networks (in German)

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Read press release in German