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A Green Hydrogen Strategy for Ireland - Exciting times ahead for the Green Hydrogen sector

  • Ireland
  • Construction and engineering
  • ESG
  • Energy and infrastructure - Hydrogen

28-03-2022

The Evolving Nature of the Climate Action Plan

Ireland’s legally binding ambitions for the delivery of climate action and achieving net-zero by 2050 are set out in the Climate Action and Low Carbon Development (Amendments) Act 2021 (the “Climate Action Act”).

However, at its core, the Climate Action Act does not define express measures that need to be delivered for Ireland to meets its overall climate targets. Instead the Climate Action Act sets out the framework for plans and programmes to be developed and implemented that will, collectively, allow Ireland to meet its climate targets. In particular, the Climate Action Act requires the Climate Action Plan (the plan setting out the specific actions Government bodies will take) to be reviewed, updated and published annually.

The role of Hydrogen in the Climate Action Plan

In respect of Hydrogen, the Climate Action Plans 2019 and 2021 acknowledge and set out (to differing degrees) the important part that hydrogen (and in particular Green Hydrogen) could play in meeting Ireland’s climate targets, including reducing emissions from the energy and electricity sector by 81% by 2030. However, the Climate Action Plan 2021 notes that electrolysis technologies (required for the production of Green Hydrogen) are still being developed and that costs of producing and supplying this fuel type remain high.

For this reason (amongst others) measures in the Climate Action Plan for the deployment of hydrogen are deemed to be “further measures” rather than “core measures” and are identified (from an authority spend perspective) as having a negative business case rather than projects that can financially stand on their own two feet. The Climate Action Plan 2021 therefore appears to place greater emphasis on the role of hydrogen to meet long term net-zero emissions while the accelerated roll out of existing technologies (for example, windfarms and transitions to electric vehicles) is the focus of Government spend/attention in the immediate/mid-term.

Given the relative immaturity of the hydrogen market in Ireland there is clearly logic in this approach. However, given the long lead times required to develop a domestic Green Hydrogen economy (including developing skilled resources and necessary infrastructure) stakeholders (including Wind Energy Ireland) have recently been lobbying the Government to develop a Hydrogen Strategy to ensure that mid to long term hydrogen ambitions can be met.

The Green Hydrogen Strategy Bill

Within this context the Government introduced the Green Hydrogen Strategy Bill 2022 on 9 February 2022, obliging the Minister for the Environment, Climate and Communication to draft and publish a Green Hydrogen Strategy (including a consultation) within six months. This timing is designed to coincide with the timing for publishing of the Climate Action Plan 2022.

It is of note that the strategy is a “Green Hydrogen Strategy” rather than a “Hydrogen Strategy”. This clearly sets out Ireland’s desire to pursue hydrogen production through renewable powered electrolysis. This is a different approach to that taken by some other nations (including the UK) who have a taken a more agnostic approach to how hydrogen is produced (with a focus on transitioning to a green hydrogen economy as an end game rather than a strict requirement on green hydrogen production at the outset).

What we might expect from the Green Hydrogen Strategy

Although it will be some time before the Green Hydrogen Strategy is published, it is not unreasonable to expect that it will focus on a number of key issues and themes in respect of Ireland’s geography and existing energy systems, including:

Infrastructure Assessment: there will need to be an assessment of existing energy infrastructure and the need to use this data to assess (and notionally cost) future requirements.

Leverage off Successes in Windfarms: Ireland has a significant and world leading renewable energy sector driven in large parts by onshore and offshore wind. Green Hydrogen has a significant part to play in capturing the value from this resource and potentially generating an additional revenue line through the export of Green Hydrogen to other international markets. The Green Hydrogen Strategy will likely therefore seek to set out a road map for accessing such markets in the long-term.

Use of Green Hydrogen in the Gas Network: Gas Network Ireland is seeking for the gas network to be Net-Zero by 2050. Biomethane will be important in achieving this but unlikely be able to deliver these targets on its own and therefore a focus in the Green Hydrogen Strategy on deployment of Green Hydrogen in the gas network will be needed.

A review of the legal and regulatory framework: the regulatory framework in Ireland was not developed with the concept of gas production through electrolysis in mind. In particular, there is no specific reference to Green Hydrogen in the Directive 2009/73/EC (the “Third Gas Directive”) or the Gas Act 1976, which evidently requires clarity in light of developments in recent years. Following a public consultation on the proposed revision to the Third Gas Directive, the EU Commission published proposals for a new hydrogen and gas market decarbonisation package entitled "Proposal for a Directive of the European Parliament and of the Council on common rules for the internal markets in renewable and natural gases and in hydrogen" (the “Proposed Directive”) published in December 2021.

The Proposed Directive seeks to revise and update the Third Gas Directive in addition to the Gas Regulation (EC) 715/2009. One of the main aims of the Proposed Directive is to establish a market for hydrogen, create the right environment for investment, and enable the development of dedicated infrastructure, including for trade with third countries. A pathway for, or interfacing with, a review of an updated regulatory/legislative framework (including impact of the Proposed Directive) may helpfully be included in the Green Hydrogen Strategy to provide greater clarity for stakeholders seeking to operate in this highly regulated sector.

Transport Usage: one of the fast growing users of hydrogen is the transport sector (specifically hydrogen busses, heavy goods vehicles and construction plant). A critical part of the Green Hydrogen Strategy will be continuing to facilitate the link between hydrogen producers and transport operators so supply is able to meet demand and both can place reliance on the other.

The potential for the Green Hydrogen market is evidently growing and it is likely that the Government will issue a national Green Hydrogen Strategy by Q3 2022, having recently launched a public consultation by the Department of the Environment, Climate and Communications in light of the provisions in the Proposed Directive and industry movement, in order to gather the views of stakeholders and all interested parties. The closing date for submissions to the public consultation is 15 April 2022.1

Our Projects and Construction team have a wealth of experience in a range of disciplines (including energy regulation, procurement, real estate and planning) required to support our clients in the delivery of the Green Hydrogen projects. We therefore look forward to reviewing the Green Hydrogen Strategy when it is published and continuing to work with Government, stakeholders and the wider energy sector in respect of the continuing evolution of the Green Hydrogen economy in Ireland.

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DECC Public Consultation on the Proposed Revision to the Gas Directive and Gas Regulation can be accessed here.

If you would like to discuss regulatory/legal issues or generally anything on this exciting emerging market please contact:

Mark Varian, Partner, Head of Construction & Projects - MarkVarian@eversheds-sutherland.ie

Rupert Lugg, Senior Associate, Construction & Projects - RupertLugg@eversheds-sutherland.ie