Certification of Renewable Hydrogen in Germany and the European Union as an Import Requirement

Why is Hydrogen Certification Needed?

Renewable hydrogen in the Member States of the European Union can be counted towards their national transport targets. But, how can it be proven and verified that the energy carrier was actually produced in a sustainable way? The answer is by way of hydrogen certification.

In the regulatory framework of state aid provision in form of subsidies, tax/levy exemptions, crediting of carbon reductions, etc, certification constitutes an essential tool for demonstrating compliance with the regulations. This framework sets the rules on how “renewable hydrogen” is defined and the requirements it needs to fulfil to be recognised as renewable. In this sense, certification systems mirror the legislative framework. Hereby, the governance structure of certification in the European Union looks as follows (Figure 1):

Figure 1: PoS certification process and competent bodies (modified from REGATRACE D4.1. (2021))

  1. The European Commission officially recognises the so-called Voluntary Schemes, which translate the regulatory framework into tangible criteria that hy-drogen producers must fulfil.
  2. Certification Bodies are then recognised by the respective Voluntary Scheme in order to carry out the required audits.
  3. Market participants register their renewable hydrogen volumes in a national registry for Proofs of Sustainability (PoS). For example, in Germany, entries are made into the national PoS registry, Nabisy1, while in Austria they are entered into ElNa2.
  4. The data from the national registry is then transferred to the EU’s Union Database (UDB). If the respective country has no national registry in place, then the producer can register the renewable hydrogen volumes directly in the UDB.
Regulatory Framework
European Union

The Renewable Energy Directive II (RED II) is currently under revision and an amendment to it will come into force in 2022. The legislation will expand its sectoral scope from the transport sector towards industry, heating and cooling. Furthermore, according to the Fit-for-55 Package, renewable fuels of non-biological origin (RFNBOs) will need to comprise 2.6% of fuels in the transport sector by 2030. In industry, 50% of the consumed hydrogen will have to be renewable hydrogen by 2030.

The transport sector

The renewable transport sector in the Eu-ropean Union is regulated by RED II, which classifies hydrogen as an RFNBO. So far, Article 27 RED II sets the renewable electricity criteria for RFNBOs. Two delegated Acts3 under the Directive are expected to be adopted by the end of 2021 and would further refine the sustainability requirements for the energy carrier. Renewable electricity criteria [delegated Act on Article 27 RED II]: This delegated Act aims to further refine the renewable electricity criteria for RFNBOs. Those criteria cover the following aspects:

  • Renewability: degree of renewable energy input required
  • Additionality: the additionality criterion is set by the European Commission for prioritising the use of renewable electricity volumes first and foremost for direct applications, while only utilising additionally installed capacities for RFNBO production. RED II defines additionality by the absence of received subsidies.
  • Geographical correlation: set geographical scope in which the electricity installation and the electrolyser must be located.
  • Temporal correlation: time difference between electricity and RFNBO production.

Although the European Commission has not yet published any official details, unofficial information was already leaked on the detailed sustainability criteria for RFNBOs (see Table 1). Greenhouse gas emission calculation methodology of RFNBOs [delegated Act on Article 28 RED II]:This delegated Act provides the methodology to calculate the greenhouse gas emission reduction for RFNBOs. Furthermore, it defines the eligible carbon sources for the methanation of hydrogen. Three different carbon sources exist: biogenic carbon, carbon from Direct Air Capture (DAC) and carbon from industrial point sources (Global Alliance Powerfuels, 2020).

Germany

The sustainability criteria of the European Union will be transpositioned4 into the national law by the 37th Federal Emission Control Ordinance (37. Verordnung zur Durchführung des Bundesimmissionss-chutzgesetzes) (BImSchVO), which currently sets the rules for being accounted towards the national transport quota. The Renewable Energy Act-Ordinance(Verordnung zur Umsetzung des Erneuerbare-Energien-Gesetzes)(EEG-VO)regulates the renewable electricity market. In Germany, additional costs associated with the renewable characteristics of electricity have to be paid by the consumer via an EEG levy. The German Government aims to exempt hydrogen from the EEG levy on the condition that certain sustainability criteria are met. These sustainability criteria are based – with minor deviations – on the delegated Act on Article 27 RED II (see Table 1).

LegislationDelegated Act on Article 27 RED II as per leaked informationGerman Renewable Energy Act-Ordinance (EEG-VO)
Geographical scopeEuropean UnionGermany
Purpose

Crediting towards the renewable transport targets
Exemption from EEG levy to reduce hydrogen production costs
 Renewable electricity criteria for power fuels
Renewability









The consumed electricity must be 100% renewable and proven by a Power Purchase Agreement (PPA). Direct connection + indirect connection (grid): Proof with smart meter that the hydrogen was solely produced through direct connection

The consumed electricity must be 100% renewable. If the electricity installation is indirectly connected to the electrolyser via the electricity grid, further proof is required in form of cancelled Guarantees of Origin (GOs). The GOs must be coupled with the electricity supply when produced and consumed in Germany.
Additionality + System  serviceability

























The renewable electricity must not be subsidised and must be produced by an installation that has a new installation or has undergone major refurbishment[5]
Direct connection:
New plants must be commissioned within a maximum of 12 months prior to the electrolyser.
Indirect connection (grid): Option 1: electricity installation was implemented OR major refurbished max. 24 months prior to the electrolyser + unsubsidized, or
Option 2: one hour correlation + proof that power-generating facilities were downward redispatched + both installations are  located on the same side of the congestion causing the redispatch, or
Option 3: one hour correlation + price of electricity in the bidding zone is lower or equal to 0€ per MWh.
The electricity installation must not be subsidised. Hydrogen is only exempt from the EEG levy if it is produced during the first 5,000 full load hours of an installation.  





















Geographical Correlation







The criteria for the geographical correlation between the electricity plants and the electrolyser is set at the same bidding zone[6] or two different bidding zones, if they have the same electricity price on the day-ahead market + same calendar hour85% of the consumed electricity must be produced in Germany and a maximum of 15% of the consumed electricity may be produced in a neighbouring country physically connected to Germany through the power grid.  
Temporal CorrelationOption 1:  same calendar hour + PPA, or
Option 2: same calendar hour + higher RE-share in the respective bidding zone compared to the bidding zone three years prior, or
Option 3: same calendar hour + power-generating facilities using renewable energy sources were downward redispatched + located on the same side of the congestion causing the redispatch, or;
Option 4: from a storage asset located behind the same grid connection point as the electrolyser that has been charged in during a calendar hour fulfilling the criteria in option 1, 2, or 3
The maximum time difference between the electricity and the RFNBO production (for a direct connection) is set at 15 minutes.    
















Voluntary Schemes

Under Renewable Energy Directive (RED I), there were 16 Voluntary Schemes recognised for biofuel certification. Under RED II, no Voluntary Schemes have been officially recognised yet. However, 13 Schemes were already positively assessed. Voluntary Schemes aiming to certify hydrogen will still have to wait for the adoption of delegated legislation (two acts) before they can submit proposals for the verification process of their requirements. SCC and CertifHy already voiced their intention to seek recognition as a Voluntary Scheme for RFNBOs.

There are already voluntary hydrogen standards available on the market such as ISSC Plus and the TÜV Süd CMS 70 standard. They do, however, not mirror the legislative framework, so that their certified volumes cannot be counted towards national targets or guarantee any state aid provision. Their certificates mainly serve marketing purposes.

Union Database

RED II provides for the implementation of a Union Database (UDB). Its aim would be to prevent double counting of PoS when traded across the national borders of Member States. The UDB would be connected to the national registries of the Member States, if any, as well as to Voluntary Schemes. If a Member State has no national registry for PoS in place, the UDB would offer direct user accounts for fuel producers (Guidehouse, 2020)7.

The implementation of the UDB is scheduled to be completed by the end of 2022 and is planned in two phases:

  • First Phase 1: Low risk value chains [start-ing from the collection point/ trader]
  • Second Phase 1: High risk value chains [starting from the point of origin]

The tracking model is aimed to be segre-gation/mass balancing. A harmonised ma-terial list in form of a drop-down menu will be based on the EUROSTAT Database. A PoS-ID is created and can be tracked in the system. Furthermore, a QR code will be generated for showing information on the material origins, but no confidential in-formation. Currently, it is also discussed if national schemes (third party databases) should be mirrored in the UDB, even if they are not officially recognised by the Euro-pean Commission.

Global Harmonisation of Hydrogen Certification

An all-encompassing global certification system for hydrogen would lead to more flexibility of hydrogen volumes towards fluctuating prices in regards to international trade and consequently create higher market efficiencies and a faster market ramp-up. Currently, there are various hydrogen standards globally.

Among its latest work, the German Energy Agency (dena) assessed whether a uniform global certification system for renewable hydrogen is feasible. For this purpose, ten hydrogen regulations/standards (ISCC PLUS, CertifHy, dena Biogasregister, TÜV Süd CMS 70, China Hydrogen Alliance’s Standard, the Certification Scheme of the Japanese Prefecture Aichi, the funding programme H2 Global, the Californian Low Carbon Fuel Standard, EU Renewable Energy Directive II and the UK Renewable Transport Fuel Obligation) were assessed for their harmonisation potential.

In Australia, The Smart Energy Council launched their Zero Carbon Certification Scheme for hydrogen and ammonia in December 2020 (Smart Energy Council, 2020). They are currently conducting pilot testing of their scheme.

In Japan, the Prefecture Aichi set up its own hydrogen certification scheme. The scheme sets renewable electricity as a pro-duction input requirement, and mass balancing as the tracking model for the chain of custody. The system boundary of the GHG methodology in the scheme is Well-to-Gate (Adelphi, 2019; dena & WEC, 2022).

The most harmonised sustainability requirements of all ten hydrogen standards/regulations evaluated are the use of renewable electricity inputs, mass balancing as the tracking model, as well as the eligibility of all carbon sources provided that they are not deliberately produced for the power fuel production.

The assessment concludes that a global certification system will not be feasible, as it is unlikely that certain markets (eg the EU) would give up their long-established ambitious criteria (eg the renewable electricity criteria according to Article 27 RED II in the European Union) for the sake of a globally harmonised system.

However, dena and the World Energy Council (2022) propose a system concept that is recognised for the transport sector by all ten hydrogen regulations/standards assessed:

• Direct line to a renewable source of electricity

• 70% GHG reduction compared to the reference value of 94 gCO2equ/MJ

• Carbon from Direct-Air-Capture (DAC) as an allowable carbon source for power fuels

Furthermore, the chain of custody must be tracked by mass balancing.

Conclusion

Certification schemes mirror the legisla-tive framework. In the EU, the ratification of the final legislation regarding the sus-tainability criteria for renewable hydro-gen is still pending. Once this is finalised, certification schemes can apply to be offi-cially recognised as a Voluntary Scheme by the European Commission and carry out hydrogen certification for the transport sector and industry. Currently, voluntary market-based renewable hydrogen stan-dards (ISCC Plus, TÜV Süd) already exist, but their certificates cannot be used to take advantage of governmental support or get the hydrogen volumes counted towards national renewable energy targets. They mainly serve marketing purposes.

References
  1. https://nabisy.ble.de/app/locale%3Bjsession-id=428BEBC86FD4DB9840B749357EE583F-B?set=en
  2. https://www.umweltbundesamt.at/en/
  3. What is a delegated Act? Please check the following link for further information.Implementing and delegated acts | European Commission(https://ec.europa.eu/info/law/law-making-process/adopting-eu-law/implementing-and-delegated-acts_en)
  4. What is national transposition? National transposition is the implementation of EU law into national law of the EU Member States. EU law sets the minimum standards that member states must adopt, they can implement stricter rules.
  5. 20% of consumed electricity is exempt from this rule, when the producer make a financial contribution to the Union renewable energy financing mechanism equal to the consumed 20%
  6. A bidding zone is defined as the largest geographical area in which market participants are able to exchange energy without capacity allocation. Bidding zones differ in the European Union. For instance, in Germany the bidding zone equals the national territory whereas Italy has several bidding zones. (ofgem, 2014)
  7. https://op.europa.eu/en/publication-detail/-/publication/f9325197-f991-11ea-b44f-01aa75ed71a1/language-en/format-PDF/source-15705125
Bibliography

Adelphi. (2019). The role of clean hydrogen in the future energy systems of Japan and Germany.https://www.adelphi.de/de/system/files/mediathek/bilder/The%20role%20of%20clean%20hydrogen%20in%20the%20future%20energy%20systems%20of%20Japan%20and%20Germany%20-%20Study.pdf

dena, & WEC. (2022). Global Harmonisation of Hydrogen Certification (in press).

Global Alliance Powerfuels. (2020). Carbon Sources for Powerfuels Production.

Guidehouse. (2020). Scoping study setting technical requirements and options for a union database for tracing liquid and gaseous transport fuels. https://op.europa.eu/en/publication-detail/-/publication/f9325197-f991-11ea-b44f-01aa75ed71a1/language-en/format-PDF/source-157051253

ofgem. (2014). Bidding Zones Literature Review. https://www.ofgem.gov.uk/sites/default/files/docs/2014/10/fta_bidding_zone_configuration_literature_review_1.pdf

REGATRACE D4.1. (2021). D4.1. Guidelines for the verification of cross- sectoral concepts. Guidelines for the verification of cross- sectoral conceptsSmart Energy Council. (2020). Zero Carbon Certification Scheme. https://smartenergy.org.au/zero-carbon-certification-scheme


Katharina Sailer

Expert, Bioenergy and Renewable Gases, German Energy Agency (DENA)

Biography

Katharina Sailer has been employed as an Expert for Renewable Gases and Bioenergy with the German Energy Agency since 2020. She focusses on hydrogen certification, bio-LNG markets and calculating CO2 certificate prices until 2030. Prior to joining the Agency, Katharina worked for two years at the Leibniz Institute for Agricultural Engineering and Bioeconomy (ATB) where she was mainly involved in the EU ADVANCEFUEL project, which has the aim to facilitate the market roll-out of second generation biofuels. She studied Environment and Resource Management with a specialisation in Energy Studies at the Vrije University of Amsterdam. Katharina’s interests are in renewable energies and decarbonising strategies.

Biography

Toni Reinholz works as Team Leader Bioenergy and Renewable Gases at the German Energy Agency GmbH (dena). He has been working in the field of renewable energies and efficient mobility at the dena since 2012. Toni Reinholz’s work focuses on the analysis of national and international market developments in bioenergy and renewable gases in the electricity, heat and fuel sector. Another focus is on regulatory and implementation-relevant topics regarding the verification of renewable energy sources for target compliance or consumer disclosure. In addition, he coordinates several steering groups within the dena Biogas Partnership, in which around 30 actors along the entire value chain are bundled and supported in their activities to develop the market for the production and use of renewable gases. He is responsible for the technical and conceptual development as well as the further development of the dena Biogasregister, which today represents the largest European electronic Guarantee of Origin system for renewable gases. Prior to this, Toni Reinholz was employed by the German Association of Energy and Water Industries (BDEW) in the sales and gas-specific issues department (2011-2012). Toni Reinholz graduated in economics from the Freie University of Berlin in 2010.

Foreword

Analysis

Conclusion