COMMISSION STAFF WORKING DOCUMENT EXECUTIVE SUMMARY OF THE IMPACT ASSESSMENT REPORT Accompanying the 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 (recast) Proposal for a Regulation of the European Parliament and of the Council on the internal markets for renewable and natural gases and for hydrogen (recast)
Date: 2021-12-15
Institutions: Directorate-General for Energy, European Commission
Subjects: carbon neutrality, energy cooperation, energy grid, energy market, energy transport, gas supply, hydrogen, natural gas, renewable energy, security of supply

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   EUROPEAN COMMISSION  Brussels, 15.12.2021  SWD(2021) 456 final  COMMISSION STAFF WORKING DOCUMENT  EXECUTIVE SUMMARY OF THE IMPACT ASSESSMENT REPORT  Accompanying the 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 (recast)  Proposal for a Regulation of the European Parliament and of the Council on the internal markets for renewable and natural gases and for hydrogen (recast) {COM(2021) 803 final} - {COM(2021) 804 final} - {SEC(2021) 431 final} - {SWD(2021) 455 final} - {SWD(2021) 457 final} - {SWD(2021) 458 final}  
 
 
Executive Summary Sheet (Max 2 pages) 

Impact assessment on hydrogen and decarbonised gas market package  

A. Need for action 

What is the problem and why is it a problem at EU level?  

The European Green Deal puts the EU on a path to climate neutrality by 2050, which requires significantly higher 
shares of renewable energy sources in an integrated energy system. Natural gas represents 95% of the gaseous fuels 
consumed in the EU today and accounts for 25% of the EU’s total energy consumption. While the share of natural 
gas  will  decrease  progressively,  biomethane,  synthetic  methane  and  hydrogen  are  expected  to  become  more 
relevant.  However,  these  alternatives  to  natural  gas  face  a  number  of  regulatory  barriers  and  are  not  covered  by 
current  energy  security  arrangements.  This  impedes  their  roll-out  and  affects  their  cost-effectiveness  under  the 
current  market  conditions  and  rules.  The  current  regulatory  setup  does  not  facilitate  the  cross-border-trade  and 
infrastructure  development  for  renewable  and  low  carbon  gases,  and  their  unhindered  access  to  the  gas  markets 
across the EU. Thus the full potential of supplying renewable and low carbon gases, at least costs and in a secure 
way, remains untapped. Finally, gas consumers do not dispose of the necessary rights and tools to choose the most 
cost-effective decarbonisation options in the market.   

What should be achieved? 

The general objective is to facilitate the cost-effective decarbonisation by creating of a European hydrogen market 
and the gradual decarbonisation of gaseous fuels markets, while ensuring energy security. The specific objectives 
are to 1) facilitate the emergence of an open and competitive EU hydrogen market, 2) ensure access of renewable 
gases to the existing methane networks and markets, and their security of supply 3) ensure transparent and inclusive 
infrastructure planning, and 4) give consumers rights and tools to choose the cheapest decarbonisation options. 
What is the value added of action at the EU level (subsidiarity)?  

The  initiative  aims  at  modifying  existing  EU  legislation  and  creating  a  new  framework  for  an  internal  hydrogen 
market to achieve a cost efficient clean hydrogen economy. Fostering more efficient and integrated EU markets for 
renewable gases requires a harmonised and coordinated regulatory approach across the EU and cannot be achieve at 
Member  State  level  alone.  The  initiative  is  also  aimed  at  avoiding  the  distortive  effects  of  uncoordinated, 
fragmented  policy  initiatives  as  many  Member  States  develop  purely  national  solutions.  This  initiative  also 
contributes  to  achieving  binding  EU-level  objectives.  The  role  of  gaseous  fuels  in  the  energy  mix  in  the  coming 
decades requires the  decarbonisation  of the  gas  sector  via  a  forward-looking  design  for  competitive  decarbonised 
gas markets able to empower and protect adequately all EU consumers. The creation of a regulatory framework at 
EU  level  for  dedicated  hydrogen  infrastructure  and  markets  would  foster  the  integration  and  interconnection  of 
national hydrogen markets. 

B. Solutions 

What are the various options to achieve the objectives? Is there a preferred option or not? If not, why? 

Problem area I considers options: to tender the rights for network operation (Option 1); to introduce main regulatory 
principles inspired by those currently applicable to the natural gas market but adapted to the development stage of 
hydrogen markets (Option 2); and to establish a fully developed regulatory regime for hydrogen (similar to the one 
currently  applicable  to  the  natural  gas  sector)  without  need  for  a  transition  to  a  more  mature  hydrogen  market 
(Option 3). 

The  preferred  option  for  problem  area  I  is  to  introduce  main  regulatory  principles  whilst  providing  guidance  for 
future regulatory developments (Option 2b ‘Main regulatory principles with a vision’). This option is best adapted 
to  the  particularities  of  the  hydrogen  sector  and  enshrines  some  of  the  benefits  that  the  other  options  could  have 
brought, whilst avoiding their downsides. By providing guidance, a stage is set for a more mature hydrogen market. 

Problem area II contains options that promote access of renewable and low carbon gases to the existing gas market 
and  infrastructure.  All  options  include  also  a  progressive  level  of  intervention  for  addressing  energy  security 

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concerns,  notably  extending  existing  tools,  standards  and  procedures  to  renewable  and  low  carbon  gases  and 
addressing risks linked to cybersecurity for the gas sector. Option 3 “Allow and promote renewable and low carbon 
gases  full  market  access  and  tackle  issue  of  long  term  supply  natural  gas  contracts”  is  the  preferred  option  for 
problem  area  II.  This  option  contains  measures  to  support  access  of  renewable  and  low  carbon  gases  to  the 
wholesale  market,  LNG  terminals,  and  transmission  grid  (regardless  of  place  of  connection),  including  tariff 
discounts for injection to the grid and cross-border transport. It bans long-term supply contracts for unabated fossil 
gas  as  of  2050.  Gas  quality  would  be  governed  by  a  harmonised  EU  approach  for  cross-border  interconnection 
points while leaving flexibility to the Member States. The allowed cap for hydrogen blends is set at 5% for all cross-
border points – a level that is cost-efficient in terms of adaptation and abatement costs.  

Problem area III considers options regarding integrated network planning. The preferred option for problem area III 
is  Option  2  “National  Planning  based  on  European  Scenarios”.  The  options  allows  for  national  planning  but 
requires that it is based on joint scenarios for gas and electricity, aligned with the TYNDP and linked to the relevant 
National Energy and Climate Plan. It includes all relevant actors (DSOs) and enables identification of pipelines that 
can be used for repurposing from methane to hydrogen on a level of detail that would not be easily achievable on 
European level.   

Problem  area  IV  contains  options  that  postulates  for  a  non-regulatory  approach  in  tackling  competition  and 
consumers’  engagement  or  instead  requires  addressing  the  problem  drivers  through  new  legislation,  mostly 
mirroring what already established in the electricity sector. In light of the analysis, the preferred option is Option 2 
“Flexible  legislation”,  which  mirrors  the  electricity  market  consumer  protection  and,  where  relevant,  also  the 
empowerment provisions. Overall, this option is most likely to be the most effective, efficient, and consistent with 
other Problem areas. 

What are different stakeholders' views? Who supports which option?  

In problem area I, a large majority of the respondents supports the introduction of regulation at an early stage to 
foster a well-functioning and competitive hydrogen market and infrastructure. Respondents strongly advocated for 
an EU legislative framework that defines key regulatory principles and takes a step-wise approach. A large majority 
supports  e.g.  regulated  TPA,  rules  for  access  to  import  terminals  and  storage  for  hydrogen,  and  advocates  for 
network  activities  to  be  unbundled.  Most  respondents  considered  it  important  to  define  early  the  role  of  private 
parties in developing hydrogen infrastructure. A large majority of respondents also consider that existing and future 
private  networks  may  be  (temporarily)  exempted  from  certain  regulatory  requirements  but  that  convergence  on  a 
single  regulatory  framework  need  to  be  assured.  The  vast  majority  of  respondents  considers  that  rights  and 
permitting  requirements  for  new  hydrogen  infrastructure  should  be  similar  to  those  applicable  to  methane  gas 
pipelines today.  

For  problem  area  II,  stakeholders  agree  on  a  need  to  revise  current  regulatory  framework  to  help  achieve 
decarbonisation  objectives.  A  majority  of  stakeholders  consider  it  important  to  ensure  full  market  access  and 
facilitate  the  injection  of  renewable  and  low  carbon  gases  into  the  gas  grid.  Many  respondents  advocate  an 
obligation for network operators to connect renewable and low carbon gases’ producers and introduce an injection 
charge reduction. The majority of respondents supports as well the improvement of the transparency framework for 
LNG terminals. There is also a strong support for the harmonised application of gas quality standards across the EU, 
for  reinforced  cross-border  coordination  and  increased  transparency.  Respondents  are  more  divided  on  hydrogen 
blending,  but the  majority  agrees  that  it  can  provide a  cost  efficient and fast  first  step, despite  the  high  technical 
costs, to energy system decarbonisation. Few stakeholders supported the removal of intra-EU cross-border tariffs. 
Majority of the respondents consider gas specific security challenges and cyber-security measures as important. 

In problem area III, the majority of stakeholders supports aligning the timing of the national network development 
plans (NDPs) with the TYNDP, with a single gas plan irrespective of the unbundling model chosen. A significant 
majority  of  respondents  expressed  an  even  stronger  support  for  a  joint  electricity  and  gas  scenario.  A  substantial 
number of stakeholders asks for the inclusion of hydrogen projects in the NDP. Most of the stakeholders agree on 
the role of DSOs to provide and share information, with several respondents also supporting that DSOs provide their 
own plan including system optimisation across different sectors. Respondents also slightly preferred a joint gas and 
electricity  plan  to  joint  scenarios  with  separate  plans.  Several  stakeholders  pointed  out  that  a  joint  methane  and 

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hydrogen plan, with a separate electricity plan, would be the preferred option. 

On  problem  Area  IV,  the  vast  majority  of  the  stakeholders  called  for  higher  ambitions  in  the  citizen/consumer-
related  provisions  by  mirroring  those  in  the  electricity  market.  As  well,  energy  poverty  provisions  should  help 
ensure consumers are not paying the cost of switching to clean gas-based options. Representatives of private sector 
support the plans to phase out regulated prices, while some consumer organisations would opt for keeping them to 
protect for energy poor and vulnerable consumers. Almost half of all respondents want provisions on comparability 
of  offers  and  accessibility  of  data,  transparency,  smart  metering  systems,  and  switching  to  be  reinforced.  No 
responded has explicitly supported the non-regulatory approach.  

C. Impacts of the preferred option 

What are the benefits of the preferred option (if any, otherwise of main ones)?  

Problem area I: The option to apply main regulatory principles with a vision on hydrogen infrastructure and markets 
has  the  key  benefit  that  it  fosters  market  integration,  provides  clarity  for  (infrastructure)  investors,  avoids  the 
emergence of non-competitive market structures and barriers to market integration due to hydrogen quality issues. 
During the ramp-up of the hydrogen sector, it provides flexibility for investors whilst clarity on the future regulatory 
regime avoids the costs of ex-post adjustments needed once market mature.  

Problem area II: Allowing and promoting renewable and low carbon full market access and tackle issue of long term 
supply natural gas contracts. The key benefit is that the measures will decrease the production costs for producers of 
renewable  and  low  carbon  gases,  increase  competition,  liquidity  and  trade  for  renewable  gases.  In  this  way 
consumers and taxpayers will benefit as support could be lowered. It will also limit risks for energy security and 
saving  time  and  resources,  reduce  uncertainties,  improve  the  efficiency  of  emergency  measures,  and  strengthen 
security specific requirements for gas companies. 

Problem  area  III:  Establish  National  Planning  based  on  European  Scenarios.  The  key  benefit  is  that  this  will 
eliminate risks that electricity and gas TSOs plan the evolution of their systems based on incompatible assumptions. 
It enables sector integration and a conceptual system plan while keeping the benefits of more detailed sector specific 
network  development  plans.  It  ensures  a  common  vision  of  the  different  stakeholders  implying  that  network 
planning  takes  into  account  the  decarbonisation  strategies  at  the  national  and  EU  levels,  reducing  the  risk  of 
potential lock-ins or stranded assets.  

Problem  area  IV:  Implementing  flexible legislation  addressing  all  problem  drivers. The  key  benefit  is  that  it  will 
offer significant savings potential, help new suppliers and service providers to enter the market, develop innovative 
products,  resulting  in  increased  competition,  consumer  engagement  and  economic  benefit.  It  would  also  enable 
citizens  and  communities  to  increase  social  acceptance,  mobilise  private  capital  and  facilitate  the  deployment  of 
renewable and low-carbon gases. Reducing the risk of over-investments will have a positive environmental impact. 

What are the costs of the preferred option (if any, otherwise of main ones)?  

Implementing measures in problem area I implies economic and administrative costs on Member State authorities, 
regulatory  authorities  and network  operators  as  main  principles  will  need to  be  introduced  and supervised.  These 
costs are however easily outweighed by the economic benefits of the preferred option.  

Implementing measures in problem area II implies economic and administrative costs as it will increase the market 
price  of  natural  gas,  and  require  more  cooperation  between  DSOs  and  TSOs.  National  authorities,  in  particular 
regulators  will  need  to  be  involved  in  implementing  the  measures.  Also,  elaborating  a  regulated  approach  to 
cybersecurity could also entail higher costs for conformity.  

No  public  quantification  of  costs  is  available  for  problem  area  III,  but  the  benefits  (increased  synergies  reducing 
societal costs) are expected to outweigh the costs of additional coordination. 

No  public  quantification  of  costs  is  available  for  problem  area  IV.  The  key  costs  are  economical  and  social  as 
consumer benefits might be lower than the cost of smart meters for granting non-discriminatory access to consumer 
data. 

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What are the impacts on SMEs and competitiveness?  

The preferred options in the different policy areas will result in increased competition for renewable and low carbon 
gases.  Improved  retail  competition  combined  with  improved  consumer  protection  will  result  in  higher  switching 
rates  among  smaller  consumers  including  SMEs.  Increased  competition  may  also  result  from  non-discriminatory 
access  to  consumer  data  and  rationally  harmonised  arrangements  as  well  as  measures  facilitating  interoperability 
within the EU. Enlarging the marker homogenising requirements will ensure more competition between providers of 
cybersecurity services and reduce costs due to economies of scale. 

Will there be significant impacts on national budgets and administrations?  

The majority of the preferred options for the different policy areas have existing  and limited negative impacts on 
Member  States,  and  mainly  encompass  limited  administrative  burdens.  However,  in  problem  area  IV  (flexible 
legislation for retail markets), consumer protection and engagement would limit such burdens for administrations. 
Overall,  during  extensive  public  consultations  including  with  Member  States’  administrations  no  significant 
increase of impacts on Member States were signalled. 

Will there be other significant impacts?  

Yes, the preferred option under problem area IV identifies impacts on fundamental rights regarding data protection 
and will ensure widespread access and use of digital technologies and data-driven services while at the same time 
guaranteeing a high level of the right to private life and the protection of personal data. 

Proportionality?  

The  preferred set  of  options  is  considered proportionate and builds  to  the  extent  possible on  existing  approaches. 
The  balance  between  obligations  and  consideration  of  the  different  capabilities  to  act  among  Member  States  and 
private entities is considered appropriate given the imperative of achieving climate neutrality. 

D. Follow up 

When will the policy be reviewed?  

The  Commission  will  carry  out  a  fully-fledged  evaluation  of the  impact  of  the proposed initiatives, including  the 
effectiveness,  efficiency,  continuing  coherence  and  relevance  of  the  proposals,  within  a  given  timeline  after  the 
entry  into  force  of  the  adopted  measures  (indicatively,  5  years).  No  policy  review  is  currently  planned  in  the 
proposal. 

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