H2 Core Network – Who Pays for It?
Why Do We Need an H2 Core Network?
The H2 core network is a fundamental prerequisite for the emerging green hydrogen market and ultimately crucial for the success of the energy transition. Without a well-developed transport infrastructure, it will be impossible to transport hydrogen, predominantly produced in northern Germany, to consumption regions. The goal of the core network is to connect consumption, production, and import regions across Germany. On November 15, 2023, the transmission system operators (TSOs) presented a draft for a hydrogen core network for the first time. Following approval under state aid law, this draft is now to be submitted to the Federal Network Agency (BNetzA) for approval. The application deadline is July 21, 2024. The current planning draft envisions a network length of 9,700 km, consisting of 60% converted gas pipelines and 40% newly built hydrogen pipelines, with an investment requirement of nearly 20 billion euros.
Financing Issue
The financing has been unclear for a long time. Unlike electricity and gas networks, which are fully financed through user fees, the H2 core network has the unique challenge of having very few end users of green hydrogen initially. Consequently, with a reduced number of end users, the number of paying connection users is also low. The network fee would thus be distributed over only a few shoulders, leading to prohibitively high fees for the few connection users, deterring them from connecting to the core network. Hence, the construction could only be managed through advance payments by today’s TSOs and future H2 core network operators. However, the network operators had opposed this early on due to the risk of default. For them, it was unforeseeable how the number of connection users and thus the fee revenue would develop over time, leading to uncertainties in the amortization of investments made.
Solution: Capped Network Fees and Amortization Account
To counter the lack of investment willingness, the legislator has introduced a capped H2 network fee in combination with an amortization account, where initial revenue losses are compensated in favor of the network operators. The central regulations for this are §§ 28r and 28s of the Energy Industry Act (EnWG). They are part of another amendment to the EnWG that came into force in April 2024.
In § 28r EnWG, the BNetzA is authorized to set a marketable start-up fee. The exact amount of the fee is currently unknown and will be determined based on reliable forecasts. The fee will be charged at all entry and exit points of the H2 core network from January 1, 2025. Starting in 2028, the BNetzA will conduct evaluations every three years.
The cost gap created by the capped network fee in financing the H2 core network will be offset via an amortization account regulated in more detail in § 28r EnWG. The annual difference between network fee revenues and financing costs for the core network will be recorded on this account and compensated in favor of the respective network operators. This creates an incentive for TSOs to invest in building the core network. In a later phase, when the number of network users and thus revenue from fees increases, the amortization account is to be balanced gradually, but by 2055 at the latest, through repayments by the network operators. If there is still a shortfall by then, 76% will be borne by the federal government and 24% by the transmission system operators.
Termination Right of the Federal Government
Should the hydrogen ramp-up foreseeably fail, the federal government is entitled under § 28r (7) EnWG to terminate the financing model by canceling the amortization account as of December 31 of a calendar year, first effective December 31, 2038, with effect at the end of the following year. This is assumed if a scientific report commissioned by the federal government finds that the marketable start-up fee at the end of December 31, 2055, would still be significantly lower than what is required for financing the core network, and a balance of the amortization account is not expected. This could happen, for example, if, contrary to today’s assumptions, only a few H2 users connect to the core network in the medium and long term. If the federal government exercises its right of termination, the hydrogen core network operators must be given the opportunity to comment.
A Sustainable Financing Concept?
The feedback on the financing model shows that it has been predominantly positively received by market players. However, a recommendation from the Bundesrat for a public-law contract between network operators, the federal government, and the BNetzA for long-term legal certainty, analogous to the Atomic Energy Act and the Coal Phase-out Act, was not followed. Uncertainties in financing also arise from the federal government’s right to terminate the financing model based on a single study commissioned by the federal government or the BNetzA. Additionally, it was criticized that the financing of the amortization account from 2035 is to be handled through the Climate and Transformation Fund, which – as the recent budget crisis has shown – is not on very stable footing.
Support the development of the H2 core network, which is crucial for the energy transition. Your involvement helps advance the green hydrogen infrastructure in Germany. Stay informed about opportunities for participation and keep up to date with the next steps.
Contact
Cäcilia Gätsch
cruh21 GmbH
Tel: +49 40 3346553-75
gaetsch@cruh21.com
About the Author
“Driving the energy transition forward, pronto!” - This is the motto of our regulatory expert Cäcilia Gätsch, who has been part of our team since April 2021. Before her time at cruh21, Cäcilia Gätsch worked on political position papers for the AquaVentus initiative and also led the Regulatory Working Group there. For the lawyer who is completing her doctorate on green hydrogen, two things are certain: First, there will be no climate turnaround without green hydrogen and its derivatives. Second, for this key role to be fulfilled, a supportive legal framework is needed – not in 20 years, but soon.
As part of the three major hydrogen flagship projects TransHyDE, H2Mare, and H2Giga, she now leads the regulatory sector, dealing with the legal framework for the future hydrogen economy in Germany. At the same time, she is writing her doctoral thesis at the Research Center for Sustainability and Climate Policy and has already been involved in numerous publications.
Focus Areas
- Hydrogen regulation at the German and European levels
- German and European energy law
- German and European climate protection law
[1] Die NWS 2023 sieht vor, dass ein Großteil der bis 2030 zu errichtenden Elektrolyseure systemdienlich im Sinne einer Entlastung des Stromnetzes verortet und betrieben werden müssen, vgl. https://www.bmbf.de/SharedDocs/Downloads/de/2023/230726-fortschreibung-nws.pdf?__blob=publicationFile&v=1, S.6. Wie mehrere Studien zeigen, kann eine Stromnetzentlastung dabei v.a. in deutschen Küstenregionen erzielt werden, da hier auch in Zukunft mit einem erhöhten Angebot an Erneuerbaren Energien zu rechnen ist, vgl. dazu https://www.wasserstoff-leitprojekte.de/lw_resource/datapool/systemfiles/elements/files/165C32BED538199EE0637E695E869D69/live/document/TransHyDE-Kurzanalyse_Systemdienliche-Elektrolyse-Standorte.pdf
[2] https://www.bmwk.de/Redaktion/DE/Schlaglichter-der-Wirtschaftspolitik/2024/02/07-wasserstoffnetze-energiewende.html
[3] Antragsentwurf Wasserstoff-Kernnetz (bundesnetzagentur.de)
[4] https://montelnews.com/de/news/b11a57a0-a510-42bc-9ad0-ba6fd331fcca/eu-kommission-gibt-3-mrd-euro-fur-h2-kernnetz-frei#:~:text=Die%20EU%2DKommission%20hat%20am,Euro%20erteilt.&text=Damit%20kann%20das%20Genehmigungsverfahren%20f%C3%BCr,Erzeugungszentren%20sowie%20H%C3%A4fen%20miteinander%20verbinden.
[5] https://www.bundesnetzagentur.de/DE/Fachthemen/ElektrizitaetundGas/Wasserstoff/Kernnetz/start.html
[6]https://www.bdew.de/media/documents/BDEW_Stellungnahme_Finanzierung_Kernnetz_EnWG_06112023.pdf, S. 4.
[7] https://www.bundestag.de/dokumente/textarchiv/2024/kw15-de-energiewirtschaftsgesetz-997410
[8] BMWK - Stellungnahmen zu dem Entwurf eines Dritten Gesetzes zur Änderung des Energiewirtschaftsgesetzes (EnWG) zu Regelungen zum Finanzierungskonzept für das Wasserstoff-Kernnetz
[9]https://www.bundesrat.de/SharedDocs/TO/1040/erl/34.pdf?__blob=publicationFile&v=1
