EU China Energy Magazine 2024 June Issue: 2024, #2

Letter from the Team Leader

Dear All,

Welcome to the June 2024 issue of the EU-China Energy Magazine!

This issue opens with a deep dive into the recently adopted EU Hydrogen and Decarbonised Gas Market Package. The writer dissects the key changes impacting network governance, market dynamics for renewable and low-carbon hydrogen, consumer protections, and security of supply.

Transitioning to energy storage, a crucial element for a renewable-powered future, the magazine features an article tackling the economic risks associated with investing in grid-scale storage solutions. The author explores market mechanisms proven to mitigate these risks, including strategies for ensuring revenue certainty and portfolio diversification.

Our June magazine also features a comprehensive overview of China's energy transition pathway towards achieving carbon neutrality before 2055. The analysis comes from the China Energy Transition Program, a prime example of successful EU-China collaboration in energy modelling.It sheds light on potential investment opportunities in China's renewable energy sector and grid infrastructure, making it an important read for European businesses and investors.

China's burgeoning interest in offshore solar power is addressed in an article discussing China's progress in accelerating the development and deployment of ocean-based PV systems. It explores the evolving policy and permitting frameworks, alongside the engineering and regulatory challenges inherent in this innovative technology. We also showcase Norway's pioneering experience with floating PV through the Ocean Sun technology, highlighting its influence on China's work in the same field.

Shifting gears towards sustainable land use practices, a separate article turns the spotlight onto agrivoltaics, a method that integrates agriculture and renewable energy production. The piece provides valuable information on policy frameworks and the role of local governments in promoting agriculture-PV projects. Additionally, it features successful case studies from China, offering practical insights for ASEAN countries that seek to implement sustainable development practices.

Finally, we conclude with a thought-provoking summary of a US Department of Energy report on the huge potential impact of Artificial Intelligence (AI) in the energy sector.

We believe this issue offers a rich tapestry of current trends and future possibilities in the energy sector. Our regular news section offers a useful overview of recent energy developments in China and Europe, with links to the original news reports. As always, your feedback is highly valued.

Dr. Flora Kan

ECECP Team Leader

27 June 2024

1.  ​​The EU Hydrogen and Decarbonised Gas Market Package

On May 21, 2024, the European Council adopted the final version of the ‘Hydrogen and Decarbonised Gas Market Package’ (gas package). The new package updates the rules for gas network and market operation, aligning the gaseous energy sector with the wider aims of the EU Green Deal and Climate Law.

The following article highlights some key changes, covering (i) network governance, (ii) the market and ‘renewable’ vs ‘low-carbon’ hydrogen, (iii) consumers, and (iv) security of supply. Finally, I will briefly recap the objectives of the package and reflect on its potential effectiveness based on this early assessment.

Background

This gas package is the fourth iteration of comprehensive legislation in the sector, following most recently the so-called ‘Third Energy Package’ of 2009. The two components of the package are an update of the Regulation on ‘the internal markets for renewable gas, natural gas and hydrogen’​[1] (Gas Regulation), and an update of the Directive on ‘common rules for the internal markets for renewable gas, natural gas and hydrogen’ ​[2](Gas Directive).

The first proposal for recasting these two documents was published by the European Commission in December 2021. Since then, the package has been revised following the EU ‘ordinary’ legislative procedure, it will no longer be modified and is just pending publication in the Official Journal of the European Union. The Gas Regulation will become applicable six months after its publication, whilst Member States will have two years to adapt their national legislation to the provisions of the Gas Directive.

The overall aim of the updates is to make the regulatory framework fit for purpose for a future gaseous energy mix that includes less and less fossil (natural) gas and a growing share of renewable and low carbon gases with various origins and properties. Specifically, this means;

●  establishing the conditions for facilitating the rapid and sustained uptake of renewable and low-carbon gases,

●  improving market conditions and increasing the engagement of gas consumers,

●  better accounting for contemporary security of supply concerns,

●  addressing price and supply concerns at the level of the Union,

●  recalibrating the structure and composition of regulatory bodies.

Network

In terms of the overall management, coordination, and planning of the network there are three key developments. Firstly, an entity for European Distribution System Operators (DSOs) will be set up per Articles 52 to 57 of Regulation 2019/943. Full details on the scope and role of the entity can be found in Articles 39, 40, and 41 of the Gas Regulation, but it is worth noting that participation is mandatory for distribution network operators for natural gas, with voluntary participation for hydrogen distribution network operators.

Secondly, a network association will be established for hydrogen transmission network operators, ‘The European Network for Network Operators of Hydrogen’ (ENNOH) (Article 57, Gas Regulation).  The tasks of ENNOH include writing relevant network codes, in some cases in cooperation with the European Network for Transmission System Operators for Gas (ENTSOG), as well as developing union-wide, non-binding ten-year network development plans (TYNDPs) for the hydrogen sector, full details can be found in Articles 59 and 60. The ENNOH shall consist of hydrogen transmission network operators certified pursuant to Article 71 of the Gas Directive, with a final list of members, draft statutes, and draft rules of procedure to be submitted to ACER​[3] and the European Commission by 1 September 2024. Until ENNOH is established in 2027, ENTSOG will be responsible for the development of Union-wide network development plans for gas and hydrogen networks (Article 61, Gas Regulation). Thirdly, hydrogen interconnection projects will now be eligible to apply for funding if they fall within the scope of the wider TYNDPs of ENTSOG,