By Karolina Brzeska, advocate, and Maja Pyrzyna, trainee, Dispute Resolution practice, White & Case
sadasdOn 21 October 2022, a draft act to amend the Energy Law and certain other acts was published on the Government Legislation Centre’s website, implementing the Polish Hydrogen Strategy. The proposal aims to create a stable regulatory environment for the hydrogen market in Poland.123
To many, it will probably come as a surprise to learn that Poland is Europe’s third-largest producer of hydrogen, after Germany and the Netherlands, with an annual production of 1.3 million tonnes. But the vast majority of the hydrogen here is produced by natural gas steam reforming, and used primarily in the chemical industry (reduction and hydrogenation processes), refining, and the food industry.
Hydrogen is an important energy medium in Poland. Therefore, it is in the interest of government and heavy industry to develop a rational framework for producing hydrogen by alternative methods, primarily ‘green hydrogen’.
According to the Polish Hydrogen Strategy to 2030 with an Outlook to 2040, adopted by the government on 7 December 2021, hydrogen is to play the role of energy storage and enable balancing of the electricity grid, as well as enable the reduction of emissions in sectors where electrification is not economically justified. The hydrogen economy itself is understood collectively as technologies of production, storage, distribution, and use of hydrogen and its derivatives, including centralised and distributed systems of production and storage, hydrogen transportation using the transmission and distribution network as well as other forms of transportation, and subsequent use in various branches of the economy.
The Polish Hydrogen Strategy foresees six specific goals:
- Implementation of hydrogen technologies in the power and heating industries
- Use of hydrogen as an alternative fuel for transportation
- Support for the decarbonisation of industry
- Hydrogen production in new installations
- Efficient and safe hydrogen transmission, distribution and storage
- Creation of a stable regulatory environment.
Implementing the sixth objective of the strategy, the proposed amendment is mainly aimed at:
- Introducing a system necessary for developing and operating a hydrogen market in Poland
- Regulation of licensing rules for hydrogen activities
- Designing the principles for operating a hydrogen network system
- Introducing systemic support mechanisms for conducting R&D activities for hydrogen technology projects
- Streamlining procedures for investing in hydrogen system development.
In amending the legal definitions in the Energy Law, the proposal would define hydrogen by reference to the Combined Nomenclature and hydrogen code CN 2804 10 00, and also define hydrogen as a fuel, placing it alongside the existing catalogue of solid, liquid and gaseous fuels which are carriers of chemical energy. The amendment also introduces the important concept of electrolytic conversion, defined as “conversion of electricity into hydrogen or other gases by electrolysis, or conversion of hydrogen obtained by electrolysis into electricity, carried out in an electrolytic conversion facility.” According to the explanatory memorandum to the bill, this concept is needed to separate the processes of bi-directional conversion of electricity into hydrogen and its derivatives (methanol, ammonia, liquid fuels) and these substances into electricity from the production of hydrogen by other means (cold plasma catalysis of biomass, separation from coke oven gas, water thermolysis).
The bill also defines other terms related to hydrogen management, such as ‘hydrogen network’, ‘direct hydrogen pipeline’, ‘hydrogen system’, ‘hydrogen transmission’, ‘hydrogen system operator’, ‘hydrogen storage’, ‘hydrogen storage facility’, and ‘hydrogen storage system operator’. The bill defines these terms analogously to the existing definitions for the electricity and natural gas markets.
And analogously to the electricity and natural gas markets, the bill would establish a register of hydrogen storage facilities, maintained by the hydrogen storage system operator, and implement other principles under EU law regarding non-discrimination, unbundling, and third-party access to infrastructure.
The amendment would impose concession obligations on hydrogen market participants regarding:
- Hydrogen transmission (hydrogen transmission via tanks or cisterns would also be subject to the obligation)
- Hydrogen storage, except for local storage of less than 5,000 Nm3 (Nm3 being ‘normal cubic metres – at 20C, 0% humidity and 1 atm.)
- Hydrogen trading, unless turnover is less than €100,000 per year
- Supply of hydrogen via direct pipeline (connecting the generator to the consumer, bypassing the hydrogen network)
- Hydrogen generation.
Entities currently conducting activity that will become subject to a concession requirement would have 12 months to obtain a concession after the amendment comes into effect. According to media reports, hydrogen production was supposed to be exempt from licensing. But no such exemption was included in the bill. Nonetheless, it can be expected that in line with the government’s stated plans, and to support the nascent hydrogen market, lawmakers will ultimately decide not to impose a licensing requirement on hydrogen generators, in order to stimulate the market as much as possible.
The bill provides for changes to other laws as well. In the Construction Law, hydrogen infrastructure would be added to provisions governing other line infrastructure facilities, and hydrogen purification facilities with a capacity of up to 250kg of hydrogen per day would be exempt from the requirement to obtain a building permit and or file a notification of construction. The proposed amendment would cover hydrogen transmission infrastructure under the special act on transmission, greatly facilitating the implementation of infrastructure projects.
The proposal would amend the National Centre for Research and Development Act to ensure that the hydrogen economy occupies a special place in the centre’s operations. It would create a committee for R&D on hydrogen technology, to become the fourth body of the National Centre for Research and Development, alongside the Centre Directorate, the Centre Council, and the Steering Committee for R&D Programmes in National Security and Defence.
So far, the amendment does not provide for any support systems for hydrogen generation, so it is difficult to foresee that it will make a significant contribution to achievement of the other goals of the Hydrogen Strategy, particularly regarding the opening of new hydrogen refuelling stations or investment in electrolysers. However, modelled on the electricity and gas regulatory system, the hydrogen economy regulatory system itself is necessary for hydrogen to begin to play the role for which it is predestined by its versatile application.
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