Hydrogen law, regulations & strategy in the Czech Republic

In the Czech Republic, the potential benefits of using hydrogen have been recognised particularly in the transportation sector. However, the actual development of dedicated hydrogen projects to date has been limited. The Czech government’s current policy framework takes the development of hydrogen technologies into account and there are several hydrogen-based projects in the pipeline.In July 2021, the Czech government approved the Czech Hydrogen Strategy for 2021 – 2050 (the “CHS”). The CHS is based on the EU Hydrogen Strategy for a Climate-neutral Europe. The CHS introduced four target areas on which the Czech Republic shall focus:

1. production of low carbon hydrogen;
2. utilisation of the low carbon hydrogen;
3. transport and storage of hydrogen; and
4. development of new hydrogen technologies.

The CHS is further divided into three phases:

Phase 1: 2021 – 2025

The priority for Phase 1 is the use of hydrogen in clean mobility. “Island solutions” are likely to emerge, because hydrogen transport infrastructure will not yet be fully developed. Therefore, integrated projects under which hydrogen production and consumption will be jointly addressed will likely be the most attractive project types during this phase. Gas grid is expected to begin with testing the blending of hydrogen with methane gas. In connection with the use of methane gas to produce hydrogen, it will be necessary to make the carbon capture and utilisation (CCU) and carbon capture and storage technologies more effective, which are currently very limited in the Czech Republic.

Phase 2: 2026 – 2030

Operational verification of how hydrogen can be used in industrial processes is expected to begin during Phase 2. The scale of this phase depends mainly on the success of the development of systems for the pyrolysis decomposition of organic waste and natural gas, and on the construction of large local solar or wind power plants connected to electrolysers. Planning of the efficient modes of transport will also be necessary to stimulate hydrogen demand. Due to the energy requirements of industry and the lack of low carbon sources of electricity, the Czech Republic is expected to be a net importer of hydrogen as it is today with respect to natural gas and oil. Separately, the testing of  hydrogen supply for domestic consumption should begin in parallel during this phase.

Phase 3: 2031 – 2050

It is expected that during Phase 3 the transport of hydrogen by pipeline/grid will be fully established without the need for subsidies. This is on the basis that there will likely already be established hydrogen producers and consumers by this phase. At this stage, hydrogen should also be used commercially in industrial processes.

Energy & Industrial sectors

There are a number of companies in the Czech Republic developing and providing a variety of hydrogen production methods and technology for use in the energy sector. One such company is ÚJV Řež, a. s., which is a member of the Czech energy group headed by ČEZ, a.s. This company has developed and offers to potential customers hydrogen energy storage systems which are capable of serving as back-up power sources, stabilising power supplied to the grid from renewable sources, or facilitating the operations of energy self-sufficient facilities/ buildings.

Currently, hydrogen is used predominantly in refining, chemical and steel production.

Transport

The transportation industry is the cornerstone of the hydrogen economy in the Czech Republic and a number of hydrogen initiatives focus on the use of hydrogen in the transport sector. The Czech government has adopted a National Action Plan for Clean Mobility (the “NAP CM”), which was last updated in 2019. The NAP CM expressly deals with the use of hydrogen in transportation and sets out specific hydrogen related goals with targets to be met in 2025 and 2030. The NAP CM identifies the development of hydrogen bus transportation in the Czech Republic as a priority of the hydrogen mobility plan and sets a target of putting 95 hydrogen buses into operation by 2025, and to have 870 buses by 2030.ÚJV Řež, a. s., a Nuclear Research Institute, has developed and put into operation a pilot transportation project involving a city bus with triple hybrid electric drive and hydrogen fuel cells (called “TriHyBus”) along with a hydrogen fuelling station in the town of Neratovice. The bus has been successfully operating on the Neratovice city line for the last 5 years. UNIPETROL RPA, s.r.o., which belongs to the PKN Orlen Group and operates the BENZINA chain of fuelling stations, announced in 2019 the implementation of a pilot project of three hydrogen fuelling stations in 2020. There is also an ongoing project to establish a cross-border hydrogen fuelled bus connection between Prague and Berlin.

Transport

The NAP CM states that in order to attain the country’s ambitious goals relating to the roll out of hydrogen bus transportation, an overall investment of approximately CZK 2.4 billion (around €92 million) from both private and public sources will be required. In respect of public funding, the action plan takes into account the significance of EU-sourced funds as well as the “Modernisation Fund”, a new fund to be established with the purpose of supporting the modernisation of energy systems in Central and Eastern Europe. The NAP CM states that a key factor in achieving this goal is the cost of hydrogen. Costs of hydrogen fuelled buses are forecast to continue decreasing in the future which will help the Czech Republic meet these targets

In addition to public transportation, the NAP CM sets the goal of achieving between 40,000 – 50,000 hydrogen fuelled cars in the Czech Republic by 2030. It is recognised that this goal is ambitious and there are several key factors which will need to be addressed in order to achieve it. Firstly, direct financial subsidies for hydrogen fuelled cars will need to be established (such as those that exist for battery powered electric vehicles). The NAP CM also notes that public procurement is an important factor in the potential hydrogen car market development, given the large number of cars purchased and operated by the public sector. The NAP CM predicts that in order to attain this goal, overall investment from both private and public sources will need to reach approximately CZK 28 billion (around €1 billion). Once again, a key factor in achieving this goal is the continuing decline in the price of hydrogen vehicles.

The NAP CM also includes a general objective to increase the share of hydrogen fuelled transportation goods vehicles. The action plan specifies that it will be necessary to set up a specific subsidy scheme to increase the share of hydrogen fuelled transportation goods vehicles. No specific time frame has yet been announced for this.

The NAP CM recognises that, in order to achieve these goals, the development of a sufficient network of hydrogen fuelling stations is crucial. The action plan estimates that it would be adequate to construct approximately 80 fuelling stations in the Czech Republic by 2030 (16 of these will need to be constructed by 2025). The overall cost of constructing these stations is estimated to be approximately CZK 3.5 billion (around €134 million).

Initiatives

There are also a number of regional initiatives in the Czech Republic relating to the development of hydrogen technology. For example, in 2019, the region of Ústí and Labem along with UNIPETROL, a.s. (a PKN Orlen Group company) assembled a group of 17 public and private entities (including regional municipalities Ústí nad Labem, Děčín, Most, and private companies AIR PRODUCTS spol. s r.o., Linde Material Handling Česká republika s.r.o., and by products ÚJV Řež, a. s.) to sign a memorandum on partnership and cooperation in the development and use of hydrogen (produced as an industrial by product) as a clean source of energy. The goal of this initiative is to support the use of hydrogen in the local industry. The initiative anticipates that hydrogen will be produced, distributed and widely used in the transport sector in the region as well. UNIPETROL, a.s., currently the largest producer of grey hydrogen in the Czech Republic, also aims to start production of green hydrogen to be used in transport in Poland, the Czech Republic and Slovakia by 2030, and plans to bolster cooperation with significant market players in these countries.

The Moravian-Silesian Region has also announced a plan (inspired by some western European cities) to create a “Hydrogen Valley”. This region is known for its coal mines and its steel industry, which are responsible for high levels of carbon emissions.  This initiative represents a shift in the approach towards energy sources in the region. It is anticipated that within five years the region will introduce hydrogen fuelled public transport, and that the funding required will be largely provided by the EU (in particular, by The Fuel Cells and Hydrogen Joint Undertaking (the “FCH JU”)).

Legal framework

Regulatory shortcomings are a key barrier to greater development of hydrogen projects in the Czech Republic. This issue is also identified in the CHS. Some of the potential regulatory issues involve a lack of regulation concerning:

1. the injection, transport, distribution, and use of hydrogen;
2. the procedure of obtaining regulatory permissions for the construction of hydrogen infrastructure; and
3. the implementation of current internationally standard norms relating to services of hydrogen fuelled cars within the Czech legislative framework.
4. In the absence of sufficient regulation, hydrogen developers must rely on existing energy and planning legislation, as well as on laws regulating the production, transport, use, and storage of gases generally.

Financial support and incentives

Despite the existence of various general national funding programmes which may potentially be used for financing hydrogen projects, the absence of a specific hydrogen fund represents a key challenge facing potential hydrogen projects and the development of the hydrogen economy in the Czech Republic. The NAP CM points out that some areas (e.g. transportation of goods) require more direct subsidy programmes for their development, rather than the general funding programmes that are currently available. There are, however, financing possibilities from EU programmes (e.g. the FCH JU), and it is expected that some of the newly established financial sources for funding energy transition (e.g. the Modernisation Fund) will also be used for financing hydrogen projects.

No tax exemptions from the transport tax are currently available for hydrogen fuelled cars, although there are such exemptions for electric cars.

Research and education

According to the CHS and NAP CM, although many hydrogen technologies are ready for introduction into the market, further research and development of the technologies is crucial for their adaptation for practical utilisation. The main areas where further research and development is likely to be needed are:

1. applied research;
2. pilot and demo projects;
3. long term support of hydrogen mobility (also within “Hydrogen Valley” projects); and
4. research for preparation of legislative framework and for development of technical norms.
5. International collaboration in the area of hydrogen technologies is essential for Czech companies and research centres.

There is no dedicated hydrogen legislation in the Czech Republic. Existing provisions of the Czech legal framework primarily relate to the use of hydrogen in transportation, although this area is underdeveloped.

Primary legislation

Legislation applicable to hydrogen projects in the Czech Republic is fragmented. There is no dedicated act relating to the use or commercialisation of hydrogen in the Czech Republic. Indeed, hydrogen has only been recognised as an alternative fuel since 2017 under the Czech Act no. 311/2006 Coll., on Fuel Substances, as amended. Therefore, the application of hydrogen will dictate the rules that stakeholders have to follow (such as rules applying to vehicle fuels or rules applying to energy supply). Given these rules have not been drafted with hydrogen in mind, they may not be suitable for the development and implementation of hydrogen technology. The laws which would apply to hydrogen projects will depend on the means of production, management, disposal, and use of hydrogen, thus including laws such as the Energy Act, Chemical Act, Act on Protection of Public Health, Health and Safety regulations, transport regulations, and legislation relating to the management of dangerous gases.  

There are certain sources of primary legislation which make reference to the use of hydrogen, including:

1. Act no. 13/1997 Coll., on road infrastructure, as amended, which exempts hydrogen fuelled vehicles from certain fees;
2. Act no. 56/2001 Coll., on conditions of traffic on road infrastructure, as amended, setting up certain rules on number plates of electric and hydrogen fuelled vehicles; and
3. Act no. 201/2012 Coll., on the protection of the environment, as amended, which includes hydrogen under the definition of fuel substances.

Secondary legislation and other legal documents

Relevant secondary legislation includes Ministerial Decree no. 268/2009 Coll., on technical requirements of constructions, as amended, which addresses to a limited extent the technical requirements of hydrogen fuelling stations. There is also the Ministerial Decree no. 341/2014 Coll., on technical capability and technical conditions of transport vehicles, as amended, which provides for the reconstruction of a hydrogen fuelled vehicle.  

Policy and government programmes

The most recent government policy relevant for hydrogen is the Czech Hydrogen Strategy, namely, the CHS (discussed above).

There is a national action plan for clean mobility in place which also covers the use of hydrogen in transportation – namely, the NAP CM (discussed above).

There are a number of general national funding programmes which can be used for financing hydrogen projects (e.g. programmes “OP Doprava” and “Restart” administered by the Ministry of Transport and by the Ministry of Environment). 

Since there are no hydrogen-specific provisions in Czech legislation, acts which include general provisions concerning the investment process and exploitation of industrial installations and devices apply to hydrogen projects.

In respect of licensing, given there are no specific hydrogen licensing regulations in place, the generic licences covering specific activities will be applicable to hydrogen production and processing. For instance, the production of hydrogen as a fuel in transport is likely to be covered under specific trade licences for the production, processing and distribution of fuel substances. Trade licenses in the Czech Republic are issued by the Trade Licence Office. There is also no special licence for energy storage, hence activities such as energy accumulation would likely fall under the electricity production licence. Energy licences in the Czech Republic are issued by the Energy Regulatory Office. 

It can be expected that investment in the area of hydrogen technologies will increase in the upcoming years. With regards to the ambitious goals set out in the NAP CM, and taking into consideration the CHS as well as the initiatives of certain regional municipalities in the Czech Republic, these investments will be made primarily in the transportation sector with the aim of decreasing the carbon footprint of this sector.

While there are several projects being discussed, many of these are not yet sufficiently developed. At this stage, the main project of note is the Usti-nad-Labem hydrogen station.

In February 2020, the city of Usti-nad-Labem announced the construction of its first hydrogen station. Construction has been planned to start in 2021 and will be funded under the Operational Program “Transport”. The total funding is expected to be CZK 31 million, with completion of the station initially expected by the end of 2022 is the latest, but the completion will probably be delayed. The city also intends to invest in a fleet of hydrogen buses.

ČEZ, a.s. intends to focus on production of green hydrogen from renewable energy sources and has announced that it plans to develop 6 electrolyser projects with a total capacity of 10 MW by 2025. Such green hydrogen is expected to be primarily used in the transport sector.

In addition, two Czech investment entities (ForH2Energy and Hydrogen1) are cooperating together on the “H2 Triangle” project, which involves the creation of a hydrogen research centre with a total combined investment of CZK 600 million. It has been reported that the project, which is to be located in the region of Ústí and Labem, has been selected for inclusion in the list of eleven strategic projects that will seek funding of approximately 50% of the overall investment from the EU Just Transition Fund next year. In the first phase of the project, the intention is to build a 4 MW electrolyser for hydrogen production using electricity from a photovoltaic power plant (to be constructed as part of the project). It has been reported that this first phase could be completed by 2024. A research centre will also be developed which focuses on both hydrogen fuel cells and electrolysers. 

Significant investment in hydrogen technology has been announced also by ORLEN Unipetrol, a Czech petrochemical company belonging to the PKN Orlen Group. It has been reported that ORLEN Unipetrol plans to produce 990 tonnes of hydrogen per year by 2025. It is anticipated that this hydrogen will also be produced by a 26 MW electrolyser using electricity generated by a new 52 MW photovoltaic power plant.