Hydrogen law and regulation in France

1. Current State of Hydrogen Projects in France

In France, Law No 2015-992 of 17 August 2015, relating to the Energy Transition for a Green Growth provided in its Article 121 that the Government shall establish a “development plan for the storage of renewable energies using decarbonated hydrogen” aiming, firstly, at encouraging hydrogen mobility through the development of fuel cells and hydrogen distribution infrastructures, and secondly, at adapting regulations to allow the power-to-gas business.

On 1 June 2018, the Minister for Energy presented the hydrogen plan, which has three main objectives:

  1. “greening” hydrogen for industrial use;
  2. using hydrogen for mobility to complement the battery sector; and
  3. stabilising energy networks.

Law No 2019-1147 of 8 November 2019 on Energy and Climate added the objectives of a low carbon hydrogen rate of 10% by 2023, and between 20% and 40% by 2030. 1 Article L. 100-4, I, indent 10°, of the Energy Code  The Parliament also empowered the Government to take measures through law-decrees in order to “define the terminology of the different types of hydrogen according to the energy source used for its production”, “to allow the production, transport, storage and traceability of hydrogen”, and “to define a support framework applicable to low-carbon hydrogen”. 2 Article 52 of the Energy and Climate law Finally, this law instituted a system of guarantees of origin for hydrogen of renewable origin 3 Article L. 447-1 of the Energy Code  these provisions were however repealed and replaced.

After a public consultation from 8 January to 2 February 2021, the Law-Decree No 2021-167 of 17 February 2021 relating to hydrogen 4 https://www.legifrance.gouv.fr/jorf/id/JORFTEXT000043148001/  was published in the Journal Officiel on 18 February 2021. It created a Book VIII in the Energy Code, entitled “Provisions relating to hydrogen”. The Law-Decree provides several clarifications on the legal framework for hydrogen (see below challenges facing hydrogen projects in France ).

In addition, the Multiannual Energy Program (the “PPE”), published on 23 April 2020, approved by Decree No 2020-456 of 21 April 2020, with deadlines in 2023 and 2028, foresees an increase in the financial support for the hydrogen sector. The Government is determined to promote the development of green hydrogen in France. For instance, it has not waited for the publication of the Law-Decree to encourage motorway concessionaires to install hydrogen refuelling stations as soon as the car fleet has reached a certain threshold of hydrogen vehicles. 5 Article D. 122-46-1 of the Road Code

Energy & Industry

GRTgaz, a subsidiary of ENGIE and the main gas TSO, has set up the “Jupiter 1000” project to demonstrate the feasibility of the power-to-gas process on an industrial scale. The project will also test the injection of hydrogen and synthetic methane into its transmission network through a 1MW hydrogen production facility, a methanation unit to convert the hydrogen produced into synthetic gas, and an industrial CO2 capture unit for methanation. This project was approved by the French energy regulator (the “CRE”) 6 https://www.jupiter1000.eu/  in 2015. 7 https://www.cre.fr/Documents/Deliberations/Approbation/programme-investissements-2015-grtgaz

GRTgaz announced in May 2020 that it was initiating another project in collaboration with CREOS: the MosaHYc project. These two companies will create a hydrogen network linking Germany and France. The purpose of this agreement between the two gas transmission system operators is to make a 70km hydrogen transport infrastructure accessible by adopting existing gas infrastructures. 8 https://www.h2-mobile.fr/actus/mosahyc-grtgaz-creos-lancent-reseau-europeen-transport-hydrogene/

Hydrogène de France and Teréga will develop a HyGéo pilot project to set out solutions for significant hydrogen energy storage. 9 https://www2.terega.fr/fileadmin/presse/CP_FR/2020/CP-Terega-Hygeo.pdf This project aims to study the underground storage of energy using hydrogen obtained by electrolysis of water. This non-polluting hydrogen will be stored in an abandoned geological cavity previously used for hydrocarbon storage. Using fuel cells technology, the stored hydrogen will then be used to produce electricity back.

GRDF’s tender for a “power-to-gas” demonstrator. Launched on 29 October 2020, it aims to test the injectionof synthetic methane into the network from hydrogen produced by electrolysis and CO2 from a biomethane production site. GRDF is proposing to contribute €1.25 million to the project over the duration of the experiment. 10 https://www.grdf.fr/institutionnel/actualite/newsroom/liste/communiques-presse/laureats-power-to-gas The three award winners selected are:

  1. the Hycaunais project, led by Storengy and developed in Saint-Florentin: linked to a methanation site already connected to the network, this project will make it possible to use hydrogen for green mobility and to produce synthetic methane by biological methanation. This project should demonstrate the advantages of power-to-gas as a flexibility service for the electricity network;
  2. the Perpignan pumping storage power plant, supported by the Perpignan Méditerranée metropolis: the project is based on the water treatment activity of the wastewater treatment plant, which already generates green gas (biomethane), and will set up a biological methanation process to recover its CO2 with hydrogen delivered from the hydrogen hub in Port-la-Nouvelle; and
  3. the Pau Lescar pumping storage power plant is a project carried out by the Pau Béarn Pyrénées agglomeration community. The methanation part is integrated into the project to develop a methanation unit on the site, which should facilitate its financing, while allowing savings on wastewater treatment.

Transportation

Hydrogen is a technology competing with electric batteries and other chief fuels. Its cost is still very high compared to its competitors. This challenge is the reason why regions are heavily investing in hydrogen projects. For example, the Auvergne Rhône Alpes region has invested in a project to build 14 hydrogen recharging stations. This is the “Zero Emission Valley” project. The Pays-de-la-Loire region recently set aside a budget of €100 million to invest in hydrogen projects until 2030.

In order to encourage green investments, the French Environment and Energy Management Agency (“ADEME”) is responsible for encouraging “the development of clean technologies and savings”. 11 Article L. 131-3, 5° of the Environmental Code  It thus encourages the development of hydrogen and fuel cells by issuing tenders for projects, which, if successful, would qualify for a State subsidy. The tenders to date have included: 12 smartgrids-cre.fr

  1. Call for projects “Ecosystems of hydrogen mobility”, 3 May 2019;
  2. Call for projects “Support for the emergence of hydrogen mobility in the railway sector”, 21 January 2020;
  3. Call for projects “Innovative projects of European or national scope on the design, production and use of hydrogen systems”, 23 January 2020;
  4. Call for projects “Technology bricks and hydrogen demonstrators”, 13 October 2020; 13 https://agirpourlatransition.ademe.fr/entreprises/dispositif-aide/20201013/inodemo-h22020-176  and
  5. Call for projects “Territorial ecosystems”, 13 October 2020. 14 https://agirpourlatransition.ademe.fr/entreprises/dispositif-aide/20201013/ecosysh22020-165

2. Market Prospects for Hydrogen

The potential of hydrogen to boost the economy is recognised in France. Both State and local authorities have expressed an interest in developing this new technology. The use of hydrogen as an alternative fuel for mobility and as an energy storage technology are currently one of the main areas of research and development in France.

To date, hydrogen has developed further for mobility. However, the injection of hydrogen into networks is still at the research and development stage. More generally, hydrogen technology is still in the early stages of development in France. 
There have also been a number of mergers and acquisitions in the sector. For example, EDF created a subsidiary in 2020 dedicated to industry and mobility, Hynamics, and took a minority stake in the French company McPhy, a designer and manufacturer of hydrogen equipment. Another example: Michelin and Faurecia took the joint and equal control of Symbio, a fuel cell manufacturer created in 2010, whose plant is located near Lyon. 

Currently, the projects are mainly financed by public bodies. However, it is likely that investors and banks will participate in the near future. 15 French industrialists in the starting blocks, Les Echos, 9 July 2020

Finally, several gas system operators, including GRTgaz which operates in nine EU Member States, proposed a European “hydrogen backbone”. GRTgaz and Téréga participate in the project. The work carried out by these TSOs has shown that existing gas networks can be adapted to transport hydrogen at an affordable cost. The emergence of a hydrogen network in the mid-2020s to reach by 2030 a first set (totalling 6,800 km) of pipeline is considered possible. If achieved, it will link the different European hydrogen valleys. For 2040, a 23,000 km hydrogen network is envisaged, i.e. the European “hydrogen backbone”, consisting of 75% of existing converted natural gas pipelines supplemented by 25% of new hydrogen pipelines. 16
https://www.terega.fr/newsroom/nos-actualites/terega-et-dix-autres-transporteurs-de-gaz-presentent-leur-plan-hydrogene-dans-le-cadre-de-la-strategie-europeenne

3. Challenges Facing Hydrogen Projects in France

Legal framework

Since the publication of the Law-Decree No 2021-167 of 17 February 2021, the regulations concerning the use of hydrogen in the mobility sector have developed for the injection of hydrogen into the gas networks. 

The major stake is the development of projects by the network operators regulated by the Energy Regulator, CRE, since these operators essentially depend upon the grid tariffs.

The sale of hydrogen is not regulated, 17 Article L. 851-1 of the Energy Code.  and a producer is allowed to sell renewable gas to a natural gas supplier without a licence. 18 Article L. 445-2 of the Energy Code.

The Law-Decree No 2021-167 of 17 February 2021 made some significant changes to the legal framework:

  1. Definitions of the different types of hydrogen: First of all, “renewable hydrogen” is produced with electricity generated from renewable energy, such as wind or solar, below a specified threshold of CO2 per kilogram; it can be produced with an electrolyser. 19 Article L. 811-1, second indent, of the Energy Code Secondly, “low-carbon hydrogen” is defined as hydrogen produced from other energy sources below a threshold, like nuclear energy, with the threshold defined by a ministerial order. Finally, “carbon-based hydrogen” corresponds to the gas currently used in industry.
  2. Self-consumption of hydrogen: The Law-Decree has a chapter dedicated to the self-consumption of hydrogen in the Energy Code. The legal regime for hydrogen self-consumption is based on the individual and collective self-consumption regime, provided that it emits in the electricity sector. To be self-consumed, hydrogen must be produced and consumed on the same site by one or more producers and one or more consumers who are linked together within a single legal entity, possibly with a storage period. 20 Article L. 813-2 of the Energy Code
  3. The mechanisms of guarantees and traceability for the production of renewable and low-carbon hydrogen: The Law-Decree establishes two traceability systems for hydrogen, so that its low-carbon or renewable nature can be ascertained by the buyer, or so that the buyer is informed that the purchase of a guarantee constitutes a support for green energy. A traceability mechanism and a guarantee of origin system have been put in place; in both cases, one guarantee is issued for each megawatt-hour of energy.
  4. The system of guarantees of origin is inspired by the existing mechanisms for electricity from renewable energy sources 21 and biogas. 22  Articles L. 445-3 and following of the Energy Code A guarantee of origin is issued for each megawatt-hour produced. 23 Article L. 821-3 of the Energy Code The guarantee of origin is issued to certify the origin of the renewable or low-carbon hydrogen, either when it is likely that it will be mixed with another type of hydrogen or gas, or if the guarantee issued at the time of its production is likely to be sold independently from the hydrogen produced. The guarantee proves that one megawatt-hour of hydrogen with this character has been produced.
  5. A traceability guarantee proves one megawatt-hour of hydrogen with a low-carbon or renewable character, not mixed with another type of hydrogen or gas, has been physically delivered to the buyer or final consumer. 24 Article L. 821-3 of the Energy Code A traceability guarantee cannot be sold independently from the corresponding hydrogen.
  6. Guarantees of origin of renewable and low-carbon hydrogen from other Member States may be assimilated to French guarantees of origin provided they meet a similar level of requirements. These special provisions for guarantees of origin from other Member States have been applicable since 30 June 2021.
  7. The public support mechanism for hydrogen production: The cost of low-carbon or renewable hydrogen production, notably by electrolysis, is higher than that for carbon-based hydrogen. The Government has therefore established a support mechanism for green hydrogen production. This mechanism takes the form of either an operating aid, or a combination of financial aid to investment and operating aid. 25 Article L. 812-2 of the Energy Code
  8. Hydrogen injection into natural gas networks: The hydrogen produced can be transported via new infrastructures dedicated to the transport and storage of hydrogen 26 Articles L. 831-1 and following of the Energy Code or by being injected into the existing natural gas networks. 27 Articles L. 431-6-4 and L. 432-14 of the Energy Code The Law-Decree amended articles L. 431-6-4 and L. 432-14 of the Energy Code to extend the obligations of natural gas network operators regarding hydrogen transportation. In this respect, the operators will have to ensure the safety conditions of goods and people, in addition to the proper functioning and balancing of the networks.
  9. The implementing regulations of the Law-Decree should be published during the course of 2021 to set out the details of this new legal regime.

Financial support and incentives

The Government has decided to significantly accelerate its investments in the development of low-carbon hydrogen. The Government announced that €7 billion will be invested before the end of 2030 according to the National Strategy for the Development of Low-Carbon Hydrogen published on 8 September 2020, including €2 billion before the end of 2022 for the framework of the Covid-19 “Recovery Plan”.

This strategy targets three priorities that combine technological development and ecological transition:

  1. the decarbonation of industry to help achieve carbon neutrality in 2050, by developing a French hydrogen industry;
  2. the development of hydrogen-powered heavy mobility; and
  3. support for research, innovation, and skills development.

The objective of this strategy is to accelerate the technological mastery in order to industrialise hydrogen and enable a significant reduction in production costs.

As with renewable electricity, to avoid accumulating multiple State aids, the guarantees of origin generated by the production of renewable or low-carbon hydrogen in facilities benefitting from State aid (CfDs) belong to the State, which sells them via auctions. The municipalities which consume such gas can however be granted these guarantees for free, insofar as the gas is produced in their territory, and the amount of guarantees correspond to their consumption. These provisions relating to the guarantees of origin associated with the production of installations benefiting from State aid apply only to installations commissioning after 31 December 2023.

Research and education

Lhyfe has joined forces with CEA Tech, the European consortium marine energy alliance, and the IRD in three R&D partnerships dedicated to the deployment at sea of green hydrogen production by electrolysis using electricity produced by offshore wind turbines. 28 https://www.industrie-techno.com/article/lhyfe-avance-vers-un-hydrogene-vert-produit-en-mer-avec-trois-partenariats-r-d.61076

Network operators such as GRTgaz and GRDF, respectively the main French gas TSO and DSO, are also very active in hydrogen research and development, in particular by participating in pilot projects.

4. Regulation of Hydrogen

Specific legislation/regulation

The legal regime for hydrogen is enshrined in the Law-Decree No 2021-167 of 17 February 2021 relating to hydrogen, in application of the Mobility Orientation Law No 2019-1428 of 24 December 2019, which allows cities to create hydrogen refuelling infrastructures for vehicles and boats. The Law-Decree relating to hydrogen is the first text in France to establish a legal regime for hydrogen. As set out in para 3.1 above, this text mainly defines the different legal categories of hydrogen, its traceability in the networks, and the public support mechanism to develop the sector.

However, the implementing regulations for the Law-Decree are still to be published.

Policy and Governmental programmes

The Government presented its Hydrogen Plan, named “National strategy for the development of carbon-free hydrogen in France” in September 2020, partly influenced by the global COVID-19 “Recovery Plan” (this is discussed in more detail below).

Primary legislation

As set out in para 3.1 above, the legal regime for hydrogen is enshrined in Law-Decree No 2021-167 of 17 February 2021 relating to hydrogen.

Generation

  1. Hydrogen production is divided into three categories (renewable hydrogen, low-carbon hydrogen, and carbon-based hydrogen). Renewable and low-carbon hydrogen producers will be eligible for public support mechanisms. The conditions and modalities of this public support mechanism are yet to be defined by the Minister in charge of Energy.
  2. Production and recharging facilities are subject to environmental regulations specific to “classified facilities for the protection of environment” (known under the French acronym “ICPE”).

Connection and distribution

According to the Energy Code, it is mandatory to conclude a contract for being connected to the public gas network either for a generation facility, or for a consumption site, and the distribution network operator prior informs the user of the conditions relating to the connection of his installation. The activity of the DSOs is regulated and controlled by the regulator. GRDF, a subsidiary of ENGIE, is by far the main DSO in mainland France (there are no gas networks either in Corsica, or in overseas territories).

Transportation

The Mobility Orientation Law of 24 December 2019 mainly provides a framework for refuelling stations for private vehicles, buses, and ships.

Since the publication of the Law-Decree No 2021-167 of 17 February 2021, the hydrogen produced in France can be blended with methane gas and injected into the existing natural gas networks.

In addition, the Law-Decree extends the tasks of natural gas system operators to the injection of hydrogen. In this respect, the network operators must ensure the safety conditions of goods and people and ensure the proper functioning and balancing of the networks.

Any investment or extension of the scope of activity of natural gas network operators is regulated and must be approved by the CRE in accordance with Articles L. 453-2 and L. 453-6 of the Energy Code.

Financing

Subsidies are awarded by a State-owned public body (ADEME) in response to tenders for projects. To date, the regulator has not launched yet any call for tenders to develop hydrogen projects; this option would allow operators to benefit from funding by the taxpayer.

In its Deliberation No 2020-231 of 24 September 2020 on the draft Law-Decree regarding hydrogen, the CRE specified that it was not in favour of setting up a support mechanism for renewable hydrogen distinct from that for low-carbon hydrogen because the production of renewable energy already benefits from a public support mechanism for the production of electricity. In addition, the regulator stated its support for the production of hydrogen with electricity generated from nuclear power plants.

  1. The Law-Decree No 2021-167 of 17 February 2021, however, provides for public support mechanisms for renewable and low-carbon hydrogen production projects. 29 Article L. 812-1 of the Energy Code This public support mechanism takes the form of either operating aid (OPEX) or a combination of financial support for investment (OPEX) and operating aid (CAPEX). The duration of the aid is up to 20 years. 30 Article L. 812-4, last indent, of the Energy Code
    1. A Decree must specify the terms of application of these public support mechanisms and thus allow the launch of the first calls for tenders by the CRE.

Permitting process

Hydrogen production and fuelling station construction projects are subject to the regulations for environmentally classified facilities (ICPE).

Secondary legislation and other legal documents

The Multiannual Energy Programme (PPE), approved by Decree No 2020-456 of 21 April 2020, determines the objectives for the development of hydrogen until 2028.

France’s future hydrogen plan should make it possible to draw up a financing plan to develop hydrogen in the coming years.

Regulation of hazardous activities

The main laws here are: the Environmental Code (with inter alia the regulation on the environmentally classified installations, or ICPE), the General Code of Local Authorities (which for instance gives powers to local authorities to build and operate supply stations) and, more broadly, the Law on Energy Transition of 17 August 2015 and the Mobility Orientation Law of 24 December 2019.

Transport, import and export of hydrogen

To date, there are no specific regulations for the transport, import and export of hydrogen.

5. Regulatory Bodies

As there are no specific provisions on hydrogen, the general provisions on the development and construction of renewable energy apply.

The Energy Regulator, CRE, controls the investments made by the network operators. For the time being, investments only concern experimental and research and development projects.

The Transport Regulator (the “ART”) has no jurisdiction over hydrogen projects: the CRE is the sole competent regulator

6. Upcoming Developments

On 8 September 2020, the French Government published its new Hydrogen Plan titled “National strategy for the development of carbon-free hydrogen in France”, which takes into account the global COVID-19 “Recovery Plan” aimed at progressively removing the consequences of national lockdowns. 

The purpose of the Hydrogen Plan is to make France “the carbon-free leader for tomorrow”, according to the Minister for Economy. In order to do so, €7.2 billion shall be invested in this sector to: firstly, decarbonise the industry through cost-effective water electrolysis, with long term targets, such as saving 6 million tonnes of CO2 by 2030 and to reach carbon neutrality by 2050; secondly, support research and development, inter alia to make green hydrogen profitable; and thirdly, develop a “heavy mobility” using hydrogen as fuel (in trucks, trains, buses, planes) by utilising fuel cells. 

Additionally, the Government hopes that this effort will directly create between 50,000 and 150,000 jobs.

The Hydrogen Plan includes measures, such as:

  • Install enough electrolysers to make a significant contribution to the decarbonisation of the economy with a production capacity of 6.5 GW carbon-free hydrogen through electrolysis;
  • Conversion of land transport (passengers and goods) to hydrogen technologies, for example hydrogen-powered river shuttles and ships;
  • Promote the emergence of a French electrolysis sector;
  • Decarbonise industry by replacing carbonated hydrogen; and
  • Calls for large-scale regional projects, aimed at pooling uses, to accelerate the deployment of professional hydrogen mobility (e.g. call of tenders for a “Territorial hydrogen hub”). 

On 11 January 2021, the Government announced the formation of the National Hydrogen Council 31 https://www.ecologie.gouv.fr/installation-du-conseil-national-lhydrogene  to ensure the effective implementation of the National Strategy for the Development of Low-Carbon Hydrogen. The role of this Council is to structure exchanges between the State and the stakeholders in the implementation of the strategy, particularly the industrial sectors, and to measure the progress of the planned actions in order to identify any obstacles. 

The Law to combat climate change and strengthen resilience to its effects, voted on 20 July 2021 and signed on 22 August 2021 (known as the “Climate and Resilience Law”), which was published in the Journal Officiel on 24 August 2021, allows local authorities to participate in the development of hydrogen, notably to develop, operate or delegate the development and operation of hydrogen facilities in the same way as renewable energy projects in accordance with Article L. 2224-32 of the General Code of Local Authorities. 32 Article 88, 1°, c) of the Climate and Resilience Law

Similarly, municipalities and their groupings will be able to participate in the capital of a public limited company or a simplified joint stock company whose corporate purpose is the production of renewable or low-carbon hydrogen in the same way as companies whose corporate purpose is the production of renewable energy in accordance with Article L. 2253-1, 2nd intend of the General Code of Local Authorities. 33 Article 88, 2°, a) of the Climate and Resilience Law

Moreover, for hydrogen installation projects selected by calls for tender and benefiting from a public support mechanism, the Administration may waive the need to organise a competitive bidding procedure for occupation of the public domain in accordance with the exemptions provided for in Article L. 2122-1-3-1 of the General Code of Local Authorities. 34 Article 87, III, 1° of the Climate and Resilience Law.

Finally, the regulatory texts implementing the Law-decree No 2021-167 of 17 February 2021 relating to hydrogen are expected by the end of 2021 to particularly specify the public support mechanism for hydrogen and the two traceability mechanisms for hydrogen in the networks (guarantees of origin and traceability).

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