Hydrogen law, regulations & strategy in Italy

According to the Integrated National Energy and Climate Plan (“PNIEC”), published in December 2019 by the Ministry of Economic Development together with the Ministry of the Environment and the Ministry of Infrastructure and Transport, one of the primary objectives Italy is aiming to achieve by 2030 is the reduction of around 30% of national greenhouse gas emissions. With this in mind, hydrogen is considered as having a key role in reaching this goal as a result of its unique chemical and physical attributes, and specifically because hydrogen can be produced by renewable energy sources and can be stored and transported like a gas or liquid.

In November 2020, the Ministry of Economic Development published the “Italian Hydrogen Strategy: preliminary guidelines” (the “Hydrogen Strategy”). This document sets a medium and a long-term objective, according to which the national energy consumption is expected to consist of 2% hydrogen by 2030 and 20% by 2050. The Hydrogen Strategy also identifies the sectors that will be crucial for the use and development of the hydrogen, such as public transportation, chemicals and refining.   

The key role of hydrogen in the context of the national energy transition has been further confirmed by the National Recovery and Resilience Plan (“NRRP”), transmitted by the Italian Government to The European Commission on 30 April 2021 and approved by the European Commission on 13 July 2021. The NRRP is part of the Next Generation EU programme, namely the € 750 billion recovery package, consisting of grants and loans, set up by the European Union in response to the Covid-19 pandemic crisis. The NRRP, whose total value is equal to € 191.5 billion, has been conceived based on three strategic pillars: (i) digitalisation and innovation, (ii) ecological transition, and (iii) social inclusion. In the context of the ecological transition, paramount importance has been given to renewable energy, hydrogen and sustainable mobility.

Currently, hydrogen is mostly used in chemical and metallurgical industries in Italy. It is commonly obtained through a thermochemical process called “steam methane reforming” which consists in the conversion of fossil fuels (e.g. coal and natural gas) into “grey” hydrogen. This produces high CO₂ emissions and other pollutants; therefore, in order to reduce such emissions, both “blue” and “green” hydrogen should be considered as alternatives.

To date, in Italy only a small share of the hydrogen production originates from electrolysis to create green hydrogen. However, an increasing interest in green hydrogen is expected over the coming years thanks to the progressive reduction in the cost of renewable power and electrolysers.

In Italy, the transition to green hydrogen would be facilitated by two additional key factors, namely: 1) a higher availability of renewables than in other European countries and 2) the existence of several pipelines connecting northern Africa to Southern Italy which could be used to import hydrogen at a lower cost. Green hydrogen is therefore now considered as a game changer for Italy’s energy transition. More generally, a recent study conducted in 2019 by specialists in the energy sector has confirmed this by showing that hydrogen has the potential to provide almost one quarter of all national energy consumption by 2050. 

There are significant opportunities for the use of hydrogen in many sectors, such as in buildings, industry, transportation and the entire energy supply and storage chain. More specifically, green hydrogen could be used as chemical product to decarbonise refining and high-heat processes of the steel, petrochemical, and mining industries. Green hydrogen could also serve as a storage system for the electricity surplus produced by renewable sources and as a fuel for public and private transportation.  

Industry

In 2019, SNAM S.p.A (“SNAM”), one of Italy’s leading energy infrastructure operators, launched a project called “SNAMTEC”, worth approximately € 850 million, aimed at increasing energy efficiency, reducing pollutant gas emissions and promoting innovation in the energy sector. Among the initiatives included in SNAMTEC project, SNAM launched a trial that took place in the Campania Region consisting of the introduction of a quota of 5% of hydrogen in the energy mix for a period of a month. The trial proved that the introduction of even a small portion of hydrogen in the energy mix would allow a substantial reduction in carbon dioxide emissions.

In March 2019, ENI, one of the most important Italian energy companies engaged in the exploitation, production, refining, and sale of oil, gas, electricity, and chemicals, signed an agreement with the National Consortium for the Collection, Recycling, and Recovery of Plastic Packaging (“COREPLA”), to develop a research project aimed at producing hydrogen and high-quality biofuels from non-recyclable plastic packaging waste.

ENI and NextChem, the Maire Tecnimont Group’s subsidiary for green chemistry, have entered into several partnership agreements to conduct engineering studies with the aim of developing and building new waste-to-hydrogen and waste-to-methanol production plants in Taranto, Venice, and Livorno. These plants will be crucial for a massive reduction of pollutant gases and for achieving Italian decarbonisation targets.

Transportation

In June 2020, Alstom, a leading company in the construction of trains and railway infrastructure, signed an agreement with SNAM where, for the first time, hydrogen fuelled trains will be introduced in the Italian rail network. These trains will be equipped with fuel cells which will convert the hydrogen into electricity with no greenhouse gas emissions. The first hydrogen-fuelled trains are expected to run in the Lombardy region from 2023.

In June 2019, ENI announced the launch of a new partnership with Toyota for the planning of a new hydrogen refuelling station in the Lombardy Region. ENI has specified that the hydrogen that will be sold in the refuelling station will be completely green as it will be produced only through the electrolysis process.

In September 2019, another partnership was signed between ENI, Toyota and the Municipality of Venice to evaluate the construction of a hydrogen refuelling station. The refuelling station will mark a concrete step forward in promoting the circulation of public and private hydrogen powered vehicles.

Energy storage and power generation

In January 2019, Enel Green Power, Enel Group’s subsidiary involved in the generation, distri­bution, and supply of renewable energy, and the Municipality of Lipari entered into an agreement for the building of a new photovoltaic plant on the Island of Stromboli. The new plant will be equipped with an innovative energy storage system that will store the excess solar energy produced in the form of hydrogen and will convert it back into electricity during periods of maximum consumption. This storage system will avoid the risks related to non-programmable renewable energy sources ensuring the availability of electricity.   

In April 2019, the National Agency for New Technologies, Energy, and Sustainable Economic Development (“ENEA”) and the Società Gasdotti Italia (“SGI”) , an Italian Company that offers the service of transportation of natural gas, signed a framework agreement to develop a “Power to Gas” pilot project, consisting in one or more electrolysers directly connected to an electricity grid or to a renewable energy system converting the overproduced electricity into hydrogen. The hydrogen can then be used for several purposes, e.g. as gaseous fuel in industry and transport sectors; as a chemical component to be added to CO₂ to obtain methane; or as reserve energy to be stored for underproduction periods.

Compared with other energy sources, the hydrogen market is still at an early stage in Italy. Nevertheless, it is at the heart of the Italian new green deal given its huge potential in terms of decarbonisation and exploitation of renewable energy. In recent years, the Italian government and private companies have invested in research and innovative projects to boost the development of new hydrogen-related technologies. Italy is one of the leading countries in Europe in terms of research in hydrogen sector, with 128 projects financed by the European Commission in the period 2008-2017, involving over 80 Italian beneficiaries and mobilising over €90M funding.

It is expected that, in the medium-long term, the economic and environmental potential of hydrogen will be crucial in the following areas:

• Decarbonisation of hard-to-abate sectors, such as private and public transport, building heating, and the production of fertilisers and petrochemicals;
• Integration of renewables by using electrolysers to convert surplus electricity in hydrogen. The development of this technology will be crucial to improve large-scale energy storage systems and to make the electricity grid more stable;
• Implementation of more efficient energy storage and distribution systems; and
• Promotion of sustainable mobility through incentives for vehicles fuelled by hydrogen.

Currently, ENI and SNAM are the main players involved in hydrogen projects. However, it is expected that, in the next few years, many other private and state-owned companies will operate in the hydrogen market. The growing interest in hydrogen sector, proved by the recent increasing public investments in hydrogen technology research, is also likely to attract strategic investments from private equity funds, as well as from other public and private investors. Potentially, there is a wide range of private financing options that may apply to hydrogen projects, such as green bonds (i.e. minibonds linked to energy projects with a positive impact on the environment) and project financing.

Legal framework

The Italian legal framework regulating hydrogen production, operation, and connection is rather fragmented and often this has proven to be a barrier to the development of new projects. For instance, although the authorisation process related to hydrogen production and storage is set at a national level, the local public authorities may ask for different requirements with regard to the land use. Such divergence may lead to uncertainty in terms of project financing and timing.

Another relevant issue is the lack of a clear distinction, in terms of authorisation procedures, between:

1. the production of hydrogen for industrial use obtained through reforming process and
2. the production of green hydrogen obtained through electrolysis process.

The Italian environmental authorities do not differentiate between these two processes with the result of imposing the same level of restrictions even though the electrolysis is more similar to an electrical reaction rather than a chemical process like reforming. Therefore, a specific legislation for hydrogen production by electrolysis is highly desirable in order to simplify the authorisation procedure and encourage investments in this low-carbon sector.

Financial support and incentives

To date, most of the hydrogen projects in Italy have been financed by private and state-owned companies. Nevertheless, it is worth noting that there are other national and European financial support schemes which have been already implemented or are in the process of being defined.

At European level, the Next Generation EU programme is undoubtedly one of the most impressive financial supports in recent decades. The NRRP, which allowed Italy to benefit from the European funding, has allocated approximately € 23 billion to promote and develop the green transition with the main goals of improving the sustainability and resilience of the economic system and ensuring a fair and inclusive environmental transition. With specific reference to hydrogen, the NRRP has allocated around € 3 billion to pursue the following objectives:

• developing flagship projects for the use of hydrogen in hard-to-abate industrial sectors, starting with the steel industry;
• promoting the creation of "hydrogen valleys", especially on brownfield sites;
• allowing - through the building of new recharging stations - the use of hydrogen in heavy transport and in non-electrifiable railway sections;
• supporting research and promoting all necessary legislative reforms to facilitate the use, transport, and distribution of hydrogen.

Still also at the European level, in March 2020, the Clean Hydrogen Alliance (the “Alliance”) was set up as part of the new European industrial strategy. The Alliance’s main task is the promotion and solicitation of investments in hydrogen projects. It is estimated that, at European level, the hydrogen sector will benefit from investments of €430 billion until 2030.

An interesting outlook on hydrogen market investments is also offered by the Hydrogen Roadmap, a report issued in January 2019 by the Fuel Cells and Hydrogen Joint Undertaking (“FCH JU”), a public-private partnership, of which the European Commission is a member, supporting research and technological development in fuel cells and hydrogen energy technologies. The roadmap makes an accurate analysis of the investments to be made until 2030, distinguishing them on the basis of the technologies to be developed (e.g. fuel cells vehicles, industry heat equipment and new production facilities along the value chain).

At a national level, it has been estimated that the investments required to achieve the new green deal objectives set out in the PNIEC should reach the quota of €50 billion up to 2030.These investments are expected to lead to a GDP growth of 0.5% each year and to contribute to the creation of more than 5 million jobs in the green economy sector. With specific reference to hydrogen, the Hydrogen Strategy has forecasted that up to €10 billion will be required in order to foster the deployment of hydrogen and achieve the medium and long-term goals set at national level. This sum includes:

• investments required for hydrogen production: € 5-7 billion;
• investments in hydrogen distribution and consumption facilities (hydrogen trains, refuelling stations, etc.): € 2-3 billion;
• investments in research and development: €1 billion.

It is expected that up to half of these investments could be supported by ad hoc national and European resources and funds (e.g. the Next Generation EU program and the Mission Innovation project, among others).

Specific legislation/regulation

On 23 October 2018, the Ministry of Interior Affairs jointly with the Ministry of Infrastructures and Transport issued a Ministerial Decree on “Technical rules of fire prevention for design, construction and operation of hydrogen distribution facilities for automotive vehicles” (the “Decree”). Compared to the previous ministerial decree of 2006 regulating the same matter, the Decree has overcome some of the regulatory barriers that affected the construction and operating of hydrogen plants during previous years. For the first time, the Decree has introduced the distinction between the reforming and electrolysis processes, as the past decree considered hydrogen as an industrial chemical produced only through fossil sources. Nonetheless, to date, the production of hydrogen in Italy is considered to be an industrial activity both when it takes place through steam reformation method or electrolysis. This means that restrictive measures in terms of land use, including zone prohibitions, apply irrespective of the production method adopted. 

Within the Italian regulatory framework, the Decree is the only specific legislation relating to hydrogen production and operating. Thus, other general provisions, mostly referring to gas and other fossil fuels, are applicable. 

Policy and government programmes

In 2019, the Ministry of Economic Development approved a “three-year electrical research plan”. The plan, applicable for the period 2019-2021, aims at fostering the research and the development of new technologies that could improve the national electricity system. The plan discusses new ways to covert renewable power into hydrogen and more efficient hydrogen storage systems.

Italy is a participant of the “Mission Innovation” project, a global initiative of 24 countries and the European Commission. The main goals of the project are doubling private and public investments in clean energy and fostering international collaboration to reinvigorate and accelerate global clean energy innovation. More specifically, among other initiatives, Italy joined the Renewable and Clean Hydrogen Innovation Challenge. This is a multinational research program, launched in June 2021, aiming to accelerate the development of the hydrogen market by improving key technologies at production, storage and distribution levels.

Generation

In Italy, the production of hydrogen, both through the reforming or electrolysis process, requires the obtainment of the Integrated Environmental Authorisation (“AIA”) by the Ministry of the Environment and Protection of Land and Sea. This authorisation is granted following an administrative procedure whereby the concerned authorities examine the project and evaluate its potential environmental risks. Moreover, according to the Ministerial Decree dated 23^rd October 2018, the components of a hydrogen production plant must comply with specific standards and the producer is bound to detailed maintenance duties.

Connection

With regard to the connection of electrolysers to the electricity national grid (Power to Gas facilities), there are no specific laws or regulations regulating this. Therefore, the Italian Unified Text for Active Connections (“Testo Integrato delle Connessioni Attive” or “TICA”) issued in 2008 by the Italian Regulatory Authority for Electricity Gas and Water (“AEEG”, the former ARERA) contains the rules applicable to high, medium and low voltage connections to the power grid. A specific regulation applying only to Power to Gas facilities is needed given the specific and complex technology used for the process of conversion from electricity energy to hydrogen. 

Regulation of hazardous activities

Pursuant to the Ministerial Decree of 23 October 2018, an applicant wishing to build a new hydrogen production plant must accurately indicate the place where the plant is expected to be built so that the local authorities can assess compatibility with the Land Use Plan. Afterwards, the local Fire Department provides an assessment with regard to safety and fire prevention. Depending on the location of the proposed plant, other Regional authorities might have to be consulted, e.g. the Regional Environmental Protection Agency (“Agenzia Regionale Protezione Ambiente” or “ARPA”) and the regional technical committee (“Comitato Tecnico Regionale” or “CTR”). Moreover, the Decree makes a list of all potentially hazardous activities and provides for the relevant required safety measures that must be implemented.

Transport, import and export of hydrogen

Since there are no specific national rules relating to hydrogen transport, Italy has implemented the last European ADR regulation, which relates to regulation concerning the international carriage of dangerous goods by road. Hydrogen is included among the dangerous materials classified as a flammable gas.

The same can be said of the regulation of import-export activities. As no specific law has been implemented to regulate the hydrogen trade with other countries, it can be argued that the same regulatory framework applying to the trade of natural gas also applies to hydrogen. More specifically, according to the Legislative Decree No. 164, dated 23 May 2000, gas import activity is subject to a specific licence issued by the Ministry of Economic Development. To obtain such a licence, the applicant must:

1. possess the technical and financial capacity appropriate for the import activities;
2. provide adequate information and guarantees regarding the origin of the natural gas; and
3. prove the safety of the system to be used for transport.

The guidelines set out in the PNIEC and in the PNNR will drive Italian energy policy over the next few decades. 

The Ministry of Economic Development has announced that, in compliance with the PNIEC, the Italian Government will launch a program aimed at developing and fostering the hydrogen industry and its value chain, thus making the industry more appealing to operators and investors. The objective is to strengthen the position of Italy in the European hydrogen market and to make progress in the country’s energy transition. In this, the NRRP has stressed the importance of a legislative reform regulating: i) technical standards on production, transport, storage and use of hydrogen; ii) administrative simplification measures for the construction of small-scale green hydrogen production plants and iii) measures to allow the building of hydrogen refuelling stations at motorway service areas, logistic warehouses, ports etc. by means of specific agreements between the Ministry for Ecological Transition and the Ministry of Infrastructures and Sustainable Mobility. The Ministry of Economic Development is currently considering the comments made by market players and trade associations on the preliminary hydrogen strategy guidelines before proceeding with the publication of the final program.

Also, during 2021, the Ministry of Economic Development, jointly with the Ministry for Ecological Transition, met several times with market players to discuss the potentials for hydrogen and its implications on the decarbonisation process. Following these sessions, a new study was submitted in July 2021 to the abovementioned Ministries and is currently under review. This study analyses trends and costs related to the technologies to be implemented in “hard to abate” sectors.