The bill to amend the Gas Supply Act, the Act concerning Energinet and the Act on electricity supply, which regulate the establishment of a hydrogen infrastructure in Denmark, the reorganisation of Energinet and a pilot project concerning carbon capture storage, was rushed through before Christmas. The rules concerning hydrogen and Energinet’s authority for a pilot project concerning carbon capture storage came into force on 1 January 2023.
The purpose of the amendments is to create a framework for the establishment of a hydrogen infrastructure (transport and storage) which is to support the green change-over and promote the development of PtX. Energinet has also been authorised to establish a pilot project concerning carbon capture storage to obtain more knowledge on carbon capture storage in the Danish subsoil.
Regulation of hydrogen infrastructure
According to the amendment, piped hydrogen will be regulated by the Gas Supply Act. The Gas Supply Act’s provisions therefore apply to both methane-based gas and hydrogen gas. The hydrogen infrastructure is expected to develop based on clusters, i.e. small systems with pure hydrogen, but the Act will also apply to hydrogen injected into the gas system provided that the hydrogen is of a proper quality.
The Minister for Energy has been authorised to lay down rules on:
- Exemptions for clusters, transmission and distribution systems and storage and LNG facilities which are part of the hydrogen supply.
- Organisation of the hydrogen supply.
- Estalishment and expansion of the hydrogen supply, including conversion of the existing gas infrastructure into hydrogen supply.
The government will present a proposal for political review concerning ownership, operation and financing of the hydrogen infrastructure.
During the consultation process, a clearer framework and security for the investments made were requested. However, the government maintains the model concerning a framework regulation where exemptions are possible. According to the consultation memo concerning a future hydrogen market, it is a balancing between creating a fast roll-out of a hydrogen infrastructure and creating final and transparent terms for hydrogen operators on the market without any exemptions. The Ministry is of the opinion that, at present, it is not possible to fully describe the final regulatory conditions concerning hydrogen as an additional maturing of the hydrogen market is required and because future EU regulation is on the way.
When the bill was considered, questions were asked about the legality of municipal hydrogen production. The Minister’s immediate assessment is that hydrogen production may presumably not be considered supply under the local government mandate, and a municipality’s participation in hydrogen production will therefore require explicit statutory authority, but this question will have to be clarified in detail.
Pilot project concerning carbon capture storage
The new rules make it possible for Energinet, Gas Storage Denmark (GSD), to establish a pilot project concerning carbon capture storage at Stenlille, which is the implementation of an agreement concerning framework terms for carbon capture storage in Denmark of 21 June 2022. To begin with, it is only a pilot project. The pilot project is expected to contribute with knowledge about carbon capture storage in the Danish subsoil and at the same time support early storage of carbon in the Danish subsoil.
During the consultation process, it was noted that the pilot project at Stenlille ought to be operated on market terms. Energinet needs explicit authority to carry out carbon capture storage, but, as stated in the consultation memo, Energinet may operate a carbon capture storage on the same terms as other players under the Subsoil Act. Under the Subsoil Act, potential users are entitled to use the carbon transport network and storage facilities against payment. The prices and terms are laid down by the transport network company and the storage company which must publish the tariffs and terms. The Danish Energy Agency monitors that there is fair and open access to the transport network and the storage facilities.
The amendment of the act does not decide whether Energinet may be responsible for storage activities after the pilot project.