Introduction
The hydrogen industry has had a blast with its rainbow of labels—green hydrogen, blue hydrogen , and even pink hydrogen—each one trying to describe how hydrogen is made. But after four years of trying to untangle this colourful mess, European policymakers have decided it's time to keep things simple.
Now, hydrogen is mostly sorted into just two categories:
- Renewable Fuels of Non-Biological Origin (RFNBO): This is the VIP section for hydrogen made using renewable energy sources like hydropower, wind, or solar power. Think of it as the eco-friendly superstar that follows strict rules.
- Low-Carbon Fuels: This category is like the trusty sidekick in the hydrogen world. While it might not have the VIP status, it's still crucial to the story. Produced with low-carbon energy—whether it's a blend of renewable and non-renewable electricity or with natural gas with carbon capture and storage—this sidekick plays a key role in the hydrogen journey.
If hydrogen doesn’t fit into these categories, it doesn’t get to join the low-carbon party. So, while the colourful labels might look cool, the real deal is all about the hydrogen’s carbon footprint. Right now, the RFNBO regulations are all set, but the Low-Carbon Fuels, such as nuclear power, regulations are still in the works and eagerly awaited by the industry.
Brace yourself, we’re about to dive into the regulatory deep end.
What is RFNBO Regulation?
The so-called Delegated Act, required by the EU’s renewable energy directive, specifies when hydrogen, hydrogen-based fuels, or other energy carriers can be categorized as a Renewable Fuel of Non-Biological Origin (RFNBO). This Delegated Act outlines the strict criteria that ensure production processes contribute to reducing greenhouse gas emissions. Buckle up, as we will soon plunge into the details of these regulations and explore the five specific production routes for RFNBOs.
What are the main criteria for producing RNFBO?
Option 1: Direct connection between renewable energy and RFNBO production
For RFNBO production facilities using a direct connection to renewable energy sources, the following criteria must be met:
- The renewable energy installation must be new and come online no earlier than 36 months before the RFNBO production facility. This applies only to hydrogen production sites entering operation after January 2028.
- Production and consumption must occur within the same installation or be directly connected, without utilizing grid power.
- The RFNBO production facility does not utilize grid power even if grid connected.
Option 2: Renewable energy production and RFNBO production are connected through electricity grid
Option 2.1: PPA. The RFNBO producer purchases renewable electricity via PPA.
- Additionality: The renewable energy generation installation must come online no earlier than 36 months before the RFNBO production facility.
- Temporal Correlation: RFNBO production must take place during the same calendar month as the contracted renewable energy generation until December 31, 2029 (e.g. monthly matching), and during the same hour thereafter (e.g. hourly matching). Temporal correlation can be buffered via storage behind the same network point. An RFNBO will always be counted as temporally correlated if produced during a one-hour period where the clearing price of electricity in the day-ahead market is lower or equal to €20 per MWh or lower than 0.36 times the price of an allowance to emit one tonne of carbon dioxide equivalent during the relevant period.
- Geographical Correlation: The renewable energy installation and the RFNBO production facility must be in the same bidding zone or an interconnected bidding zone with equal or higher day-ahead prices. Renewable energy can also be sourced from an offshore bidding zone connected to the RFNBO production zone.
Option 2.2: High Renewable Energy (RE) Share in bidding zone
- If in the previous year, renewable energy sources accounted for more than 90% of the total energy mix, no additional renewable capacity needs to be built (exemption from additionality requirements) this is the case now for bidding zones in Northen Sweden).
- This exemption applies to the bidding zone where RFNBO production occurs, for the next five calendar years.
- Temporal and geographical correlation rules are waived under this option.
- The annual operating hours for RFNBO production must be less than the product of 8760 hours and the percentage share of renewable energy.
Option 2.3: Low CO2-emission grid
- The electricity grid has achieved significant decarbonization, with an emission intensity below 18 gCO2eq/MJ within the bidding zone. This is the case at the moment in Finland, Sweden, France and Norway. No additional renewable capacity needs to be built (Additionality exemption), but renewable energy must be contracted via a Power Purchase Agreement (PPA).
- Temporal and geographical correlation criteria apply.
- This condition remains effective for five years once the specified emission threshold is met.
Option 2.4: Redispatch
RFNBO producers must demonstrate, with assistance from their national Transmission System Operator (TSO), that during any period of imbalance settlement (which varies by nation):
- Renewable power generation facilities were instructed to reduce output.
- The electricity consumed for RFNBO production offset an equivalent amount of redispatching demand.
Many options indeed, each resulting in in different types of RFNBO varying in price.
Conclusion
While the EU regulations for producing RFNBOs are stringent, they are essential for ensuring sustainable and environmentally friendly hydrogen production. Nordic countries, with their low CO2 intensity electricity grids and strong capacity for new renewable energy projects, are particularly well-positioned to meet these challenges. This makes them capable of providing RFNBO-eligible hydrogen, contributing significantly to the transition towards a low-carbon economy and supporting global sustainability goals.
Happy to help! Contact us for more information
Hassan El Mahdi
Sales Manager, Sweden
Tel: +46 70 859 3503
hassan [dot] el [dot] mahdi [at] fortum [dot] com
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