A core element of the proposed amendment is the adjustment and introduction of comprehensive unbundling provisions in the Energy Industry Act (Energiewirtschaftsgesetz, (EnWG)) for hydrogen infrastructure. The proposal closely mirrors the provisions on unbundling applicable to existing natural gas networks that have been in place since 2009. This approach is to be welcomed, as it is likely to enhance legal certainty in the upcoming procedures for the initial certification of hydrogen network operators.
1. Vertical unbundling of transmission system operators
Operators of hydrogen transmission networks are natural or legal persons who operate pipelines for hydrogen transport (Section 3 No. 20 EnWG). If these operators belong to a vertically integrated company (vertikal integriertes Unternehmen, (VIU)), they must unbundle themselves in accordance with the new Section 8 (1) Draft Energy Industry Act.
From now on, VIUs are defined as companies or groups of companies that perform at least one of the functions of hydrogen transport, distribution, operation of a hydrogen terminal or hydrogen storage in the hydrogen sector, and at the same time engage in the production or supply of hydrogen. In this context, a cross-energy carrier consideration must be made: A VIU may also exist where functions are performed across different energy sources (e.g. transmission of natural gas and distribution of electricity).
As in the gas sector, three unbundling models are available:
- Ownership unbundling forms the basic case and requires the complete separation of network activities from generation and distribution activities within a VIU in terms of personnel, organization and ownership.
- As an alternative, companies may appoint an Independent System Operator in accordance with Section 9 Draft Energy Industry Act. In this case, ownership of the network remains with the VIU, while operation, maintenance and decision-making authority are transferred to a legally and functionally independent operator.
- In addition, the new Section 10f Draft Energy Industry Act introduces the third variant: the Independent Transmission Operator (ITO) of a hydrogen transport network, which corresponds to the ITO variant in the gas sector. In particular, the ITO must have its own legal and accounting departments, its own IT infrastructure and independent. representation vis-à-vis regulatory authorities and third parties. The familiar requirements of Sections 10 to 10e EnWG apply mutatis mutandis.
2. Horizontal legal unbundling of Transmission System Operators
In addition to vertical unbundling, the draft bill introduces horizontal legal unbundling for the first time with Section 10g Draft Energy Industry Act, which implements the requirements of Article 69 (1) of the Gas and Hydrogen Internal Market Directive:
The operator of a hydrogen transmission network must be legally independent of the operator of a transmission system, a transmission system and gas and electricity distribution system operators in terms of its legal form. The unbundling obligation is therefore cross-sectoral and does not only apply to the gas sector but also covers electricity transmission and electricity distribution system operators. According to the regulatory approach under EU and national law, the joint operation of hydrogen networks and natural gas or electricity networks can enable efficiency and synergies and is therefore permissible in principle. Nevertheless, the operation of a hydrogen transmission system is to be bundled in an independent legal entity in order to ensure transparency with regard to the financing and use of network access charges. In particular, the aim is to prevent cross-subsidization between the individual energy source and network sectors.
However, the draft law provides for an exception to the horizontal unbundling obligation:
Based on a cost-benefit analysis prepared in accordance with the current state of scientific knowledge, legal unbundling may be waived if the Federal Network Agency (Bundesnetzagentur, (BNetzA)) concludes that the absence of unbundling does not adversely affect transparency, separate financing, network access charges and cross-border trade. This exemption enables synergy effects and reduces the burden on affected network operators. The BNetzA reviews its assessment at least every seven years or at the request of the European Commission. In the event of a negative outcome, the exemption does not apply to all affected companies.
3. Unbundling of distribution system operators
In the area of hydrogen distribution networks—similar to the gas sector—less stringent requirements apply:
Operators of hydrogen distribution networks are natural or legal persons who perform the task of distributing hydrogen and are responsible for the operation, maintenance and expansion of the hydrogen distribution network in a given area.
In this respect, too, the tried-and-tested simplified unbundling regulations from the natural gas sector will be adopted: VIUs, which were already exempt from legal unbundling in the gas sector, will also be exempt with regard to connected hydrogen distribution system operators, provided that the total number of customers connected to the gas and hydrogen distribution network does not exceed 100,000.
4. Other requirements
Special regulations apply to certain players in the hydrogen economy, again closely based on the established requirements for the gas sector: Operators of hydrogen storage facilities are natural or legal persons who are storing hydrogen and are responsible for the operation of a hydrogen storage facility (Section 3 No. 19 EnWG). The unbundling rules under Section 7b EnWG will be extended to them. In future, equal treatment commissioners will also monitor non-discriminatory access to the grid for hydrogen transport network and storage facility operators.
For hydrogen networks within a geographically limited industrial or commercial area, the regulatory authority may grant an exemption from certain certification and unbundling requirements in accordance with the new Section 110b Draft Energy Industry Act. The legislator assumes that such networks carry a lower risk of discrimination and therefore not all unbundling regulations have to be complied with.
Accounting unbundling under Section 6b EnWG will be extended to the hydrogen sector. Energy supply companies will be required to maintain separate accounts for, among other things, hydrogen transport, hydrogen distribution, hydrogen storage and the operation of hydrogen terminals.
5. Outlook
The draft is now entering the legislative process, which could possibly be completed before the summer break. The draft is expected to be relatively uncontroversial and is to be welcomed, as its close alignment with the established gas sector regulations enhances legal certainty. For VIUs that are or will be active in both the gas and hydrogen sectors, there is a need for action: the choice of the appropriate unbundling model and early planning of the corporate law implementation are crucial for efficient positioning in the hydrogen market.
