German industry warns on electrolysis restrictions
German industries federation BDI has criticised government plans to limit the exemptions applicable for renewable power used in the electrolysis process for producing hydrogen.
The federal government last month proposed rules on exempting the renewable power used by electrolysis sites for producing green hydrogen from the renewable energies law (EEG) levy, as part of several changes to the EEG.
The rules propose that renewable power used by electrolysis sites for producing green hydrogen will from 1 January 2022 be exempt from the EEG levy. At least 85pc of the exempted power must be generated within the German bidding zone, and a maximum 15pc outside the zone. The relevant renewable power must not be subsidised under the EEG or the combined heat and power (CHP) law, but must instead be certified through guarantees of origin (GOOs) coupled with data from the generation sites. For power generated outside Germany, GOOs will suffice.
The exemption applies to relevant renewable power plants' first 5,000 load hours of every calendar year.
But limiting low-cost electrolysis power procurement to unsubsidised, predominantly domestic renewable power, and to just 5,000 hours/yr, risks undermining the profitability of hydrogen projects, BDI head of energy and climate policy Carsten Rolle warned at a parliamentary hearing this week.
Most renewable project developers are assuming annual load hours of 6,500-7,000, and will have problems operating profitably at such a low load, unless their investment support is raised, Rolle said.
But the main problem is the limited pool of available power, given that EEG-supported power is excluded, Rolle said. This could turn out to seriously hamper the growth of electrolysis sites in Germany, Rolle warned.
To remedy the situation, Germany will need to encourage strong growth of renewable power outside the EEG, or the country will need to overturn the so-called "multiple sale ban" — that is to allow EEG-supported sites to also qualify for GOOs.
Policy makers will need to face the issue of location, transmission system operator Amprion's chief executive, Hans-Jurgen Brick, said. It will be difficult to secure local acceptance in south Germany, if new power lines will need to be built to transport the necessary power from the wind-rich north to the south's electrolysers, Brick warned.
The EEG levy, which finances feed-in tariffs and market premiums for renewable generation, is capped at €65/MWh this year and €60/MWh in 2022. The levy alone would add costs of about €3/kg for the hydrogen, compared with costs of "grey" hydrogen produced from fossil fuels of €1-1.50/kg, Rolle said.
The Bundestag is preparing to pass several legislative packages touching on the energy sector before the end of this month, when parliament will break up ahead of federal elections in September.
The SPD-led environment ministry has calculated that Germany will need 100 TWh/yr more power in 2030. Energy and water association BDEW estimates power demand in 2030 at about 700TWh.
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French EdF develops more nuclear supply contracts
French EdF develops more nuclear supply contracts
Paris, 2 July (Argus) — French state-owned utility EdF has signed five letters of intent for long-term nuclear supply contracts for power-intensive industries, EdF executive director Marc Benayoun said at the Europ'Energies conference in Paris today. The five nuclear power supply contracts represent over 10 TWh/yr of consumption and will last for at least 10 years. Payment will be upfront. "We are still far from the [24TWh] maximum that we were aiming for but, in a context of low prices, some actors prefer medium-term contracts", Benayoun said. The utility had signed three letters of intent for nuclear power supply contracts as of April, including one with steel manufacturer Arcellor Mittal and another with green iron consortium GravitHy . French nuclear power supply contracts — or CAPNs — are designed for power-intensive industries, defined by the share of energy expenses in their revenue. French state-owned rail company SNCF consumes an average of 9 TWh/yr of power so does not fall under the power-intensive category, making it ineligible for a CAPN. Discussions on widening the scope of CAPNs have been ongoing with EdF, SNCF operations director Khadidja Haned Bouaddou told Argus . Nuclear supply contracts will partly replace France's Arenh scheme, under which EdF is obliged to sell nuclear power at a fixed price to competitors. The Arenh mechanism is due to expire at the end of next year. The French state reached a deal with EdF at the end of last year that sets a price for nuclear power sales, but the agreement has not yet become law. The prices of the contracts could be renegotiated, French economy minister Bruno Le Maire said recently. France's current parliamentary elections add further uncertainty to the future of the mechanism. EdF has concluded 2,000 contracts for around 40TWh, or 11.7 TWh/yr, of power over 4-5 years, with the power coming not only from its nuclear fleet. This compares with the 20TWh of power that the utility had sold as of the beginning of April . In parallel, the utility is conducting pay-as-clear auctions for delivery in 2028-29, offering 1-5MW. But the auction has not cleared, as prices have decreased and bids received by EdF were below its reserve price, Benayoun said. Power-intensive industries union Uniden president Nicolas de Warren welcomed the initiative of the auctions and said they represent a complementary source of supply. By Tatiana Serova Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
Italy’s NECP eyes 11pc of power demand from nuclear
Italy’s NECP eyes 11pc of power demand from nuclear
London, 2 July (Argus) — Italy aims to generate at least 11pc of its power demand from nuclear energy by 2050 and could double that amount if necessary as part of efforts to meet its climate goals. In its new national energy and climate plan (NECP) sent to Brussels yesterday, Rome said its "conservative" scenario envisioned installing 8GW of nuclear power capacity using mainly small modular reactors but also fusion plants. Italy could build as much as 16GW of nuclear capacity depending on developments across the energy system, according to the document. The ‘with-nuclear' option would provide savings of around €17bn ($18.3bn) compared with not using it. It would also mean less gas consumption tied to carbon capture and storage (CCS) technology. Italy banned nuclear power in a referendum in 1987 after the Chernobyl disaster, but the current right-wing government of Giorgia Meloni has voiced its support for the technology. Last year it set up the national platform for sustainable nuclear power to map out a timeline for a possible return to nuclear power. In confirmation of targets set last year , Rome said it aimed to install a total of 131GW of renewable energy capacity by 2030, compared to 58GW in 2021, with a view to meeting 63pc of power demand and 39.4pc of total energy consumption. Most of the new capacity will be solar photovoltaic (PV), with 79GW expected to be installed driven by new subsidies and easier permitting. Wind capacity is expected to contribute 28GW, with offshore wind providing just 2.1GW. The plan envisages the development of contracts for difference (CfDs) through auctions for larger plants, as well as a framework to boost power-purchasing agreements (PPAs). Italy's NECP also maps out the development of electricity grids and cross-border interconnections. "The long-term risk is that the tight renewables penetration targets and the CfD mechanism established by the EU to deliver incentives could lead to a negative impact on spot prices, currently driven in Italy by the price of natural gas and carbon allowances," Italian broker Equita said. The current final revision of Italy's NECP comes after a cross-sector and public consultation. It was submitted to the European Commission for approval on 1 July, a day after the deadline required by EU law. By Steven Jewkes and Timothy Santonastaso Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
Japan mulls seeking more gas-fired capacity in auction
Japan mulls seeking more gas-fired capacity in auction
Osaka, 1 July (Argus) — Japan is considering further adding to gas-fired power generation capacity through its long-term zero emissions power capacity auction, given forecasts of rising electricity demand with the rapid adoption of artificial intelligence. A working group under the trade and industry ministry Meti has proposed to look for an additional 4GW of gas-fired capacity over two fiscal years from April 2024-March 2026 via a clean power auction. This came after awarded gas-fired capacity reached 5.76GW in the first auction held in January , with the auction seeking about 6GW over three years. The second auction — which Tokyo plans to hold in January 2025 — could seek 2.24GW, including the remaining 0.24GW in the first auction, for 2024-25 and another 2GW for 2025-26 in a third auction, the working group suggested. It has also proposed to extend the period within which awarded gas-fired projects have to start operations to eight years from the previous six years, given current resource shortages at plant manufacturers. Japan has launched the auction system to spur investment in clean power sources by securing funding in advance to drive the country's decarbonisation towards 2050. This generally targets clean power sources — such as renewables, nuclear, storage battery, biomass, hydrogen and ammonia. But the scheme also applies to new power plants burning regasified LNG as an immediate measure to ensure stable power supplies, subject to a gradual switch from gas to cleaner energy sources. These measures will not necessarily lead to increased demand for LNG, as Japanese import demand for the fuel would further come under pressure from expanded use of renewables and nuclear power. But the power sector will have to secure enough capacity to meet peak demand, especially with power consumption by data centres and semiconductor producers expected to continue to increase. Japan's peak power demand in 2033-34 is forecast at 161GW, up from an estimated 159GW in 2024-25, as the country's digital push will more than offset the impact of falling population and further energy saving efforts, according to the nationwide transmission system operator Organisation for Cross-regional Co-ordination of Transmission Operator. By Motoko Hasegawa Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
Q&A: Corporate reporting and certification schemes
Q&A: Corporate reporting and certification schemes
London, 28 June (Argus) — Corporate reporting standards and obligations are becoming more granular and falling under greater scrutiny across the EU, after new rules came into force at the start of 2024. Argus spoke to net zero adviser Nils Holta at environmental solutions provider Ecohz to review changes to EU legislation and consider their impact on wholesale energy attribute certificates markets. Edited highlights follow: Let's start by decoding the acronyms and taking stock of changes to reporting standards this year. What do the principles of the CSRD and ESRS look like? How do these align with the EU Taxonomy? These are all thematically related pieces of legislation, that are not formally linked to each other. The Corporate Sustainability Reporting Directive (CSRD) and the EU Sustainable Investment Taxonomy are two of the angles of a sustainability transparency triangle completed by the Green Claims Directive (GCD). Through these policy mechanisms, the EU seeks to cover sustainability reporting, sustainability criteria for investments, and marketing information to consumers. Essentially, the EU is trying to add sustainability as a new dimension of the single market, alongside standardised comparisons on quality and price. The CSRD relates more to the finance side. Through the annex with the European Sustainability Reporting Standards (ESRS), it details how companies should report on their sustainability impact, their sustainability-related risks, and any financial opportunities that arrive as a result of sustainability matters. It has been developed as an addition to European financial disclosure requirements, and in Norway, for instance, it has been transposed through amendments to the "accounting law" (Regnskapsloven). For financial undertakings, the Sustainable Finance Disclosure Regulation (SFDR) plays much the same role, albeit at a higher level of granularity. On the consumer-facing side, companies will soon be required to adhere to the GCD when promoting their products' environmental profiles to final consumers in what the EU calls "explicit environmental claims". While not quite the same as sustainability reporting, it fits in a market dynamic where the EU expects economic actors to be more transparent about the environmental qualities of their products — like we are used to for price and quality. Finally, we have the EU Taxonomy for sustainable activities, or just the Taxonomy. The Taxonomy is a list of economic activities with clear criteria on how they can be performed sustainably, and, in some cases, how they can be considered a transitional activity to more sustainable options. The Taxonomy also mandates that large undertakings and financial actors disclose the percentage of their Capex [capital expenditure], Opex [operating expenditure], and turnover that is invested in, finances, or derives from activities that are considered sustainable under the Taxonomy. Here is the link to the CSRD (ESRS), GCD and SFDR. If you are required to report on the percentage of your investments or turnover that is associated with sustainable activities, you need to know how all the companies you invest in are performing. And through the CSRD they are required to share this information in a transparent and streamlined manner. If, as a company, you want to make a claim about a product's environmental profile, you are now also required to possess and sort the information necessary to found that claim through the same directive. So here we have the triangle — the Taxonomy and SFDR push investors towards sustainable investments. The GCD provides consumers with a choice to consume sustainably, and the CSRD and ESRS ensure that companies have the information necessary for the other two to work. So the EU wants you to base Taxonomy reporting or environmental claims on the information published in your CSRD reporting? Not quite. I should stress at this point that EU law does not require companies to use the same methodologies for their CSRD reporting as for explicit environmental claims under the GCD or for showing criteria alignment with the Taxonomy. The simple reason is that communication to different audiences — shareholders, financial sector institutions, consumers — might require different approaches. It is, however, very simple to base claims under the Taxonomy or GCD on information gathered for CSRD reporting, and I have seen companies rely on CSRD reporting for claims of Taxonomy-alignment in their annual reports. How are things changing within the CSRD in terms of how industrial and corporate (I&C) companies will need to document energy — power and gas — consumption throughout their supply chains? What does it mean in terms of scope 2 and 3 emissions? This is a good place to clarify terminology. The CSRD is an EU directive that mandates sustainability reporting, sets out how member states are responsible for making sure companies report, and details which categories of companies need to report. All in all, we are taking about at least 50,000 EU-based companies and maybe another 10,000 non-EU companies with operations in the EU, as a rough assessment. The ESRS are the technical standards, outlining — over some 300 pages — how companies can assess what information they need to report and how this can be reported. The ESRS go into detail regarding how questions about energy consumption and climate transition plans or supply chains are asked and framed. Thank you for the clarification, and now back to the market-based vs location-based reporting? In general, the ESRS move towards market-based reporting. Emissions are to be reported by scope — 1, 2 and 3 — separately and using both market-based and location-based methodologies for Scope 2. They are also to be reported against total turnover, so investors can see the greenhouse gas intensity of their investments' turnover. At the same time, the ESRS clearly state that energy consumption must be reported using the market-based methodology in the case of Scope 2, and that it "can" be market-based in Scope 1, which for most companies would primarily relate to gas. The latter is highly technical and is tied to the EU emissions trading system monitoring and reporting requirements. Disclosing companies must report Scope 3 as it was reported to them. There is no option to not report on Scope 3 emissions outside of Europe, which means that these 60,000 or so companies will push their own reporting requirements through their entire value chain. It also means that oil and gas companies will finally need to include emissions from combustion of their own products in their sustainability reporting. Considering that changes to the CSRD will lead to greater focus on Scope 3 emissions, how is this likely to impact the energy attribute certificates (EAC) markets? Are you already seeing changing approaches to EAC procurement? How do biomethane and hydrogen fit into the picture, and is there a role for carbon offsets? What we are seeing is a greater corporate interest in understanding their own value chain and getting their suppliers to cover Scope 2 consumption with EACs. They can even use the divergence between location and market-based reporting to stress how much they actually achieve by sourcing renewable energy. The result is quite literally the difference between the two numbers. The ESRS do not open for carbon offsets as a way of reducing total emissions. Any offsets must be reported separately. Biomethane and hydrogen would both serve to decarbonise your gas combustion, so mainly Scope 1. However, the requirements for credible claims to consumption are tied to a bundled model, so we expect less focus on certificate trade and more focus on efficient value chains to deliver the product as a whole. There are a lot of open questions here tied to member state transposition of the Renewable Energy Directive (RED) III — and in some cases RED II — and to the coming Union Database for renewable fuels. How will the GCD impact consumer disclosure requirements and how does it tangentially relate to the Taxonomy? Do you expect this to also drive more granular purchases in EAC markets? When procuring EACs, will additional specifications such as eco labels become more prominent in the market? There is no specific link between the GCD and the Taxonomy, but Taxonomy-alignment would definitely be one of the things that can be communicated and substantiated in a way that is aligned with the GCD. Using an eco-label is a way to distinguish your product among several who all use renewable electricity. However, it is difficult to assess exactly how companies and consumers will react to this information in the long term. In the near future, we expect the GCD to lead to a reduction in environmental performance claims overall, at least until companies have a decent understanding of what and how they should communicate. The fine is up to 10pc of total turnover. There are often questions around how nuclear power is viewed in the EU Taxonomy — can you clarify that? And how do you see nuclear power — through scope 2/3 — playing a role in I&C companies documenting carbon neutrality through disclosure mechanisms? There has been a growing trend of energy suppliers offering carbon-neutral tariffs as opposed to renewable owing to the greater cost of documenting renewables through EACs, on top of already higher outright power and gas prices. Do you see I&C customers taking a similar route? Under the Taxonomy, nuclear is not considered renewable. It is, however, acknowledged as carbon-neutral, and we see several EU initiatives targeted at promoting "low-carbon" rather than renewable solutions. There is also an addendum to the Taxonomy, where nuclear and gas-fired power plants can be considered Taxonomy-aligned under certain circumstances. For gas, this relates to replacing coal and being time-limited in nature; while for nuclear, it is tied to a series of environmental and waste-treatment requirements. As long as the market recognises a qualitative difference between renewable and nuclear, EACs for each will be priced differently. Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
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