Q&A: RAG says EU lacks clear hydrogen storage rules

RAG Energy Storage has been one of the front-runners in hydrogen storage, and established the first operational commercial underground hydrogen storage (UHS) in a depleted gas field in April 2023. Argus spoke to its managing director Georg Dorfleutner, who is calling for a clear framework.

Are you OK with the EU apparently scaling back from 10mn t/yr of hydrogen imports?

We base the modeling of the report for HeartforEurope more or less on 2030 projections from the RepowerEU strategy.

The assumptions on our modelling to identify an investment gap for hydrogen storage were rather conservative — that the only demand would come from industry, thus a rather flat profile over the year without seasonal-shift needs yet. From our side we have multiple potential hydrogen storage projects throughout Europe, but the hydrogen market development and support regimes for infrastructure investments will define the timely realisation.

How might any scaling back affect your report's projected 36 TWh H2 storage gap?

Whatever happens infrastructure needs to be in place very soon.

Our report really underlines the need for a clear framework for hydrogen storage. And we come with a toolbox of different possible measures to support this. Storage tariffs alone won't solve the issue of market ramp-up. Policymakers may feel relieved that the gas and hydrogen decarbonisation package was finished before the EU elections. But our report is more or less saying that this alone will not do the trick.

Could a strict EU definition of low-carbon hydrogen hinder growth?

The wider and more pragmatic the definitions of low-carbon hydrogen are, the easier market ramp-up will be.

Market ramp-up is enormously important for infrastructure. You don't build infrastructure just for demand over the next two years but for the next 10-15 years.

Do we need more tailored financial support for UHS, at EU and state levels?

There's simply no tailored financial support right now. There's a little aid for hydrogen storage research projects.

Currently, policy-making appears focused on whether or not hydrogen infrastructure has to be unbundled. As for financial support, we're completely out of the picture for now.

And there's this idea that regulated tariffs make commercially viable projects. But that's not true. It's only booked capacity based on a cost-covering approach that delivers a financially viable project. You don't build infrastructure just to have nice infrastructure without customers.

Do we need EU and member state UHS targets?

We're not looking for a strict mandatory goal.

But if there is a certain goal for hydrogen uptake in the market, then you should ensure that you have the necessary infrastructure in place. That said, targets may be helpful at state level in setting a framework for state aid.

But we also have to recognise that Europe is very diversified. Some areas may have very well-functioning hydrogen supply while other landlocked countries might depend on longer supply chains, thus being more dependent on storage.

Are markets ready for UHS?

Firms are already approaching us. The market is willing, but they need to know what the costs are.

The best way forward then is providing clear rules for storage and giving industry a clear pricing idea. There also need to be clear state support mechanisms until we get to cheaper hydrogen and sufficient infrastructure utilisation.

In the process of creating UHS capacities we need to keep in mind the SOS for natural gas, which currently is crucial. That's why we focus on new sites — caverns, porous reservoirs and aquifers — rather than repurposing.

But at some point, post-2030 with a market ramp-up, decisions on repurposing gas into hydrogen storage will need to be taken.

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