PE Live: Regulation needs to catch up with hydrogen development
The rapid emergence of hydrogen as a potential major fuel and energy storage medium means regulation will need to be overhauled—and certain countries are already taking an early lead.
Legislators and regulators around the world need to create new rules in many areas before hydrogen can be utilised on a widespread basis—including safety standards, pipeline regulations and potentially taxation—a legal expert warned on the PE Live 7 webcast last week.
While the challenge of creating regulatory frameworks “does not strike me as being insurmountable” there are many issues to be resolved and there are wide differences between countries in the amount of progress that has been made so far, according to James F Bowe Jr, partner, corporate, finance and investments, at law firm King & Spalding.
Blending green hydrogen, which is created using renewable power, into domestic natural gas supplies has been touted as a viable way of reducing carbon emissions, but a change in specification could cause unforeseen problems. “We are still in early days in some jurisdictions in dealing with things such as appliance standards,” he says. “To what degree can hydrogen be substituted for natural gas, say, in a stove or other end-use appliance?”
Australia is the most advanced country in creating a regulatory system for hydrogen, and the UK has mandated hydrogen compatibility since the late 1990s. US appliance standards, however, do not “fully embrace hydrogen yet, so that needs to happen.”
Another area in need of resolution is to the interchangeability standards that apply to gas distribution networks and transmission pipeline systems. The consensus view is that 20pc hydrogen can be mixed in to existing natural gas networks “without too many detrimental impacts”, Bowe says.
“And yet, in the US and Canada, the standards that apply to gas transmission established in pipeline tariffs do not permit any significant amount of hydrogen. That would have to be addressed through regulatory proceedings, in which questions as to interchangeability, impact on end-use, performance and even the impact on the transmission and distribution facilities would have to be played out.”
"Safety regulation is going to be of critical importance" Bowe, King & Spalding
Taxation would also need to be considered if hydrogen became a major part of the energy mix, especially in vehicular use where it would be replacing typically highly taxed petrol and diesel. “The way in which fuels are taxed can either make or break them,” notes Bowe. “If we are looking to promote the use of hydrogen as a fuel, it would be good if there were national or even international conventions as to how hydrogen ought to be dealt with.”
While safety standards already widely exist for hydrogen, they are likely to have been written in anticipation of only small-scale industrial use. “They are probably behind the times in terms of what they need to be taking into account in addressing a much larger role for hydrogen,” he says. “Safety regulation is going to be of critical importance.”
For example, hydrogen is known to have a corrosive effect on certain types of steel that can be used in natural gas pipelines, and there may well be other unknown effects.
While there are already some examples of hydrogen pipeline networks—including two in the US Gulf Coast and others in Germany and the Netherlands—regulatory regimes governing pipelines are focused on natural gas.
“Once we are moving into a situation in which hydrogen could be transported over long distances at commercial scale, there may be a need for a new legal regime or least amendment of existing laws… when it comes to such questions as authorisation to construct facilities,” says Bowe.
“It would be optimal if hydrogen pipelines could be permitted in a way that is similar to the way in which interstate natural gas pipelines can be permitted in the US or interprovincial pipelines can be permitted in Canada, which would require some legal changes.”
The argument for economic regulation of hydrogen production is “pretty weak since, at this point, it is a new entrant into a market” but would probably need to be addressed at some point, he says.
There are likely to be unintended consequences from regulation designed for a different time. For example, Bowe notes that a developer of a US renewable energy project may wish to bolt on an electrolyser to enable it to store excess power as hydrogen but may be prevented from doing so under the US Federal Power Act or risk losing its exempt wholesale generator status.
“The need to demonstrate that an exempt wholesale generator is pretty much exclusively devoted to the generation of electricity for sale wholesale could present a challenge for a solar or wind developer that wants to bolt an electrolyser on to its system,” he says.
“That is something that would obviously need to be addressed if an integrated approach to the production of renewable energy and the production of hydrogen were to be pursued in large measure.”
Other legal and regulatory issues that need to be resolved include those concerning exports, safety and underground rights for storage and eminent domain law for hydrogen pipelines.
A recording of PE Live 7: Is the world now ready for hydrogen? can be heard here.