NEWSLETTER 2.2023
Dear reader,
Welcome to the second Newsletter of the EUROFUEL newsletter of 2023. The start of the year has been full of news and significant announcements for the energy sector, and in this edition we will take a look at some of the most relevant ones, from the vote in ITRE on the critical revision of the Energy Performance of Buildings Directive, to the announcement of a new Green Deal Industrial Plan. All without forgetting the rising controversy over what constitute renewable energy following the long-awaited adoption of the Commission Delegated Act defining what can be considered renewable hydrogen.
The recent vote on the Energy Performance of Buildings Directive (EPBD) in the Parliament ITRE committee, represents without a doubt the most important, and positive development for our sector thanks to the compromise reached by the members of the committee that recognises the importance of maintaining a truly technology neutral approach in decarbonising our heating systems. A positive progress that will have to be safeguarded in the upcoming vote in the Plenary.
On the other hand, the launch of the ambitious Green Deal Industrial Plan does hold great potential for new investment to further develop net-zero technologies and could potentially have a very disruptive impact on the heating sector.
Meanwhile, the adoption of the Delegated Acts for renewable liquid and gaseous fuels of non-biological origin (RFNBOs) has raised a heated controversy dealing with the inclusion of nuclear energy as a green energy, potentially leading to unforeseen consequences in the EU path towards net-zero.
All in all, 2023 is shaping to be a very intensive year for our sector, with ongoing and new challenges requiring us to remain vigilant and continue our efforts to make certain that every available solution is considered to make our heating truly sustainable, affordable and fit for a low-carbon and resilient energy system.
Yours,
Dr Ernst-Moritz Bellingen
The Parliament ITRE committee finally reaches a compromise on EPBD
On 9 February, the ITRE Committee finally adopted its position on the revision of the Energy Performance of Buildings Directive (EPBD) after long and difficult negotiations. The draft report was adopted as amended with 49 votes in favour, 18 against and 6 abstentions.
Eurofuel has been closely monitoring the developments, and here are the main takeaways of the ITRE report:
- Minimum energy performance standards (MEPS) are at the heart of the compromise, which will make the improvement of the worst 15 percent of residential buildings mandatory by 2030.
- In addition, all new buildings should have zero emissions from 2028, which means phasing out fossil fuel heating. The rapporteur, Cuffe initially aimed to end all gas boilers by 2026, but deep divisions along country lines forced him to water down the directive with the phase-out target now set for 2035 "unless the commission allows their use until 2040."
- The compromise also sets more ambitious renovation targets than the Commission proposal, but leaves the door open for so-called “hybrid boilers”, which currently run on gas but can be switched to hydrogen and biomethane in the future. This was an important addition for some of the more conservative members of the EPP, which resented strong EU-wide targets.
- Last but not least, to ensure that these ambitious goals are achieved, the Directive obliges Member States to ensure financing will be made available to households. Under article 15, the Parliament directs member states to “facilitate the access to affordable bank loans, dedicated credit lines, or fully publicly financed renovations”.
Overall, the text adopted represent a good compromise for our industry, thanks mainly to the recognition that the energy transition of buildings needs to be open to all the solutions and cannot afford to discriminate. While the phase-out of fossil fuels is not a surprise and in line with the current policies, in fact, the adopted text does open the door to renewable liquid fuels. Article 7 and 8, in particular, allow citizens to choose between different heating systems adapted to their circumstances and needs (weather, type of building, cost, etc.), including hybrid heating systems, boilers certified to run on renewable fuels and other technical building systems not exclusively using fossil fuels that comply with the requirements set out in Article 11(1).
Despite the welcome softening of some of the most radical position in ITRE, however, we must remain vigilant to ensure that this Directive (if adopted as is) is still favourable to liquid heating fuels. To this end, ahead of the Plenary vote in Strasbourg on 13 March, we will continue to engage with MEPs and key stakeholders to make progress on key issues such as the promotion of the Green Fuels Ready Label and hybrid systems.
EU Launches Green Deal Industrial Plan to Respond to the US Inflation Reduction Act
The most important novelty of the year is without a doubt the new EU Green Deal Industrial Plan (GDIP). First announced by Commission President Ursula von Der Leyen of the World Economic Forum in Davos, the plan was officially presented on 1 February, and will serve as the EU’s response to the US Inflation Reduction Act, the $369 billion a Climate Investment Plan adopted by Washington in August 2022 to make the US a key player in that new clean technology manufacturing era.
Much like its US counterpart, the GDIP is intended to offer a supportive environment for the EU's manufacturing capacity of net-zero technologies. To achieve this goal, the Plan is based on four pillars:
- A net-zero industry act, modelled on the chips act to identify goals for European clean tech by 2030, accelerate the permitting process, and go hand-in-hand with the proposed critical raw materials act.
- A temporary adaptation of EU State aid rules, including simple tax break models. To avoid fragmentation of the single market, a European sovereignty fund would be set out as part of the mid-term review of the EU's multiannual budgetary framework (MFF),scheduled for later in 2023.
- Developing skills for the energy transition as priority for the European Year of Skills (little announcements here, as the EU has limited competences in this area).
- Facilitating open and fair trade with an ambitious trade agenda. The EU would seek to conclude agreements with Mexico, Chile, New Zealand and Australia and make progress with India and Indonesia, on top of restarted discussions over the Mercosur agreement. In parallel, it was announced yesterday that the European Commission, EU Member States, and 26 partners countries will launch “The Coalition of Trade Ministers on Climate”, the first Ministerial-level global forum dedicated to trade and climate and sustainable development issues.
The “Net-Zero Industry Act” – due to be published on 14 March – will be of particular importance for the heating sector, as it will provide a simplified regulatory framework for production capacity of products that are key to meet our climate neutrality goals, such as batteries, windmills, heat pumps, solar, electrolysers, carbon capture and storage technologies.
Although the focus of the Act are clearly renewable energy technologies, most importantly for our sector, a footnote of the text of the Communication indicates that the list is not yet definitive, and that “taking technology neutrality as a starting point, the Act would build on an assessment of strategic importance and identified needs of manufacturing investment in different types of net-zero products”. If aligned with the recent developments on the EPBD revision, this approach could allow hybrid systems and renewable liquid fuels to be considered as viable technologies under the new game-changing investment strategies.
To ensure that this is the case, Eurofuel will closely monitor the upcoming legislative proposal to be certain that the needs and wants of our sector are heard.
The Commission recognises nuclear generated hydrogen as green
On 13 February, the European Commission adopted long-awaited technical rules to define what qualifies as renewable hydrogen in the EU, i.e. hydrogen produced using renewable energy sources.
According to the adopted text, renewable hydrogen will have to be produced exclusively with additional renewable power plants, and that hydrogen will have to be produced during the hours that the renewable energy asset is producing electricity (hourly temporal correlation), and only in the area where the renewable electricity asset is located (geographical correlation). While some have complained that the additionality requirements will drive up the costs of new hydrogen projects, the adopted text also introduces an exemption until 2038 for installation commissioned before 2028 producing hydrogen from grid electricity. The Commission indicated that the transition period has been purposefully designed to allow electrolysers to be scaled up and come onto the market. As the EU Commissioner for Energy Kadri Simson noted: “the much-needed legal certainty […] will further boost the EU’s industrial leadership in this green sector”.
The most controversial aspect of the adopted text is without a doubt the French-sponsored recognition of hydrogen generated from nuclear power as renewable. The provision was introduced at the last-minute as a way to allow France, and to a lesser extent Sweden, to qualify for an exemption to the additionality rule whereby hydrogen producers will be able to count electricity taken from the grid - potentially based on nuclear – as “fully renewable” if they are located in an area where the emission intensity of power is lower than 18 grams per megajoule. As French energy minister Agnès Pannier-Runacher explained, this addition to the text de-facto recognises nuclear power in the calculation of renewable energy objectives; much to the opposition of several NGOs and, most importantly, Germany, whose economy minister Robert Habeck unequivocally stated that “Nuclear power is not renewable energy and hydrogen made from nuclear energy is not green hydrogen”.
According to some diplomatic sources, with this win France wants to create a precedent and cement atomic energy as green to support its arguments farther down the line that nuclear is a clean technology, with potential ramifications on the upcoming negotiations on the on the revised rules for renewable energy (REDIII) and, most importantly on the funding allocation from the proposed European Sovereignty Fund, certain state aid allowances or benefits from the upcoming Net-Zero Industrial Act that aims to slash red tape on “net-zero” technologies.