(Bloomberg) -- Europe’s nascent hydrogen industry is ready to battle the European Commission over a new set of rules, with business arguing that the proposals from Brussels will strangle growth of the clean fuel.
Hamburg-based Mabanaft Group — via its subsidiary Oiltanking Deutschland — and the US’s Air Products & Chemicals Inc. have drawn up plans to build a facility for converting ammonia into hydrogen at the German port by 2026. But the project is stalled amid ongoing discussions with the EC, according to people familiar with the issue.
The Commission said the legislative procedure is ongoing, with the final design of the regulatory framework subject to change.
The tussle is important because hydrogen — which is converted into liquid ammonia for easier transportation — is seen as a key tool to decarbonize some of the most energy-intensive sectors. The fight pits the principles of fair competition against the needs of businesses to be able to draw up plans solid enough to attract financing.
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In its proposal for a renewable gas and hydrogen directive, the Commission stipulates that third-party access to terminals should be “ensured,” meaning that investors would have to make available on the market any spare capacities.
Mabanaft argues that in order to access bank financing for its planned ammonia cracker, it needs to strike long-term contracts of about 20 years for all capacities as soon as possible, the people said. The company declined to comment as it is in confidential discussions with German and European institutions.
Germany’s economy ministry, which acknowledged that some investors had raised concerns, said that the goal of the European regulation is to preclude exclusive long-term contracts. The Commission’s proposal does leave open options for member states to help investors: regulators could decide to exempt major new hydrogen infrastructure — including liquid ammonia terminals — under certain conditions.
Other potential market participants also voiced concerns.
“Since investors want to see the high investments in crackers paid off as quickly as possible, they will want to market all capacities from the start for business reasons,” a consortium of EnBW, VNG AG and JERA Co. Inc. told Bloomberg. The companies are finalizing a feasibility study for an ammonia demonstration plant in Rostock in the east of Germany.
Uniper SE — which earlier this month said it will offtake and ship ammonia produced from JERA Americas and ConocoPhillips on the US Gulf Coast — said a careful balance is needed when regulating an emerging market.
“Regulatory requirements that are too strict or vague could actually hinder investment,” the company said.
--With assistance from Samuel Stolton and Rachel Graham.
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