FGSZ Földgázszállító Zrt.
FGSZ
FGSZ Ltd is the owner and operator of the Hungarian high-pressure natural gas pipeline system servicing gas distribution companies, power plants and large industrial consumers.
ID: 085354646082-32
Lobbying Activity
Response to Revision of EU rules on Gas
12 Apr 2022
FGSZ Ltd. is committed to take part in building the future hydrogen grid, but due to the peculiar situation of the nascent hydrogen market – neither demand, supply, nor mature technology and extensive infrastructure exist yet – we believe that certain provisions in the Hydrogen and Gas Market Decarbonisation Package proposal are holding back the quick transition to a decarbonised gas market. The regrettable context of the Russia-Ukraine war, the European Union’s reaction to the Russian invasion – the REPowerEU statement – and its intention to swiftly decouple the continent from the import of Russian gas and to kick-start the hydrogen market highlight the parallel needs for exploring all avenues for decarbonisation and ‘thinking outside the box’.
First and foremost, creating the desired hydrogen grid is only realistic if each Member State is allowed to choose its own system development path, in accordance with its country-specific characteristics. Allowing TSOs such freedom to pursue their own development goals rests on a permissive regulatory framework. In this regard, we deem the draft package rather restrictive, as the unreasonable discrimination against ITO TSOs may hinder network development in several EU countries with TSOs operating under ITO unbundling model, such as in Hungary, and risks creating ‘blank spots’ on the pan-European hydrogen grid. The ITO model has been proven to function well – as corroborated by the Commission and EU regulators – and delivered non-discriminatory market access since its inception. We are convinced that applying the current EU vertical unbundling provisions to hydrogen networks without an end-date to their application will help kick-start the competitive hydrogen market.
Second, by building on decades of experience, gas TSOs could significantly contribute to the quicker uptake of hydrogen technologies. TSOs should be allowed to invest in decarbonization projects under a so-called ‘tolling model’ – strictly in line with EU principles of competitiveness, transparency, as well as fair and non-discriminatory access. For example, under such a model, TSOs might be entitled to produce hydrogen with electrolysers, but not with the goal to inject it into the system and trade it on the market. Rather, they could offer a service to potential hydrogen consumers by leasing electrolyser services. This type of investment may also support smaller market participants to enter the embryonic hydrogen market – with a possible clause to only allow TSOs to operate such assets until the hydrogen market reaches sufficient maturity.
Third, we believe that the proposed 100% cross-border interconnection tariff discount system and the proposed ITC mechanisms create unworkable complexities for the market of renewable and low-carbon gases. Despite earlier attempts, such ITCs have never been put in place on the gas market and this requirement would mean lengthy, inconclusive debate between TSOs and NRAs. Furthermore, such a tariff discount system will erode investor certainty and become a hindrance to investments in cross-border interconnectors. We believe that tariffs for renewable and low-carbon gases should follow current market arrangements, while also allowing for more flexibility for financial transfer between regulated services.
The direction of the European Commission’ gas regulatory policy is a welcome change of pace, but the European Union’s ever-more ambitious hydrogen goals necessitate a more stream-lined and ‘fit for purpose’ regulation. The early phase of hydrogen market development requires a different regulatory approach than the more mature natural gas market, while following the same tenets – and at a time of unprecedented economic and political upheaval, all solutions should be kept on the table. We believe that FGSZ’s above three proposals fully serve these goals.
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