By adopting the Act, the Belgian legislator chose not to wait for the final adoption of the European decarbonised gas package, which aims to establish the principles for a common regulatory framework for the organisation of a (European) hydrogen market (Proposal for a Directive of the European Parliament and of the Council on common rules for the internal markets in renewable and natural gases and in hydrogen, COM/2021/803 final and Proposal for a Regulation of the European Parliament and of the Council on the internal markets for renewable and natural gases and for hydrogen (recast), COM/2021/804 final).
The Belgian legislator believed that further delaying the introduction of regulations for the transport of hydrogen via pipelines would be detrimental to the future of the Belgian hydrogen market, which the legislator believes to be one of the most developed hydrogen markets in the world. In order to limit the need for changes once the European decarbonised gas package is adopted, the Hydrogen Act is aligned to the current state of play of the package.
The Hydrogen Act lays down the ground rules for (i) the designation of a hydrogen transport network operator, (ii) the operation of new and existing hydrogen transport networks, and (iii) the duties and powers of CREG as the independent regulator for the transport of hydrogen. These are further discussed below.
1. Scope of the Hydrogen Act
The Hydrogen Act applies only to “hydrogen transport installations”. These are defined as “all hydrogen transport pipelines, including existing hydrogen networks, buildings, machinery and accessory facilities”.
Hydrogen transport is to be distinguished from hydrogen distribution. Hydrogen transport relates to transport (excluding the supply) of hydrogen: (i) from and to other countries and the connection of import infrastructure; (ii) from and to hydrogen distribution networks; (iii) to large end consumers; (iv) to large hydrogen production units; and (v) from and to large hydrogen storage facilities.
Hydrogen distribution on the other hand, relates to the activity consisting of connecting end consumers located in the territory of one or more municipalities via local pipeline networks with a view to providing them with hydrogen (including the connection and supply of small production and storage units, but excluding supply). Hydrogen distribution does not fall within the scope of the Hydrogen Act.
In addition, the Hydrogen Act clarifies that the applicability of the Belgian Gas Act is excluded, except where an explicit reference is made thereto.
2. Designation of a hydrogen transport network operator
The Hydrogen Act introduces a procedure for the designation and certification of a hydrogen transport network operator (the "HNO"). Companies have until 30 November 2023 to apply for a certification as HNO. Applications will be assessed by Directorate-General Energy (part of the Federal Public Service Economy, SME, Middle Class and Energy) (“DG Energy”) and the energy regulator CREG in light of the evaluation and certification criteria set out in the Hydrogen Act. The HNO will thereafter be designated by the federal Minister of Energy (the “Minister”) by way of Ministerial Decree (the “HNO Designation Ministerial Decree”). According to the explanatory memorandum, the goal is to designate and certify the HNO by March/April 2024.
In order to be certified as HNO, the candidate must demonstrate that it complies with certain criteria.
- A number of certification criteria.
These relate to:
- the candidate having to be the owner of the hydrogen transport network (with the exception of existing networks); and
- certain unbundling requirements, including:
- vertical unbundling requirements: in order to ensure its independence from network users and prevent discrimination, the candidate must be unbundled from any entity active in the production or supply of hydrogen, natural gas, biogas, biomethane, other forms of synthetic methane or electricity (i.e. the same person(s) cannot have the right to exercise direct or indirect control over such entities and the HNO; to appoint members of the supervisory board, board of directors or other company bodies of the HNO whilst exercising direct or indirect control over any such entities; or have a member of the supervisory board, board of directors or other company bodies in both entities);
- horizontal unbundling requirements: the candidate may own and operate hydrogen storage facilities and terminals, as well as infrastructure for the transport and storage of natural gas, biogas, biomethane, other forms of synthetic methane and electricity, insofar as these activities are operated in separate legal entities alongside hydrogen transportation activities and on the condition that the HNO entity is never involved in the sale of energy other than for its own needs; this in order to avoid cross-subsidisation.
- A number of evaluation criteria.
- the quality of the business plan;
- the candidate’s experience with the construction or management of infrastructure for the transport of gasses;
- the territorial coverage, location, and characteristics of the transport pipelines (a) owned by the applicant, (b) over which it has a long-term right of use, or (c) which can reasonably likely be acquired in the short term, and which can be used to transport hydrogen;
- the manner in which the candidate wishes to contribute to the balance and flexibility of the energy system as a whole; and
- the candidate’s contribution to the Belgian and European energy and climate policy.
As of entry into force of the HNO Designation Ministerial Decree, the management and operation of hydrogen transport pipelines will be reserved exclusively for that HNO, who will act either as owner and operator of the relevant infrastructure or as independent operator upon appointment by the Minister at the request of the owner of existing infrastructure.
The initial draft legislation contained a transition period until 31 December 2030, based on the European decarbonised gas package, during which other parties than the HNO would have been allowed to operate existing hydrogen networks. Following that transition period, the HNO would become the sole operator of hydrogen transport networks in Belgium. Upon further consideration and given that there currently is no unanimity on the duration of the transition period at the European level, the Belgian legislator decided to remove the end date of the transition period. According to the explanatory memorandum, the aim is to further specify the duration of the transition period through a legislative change at a later date, to the extent that the transposition of the European decarbonised gas package into national legislation would require such a change.
The HNO will be appointed for a renewable period of 20 years.
3. The HNO’s obligations and activities
The HNO will be tasked with certain responsibilities, including inter alia:
- managing, developing and operating the hydrogen transport network in a safe, reliable, efficient and economically responsible manner;
- preparing, every two years, a network development plan; and
- providing non-discriminatory access to the hydrogen transport network on the basis of the conditions set out in the Code of Conduct with respect to the access to the hydrogen transport network.
The connection to, the use of and access to the hydrogen transport network are subject to regulated tariffs. In that respect, CREG must establish a tariff methodology to be published on its website. The HNO must thereafter propose tariffs in accordance with that tariff methodology, which must be approved by CREG before these can become effective.
4. New and existing hydrogen transport installations: management & licensing
As mentioned above, as of entry into force of the HNO Designation Ministerial Decree, the management and operation of hydrogen transport pipelines will be reserved exclusively for that HNO, who will act either as owner and operator of the relevant infrastructure or as independent operator upon appointment by the Minister at the request of an owner of existing infrastructure.
As of that date, the construction and operation of each hydrogen transport installation requires the prior granting of a hydrogen transport licence in accordance with the provisions of the Hydrogen Act. Only the HNO will be eligible to be granted a hydrogen transport licence. The Hydrogen Act foresees an exception for the expansion of existing hydrogen transport networks. That exception may, however, only be granted if the HNO was requested to investigate the construction and operation of such a network (or a similar network) and if the exception is in accordance with the public interest.
Before the entry into force of the HNO Designation Ministerial Decree, the construction and operation of hydrogen transport installations is the subject of a transport license which is to be applied for in accordance with the standard licensing procedure of Articles 3 – 7 of the Gas Act. Those provisions of the Gas Act also remain applicable to existing hydrogen transport networks which are managed by an entity other than the HNO, even after entry into force of the HNO Designation Ministerial Decree.
The management of such existing transport networks is, regardless of what is included in their respective transport licences, also the subject of a specific regime included in the Hydrogen Act. Pursuant to that regime, the management of existing hydrogen networks (including approved expansions thereof) by entities other than the HNO is allowed. Owners of an existing hydrogen transport network can (but are not obliged to) request the Minister to appoint the HNO as the independent operator of their hydrogen transport network in accordance with the procedure set out in the Hydrogen Act.
If that is the case, the HNO, as the independent operator of the existing network, will be responsible for granting and managing third-party access to the network in accordance with CREG’s Code of Conduct and for ensuring that the hydrogen transport network is capable of meeting reasonable demand in the longer term. The existing network’s owner will also have certain responsibilities, such as liability regarding the network assets. The network owner is in return entitled to a fair compensation for the use of the installation.
5. Legal monopoly of the HNO?
As explained above, as from entry into force of the Hydrogen Act, a specific network operator will be designated to manage and operate the hydrogen transport network in Belgium. However, for existing hydrogen transport networks, other parties than the HNO will still be allowed to operate hydrogen networks. The Belgian legislator intends to include at a later stage a transition period in accordance with the European decarbonised gas package, after which the operators and owners of hydrogen networks will be obliged to transfer the operation of those networks to the HNO.
The initial draft legislation included an exception to that legal (quasi-)monopoly of the HNO: Entities other than the HNO would have been allowed to operate “geographically limited hydrogen networks” (even after 31 December 2030) provided that those entities were licensed to do so by the Minister. A “geographically limited hydrogen network” related to pipelines (or a set of pipelines) connecting one injection point to a limited number of offtake points within geographically limited commercial or industrial areas.
However, that exception was criticised by the Council of State, for the following reason. Such geographically limited hydrogen networks do not merely have a transport function, as they are explicitly intended to facilitate end customers. According to the Constitutional Court, any regulations on (gas) distribution activity fall under the exclusive competence of the Regions. The Constitutional Court did, however, rule that the transport of gas does not exclude delivery to certain end customers and that that activity does not necessarily turn the transport network into a distribution network. With respect to the proposed provisions on “geographically limited hydrogen networks”, the Council of State argued that these networks, although they may have a transport function, mainly perform distribution functions, and that as a result, they do not fall under Belgian federal jurisdiction. The regime applicable to “geographically limited networks” was therefore removed during the legislative process and is not included in the Hydrogen Act as adopted.
It is to be noted in that respect that the Flemish Government introduced, on 7 July 2023, a draft amending Regional Act to introduce a regulatory framework for the distribution of hydrogen through pipelines on the territory of the Flemish Region. The draft Regional Act inter alia sets out the procedure and conditions for designating a single regulated hydrogen distribution network operator in the Flemish Region. The opinion of various committees and the Flemish regional energy regulator VREG is now being sought on the draft text. This Regional Act will be adopted only after final adoption of the European decarbonised gas package (expected early 2024).