Hydrogen projects - financing and permits

There is a lot of buzz in Finland at the moment about hydrogen entering the energy sector and, according to the latest estimates, hydrogen will bring at least EUR 10 billion of investment to Finland. 

Hydrogen will play an important role in the fight against climate change. The advantages of hydrogen as a fuel are simply that it is emission-free, as the combustion of pure hydrogen does not release carbon dioxide.

Hydrogen is a versatile substance. It can be used to make fuel for transport, raw materials for industry and even food. Hydrogen is also an excellent way of storing excess electricity for when there is no wind. For climate objectives, it is essential that hydrogen is produced from renewable energy, wind, solar or even hydroelectric power. The crucial role of hydrogen is therefore played by its dependence in particular on wind power, and its considerable benefits as a form of energy storage for wind power. 

Green hydrogen, i.e. hydrogen produced from renewable energy, has a special role to play in meeting the climate targets of the RED II Renewable Energy Directive, which came into force in 2018. RED II sets a binding EU target that energy from renewable sources must account for at least 32% of the Union's total energy consumption in 2030, and at least 14% of the energy used by transport must be renewable by 2030. In addition to RED II, Member States have set their own national commitments to achieve the Union's overall target, which are implemented through national legislation (in Finland, for example, Distribution Obligations Act relating to transport fuels). 

In February 2023, the EU Commission adopted new rules defining the conditions under which for instance hydrogen and hydrogen-based fuels can be considered renewable. The adopted delegated act complements the Renewable Energy Directive ("RED II") by introducing a mechanism to lay down detailed rules for the production of certain renewable liquid and gaseous fuels ("RFNBOs"). The delegated act is subject to approval by the Parliament and the Council. If they do not object within a deadline, the delegated act will enter into force. The harmonised assessment of hydrogen projects will thus take a step forward, as the adopted delegated act will be binding in its entirety and will be directly applicable in all EU member states. 

Public support and funding mechanisms in support of hydrogen projects

Meeting the sustainability criteria for the production of renewable or green hydrogen allows the use of various public support and financing mechanisms. 

Hydrogen production, storage and related equipment manufacturing are listed in the EU taxonomy as activities directly contributing to climate change mitigation. Hydrogen production is a taxonomy-eligible activity, and the technical regulatory criteria for the climate objectives of the taxonomy regulation contain the framework conditions that hydrogen production must achieve in order to be environmentally sustainable in the context of EU sustainability regulation. 

Many projects supporting the green transition have also applied or are in the process of applying for EU Recovery and Resilience Facility (RRF) funding linked to Finland's sustainable growth program. The funding is conditional on compliance with the Do No Significant Harm (DNSH) principle. Assessing the project according to the DNSH principle ensures that it will not have a significant adverse effect on the following environmental objectives: climate change mitigation, climate change adaptation, sustainable use and protection of water and marine resources, transition to a circular economy, prevention and reduction of pollution, and protection and restoration of biodiversity and ecosystems. 

Environmental permits for the production and utilisation of hydrogen

The production of hydrogen on an industrial scale as an inorganic chemical requires an environmental permit as installation covered by the industrial emissions directive (IED). The utilisation of hydrogen, on the other hand, may be subject to environmental permit based on the utilisation activity, typically energy production. 

The law, which came into force at the beginning of the year, gives certain hydrogen production and utilisation projects procedural priority in permit procedures and administrative courts. The hydrogen projects that qualify for priority are in practice low-carbon hydrogen production, typically based on electrolytic process, i.e. electrolysis. The hydrogen produced may be used in various industrial processes to replace hydrogen produced from fossil fuels or to make new products. Such activities are covered by the scope of the procedural priority. A conversion of an operation into one that uses hydrogen also qualifies for procedural priority.  

Our experienced energy and environmental lawyers will assist you with all the specific issues related to the hydrogen economy, project development and permitting. 

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