Poland to create regulatory environment for development of hydrogen market

Poland
Available languages: PL

In May 2024, the Polish government published the legislative package known as the ‘Hydrogen Constitution’, a milestone in achieving the goals of Poland’s hydrogen strategy. The draft lays the foundations for the development of the green hydrogen market for achieving climate neutrality and strengthening the competitiveness of the Polish economy.

Background, genesis and scope of the changes

Although Poland is currently one of the leading hydrogen producers in the EU, this production primarily relies on grey hydrogen, which is produced through reforming natural gas or other hydrocarbons in the oil refining process. With the rapid increase in natural gas prices, leading to higher production costs for grey hydrogen, and the ongoing green transformation in Europe, Poland faces the challenge of reorienting its hydrogen production and implementing mechanisms to develop a renewable hydrogen market.

The draft responds to the priorities of the European Green Deal. In 2020, the European Commission presented a hydrogen strategy for a climate-neutral Europe with the aim of intensifying the development of clean hydrogen and ensuring its position as a driving force for the climate neutrality of the energy system by 2050. In response to the European Commission’s plans, in November 2021, the Polish government adopted the Polish Hydrogen Strategy until 2030 with a perspective until 2040. This strategy includes the implementation of hydrogen technologies in the energy and heating sectors and support for the decarbonisation of industry. As part of implementing the goals of the Polish Hydrogen Strategy, the draft introduces mechanisms that allow for the creation of a stable regulatory environment for renewable hydrogen use.

Moreover, the Draft aligns with the revision of EU regulations, including Directive 2009/73/EC of the European Parliament and of the Council of 13 July 2009 concerning common rules for the internal market in natural gas and repealing Directive 2003/55/EC, as well as Regulation (EC) No 715/2009 of the European Parliament and of the Council of 13 July 2009 on conditions for access to the natural gas transmission networks and repealing Regulation (EC) No 1775/2005 (the new gas package). Key elements to be restructured based on the gas package include the introduction of new definitions for renewable and low-emission gases, the creation of an EU hydrogen certification system, and the establishment of a hydrogen system operators. The planned implementation of these changes is expected this year with EU member states required to implement them within two years of their entry into force.

The draft also fulfils one of the milestones of the National Recovery and Resilience Plan by establishing a legal framework for hydrogen and enhancing the development of hydrogen technologies and other decarbonised gases.

Building the hydrogen market in Poland

The current regulations do not govern the principles of conducting business in the hydrogen sector – except when hydrogen is delivered through the gas network. Building the hydrogen market in Poland requires both organisational and structural changes. The draft includes:

  • the appointment of operators for the hydrogen transmission system, the hydrogen distribution system, and the hydrogen storage system;
  • defining the rules for appointing operators by the President of the Energy Regulatory Office and the responsibilities that will be placed on the operators;
  • regulating the principles of combining gas and hydrogen activities; and
  • simplifying the implementation of investments in hydrogen networks.

The draft also introduces a conceptual framework necessary for applying regulatory mechanisms. The authors of the draft have opted not to define hydrogen but have proposed definitions for low-emission hydrogen, renewable hydrogen, and renewable hydrogen of non-biological origin. It has been established that hydrogen will be the fourth category of fuel, alongside solid, liquid, and gaseous fuels. System definitions have been introduced, and the individual operators who will function in the hydrogen market and the connected gas market have been defined. It is worth noting that despite the absence of a definition of hydrogen, the quality parameters of hydrogen will be specified in a dedicated implementing regulation.

Operators and their responsibilities

In the initial phase of hydrogen market development, significant importance will lie in leveraging the organisational and financial potential of the existing operator of the gas transmission system, who will be able to undertake some of the obligations that will be imposed on the hydrogen transmission system operator in the future. The authors of the draft rightly assume that accelerating the development of the hydrogen market in Poland requires utilising existing gas assets.

Hydrogen system operators, including the hydrogen transmission system operator, the hydrogen distribution system operator, and the hydrogen storage system operator, will be appointed by the President of the Energy Regulatory Office for a specified period of time, not exceeding 50 years. The draft outlines the formal requirements for operators (including their legal form) and the criteria examined by the President of the Energy Regulatory Office during the procedure.

Similar to electricity and gas regulations, principles of unbundling and independence will also apply to hydrogen system operators. In practice, this means that hydrogen operators will not be allowed to engage in hydrogen production or trading activities.

The proposed regulations define the duties of individual operators, including those related to network operation and ensuring the safety of hydrogen supply and network reliability. Hydrogen operators will be required to prepare operational and maintenance instructions for the hydrogen network (transmission and distribution) or operational and maintenance instructions for hydrogen storage facilities, as well as prepare development plans.

Detailed conditions for the operation of the hydrogen system will be specified in a regulation by the minister responsible for energy matters.

Access rules for the hydrogen network

The draft regulates connection to the hydrogen network on the basis of equal treatment, provided that there are technical and economic conditions for connection to the network and the entity applying for connection meets these conditions (i.e. third-party access).

Collaboration with energy companies operating in the hydrogen sector will be based on distinct types of agreements, including connection agreements, hydrogen sales agreements, transmission or distribution service agreements, or comprehensive agreements, which, in addition to hydrogen supply, may also include provisions for hydrogen storage services. The draft contains provisions regulating the scope of each type of agreement.

Operators will charge fees for connection to the hydrogen network based on the actual costs incurred for connection implementation.

Disputes regarding refusal of connection to the hydrogen network or conclusion of the appropriate agreement will be resolved by the President of the Energy Regulatory Office.

Business regulation - licences and register

The authors of the draft have decided against imposing the obligation for entrepreneurs to obtain a licence for carrying out hydrogen production activities. Currently, such activities are exempt from the licence requirement, and imposing such a requirement would entail significant administrative burden and be unjustified at the current stage of hydrogen market development. The licence requirement also does not extend to the production of electricity from low-emission hydrogen. Additionally, no licence will be required for activities related to hydrogen transmission and distribution – in this case, it is deemed that regulations regarding the appointment of operators will ensure an adequate level of regulatory control to safeguard the interests of the state.

A licence, however, will be required for certain types of activities related to hydrogen storage and trading. As a general rule, hydrogen storage will necessitate obtaining a licence, except for local storage in small hydrogen storage facilities (i.e. storage at the point of production or at a location designated for sale for transportation purposes in a facility with a capacity equal to or less than 55,000 Nm3). Hydrogen trading will also be subject to the licence requirement, except in cases where the annual trading value does not exceed the equivalent of EUR 1 million.

Engaging in activities without the required licence will constitute a criminal offense, punishable by a fine or imprisonment.

For licence-related activities connected with hydrogen storage, there will be the possibility to apply for the issuance of a licence promise or a licence-change promise.

According to the draft, hydrogen system operators are obligated to establish and maintain a register of hydrogen storage facilities connected to the hydrogen system. The obligation to register will apply to installations that are not small hydrogen storage facilities. The new regulations specify the rules for registration and authorise the minister responsible for energy affairs to determine the register template and data format to be included. The regulations regarding the register of hydrogen storage facilities are based on existing provisions related to the register of electricity storage facilities.

Facilitating the investment process

The construction or reconstruction of hydrogen networks with an operating pressure not exceeding 0.5 MPa and the construction of hydrogen connections and hydrogen purification devices with a capacity not exceeding 250 kg of hydrogen per day will not require a construction permit, but only a notification of construction or execution of other construction works. Similarly, neither a construction permit nor a notification will be required for container facilities with installations and connections, as well as associated hydrogen networks, located in closed areas designated by the decision of the Minister of National Defence.

The construction and maintenance of installations and equipment for hydrogen transport or storage, as well as other facilities and equipment necessary for the use of such installations and equipment, have been recognised as a public purpose. This regulation will make it easier for players in the hydrogen sector to acquire the necessary administrative permits and reduce the possibility of revocation of these permits in disputes before administrative authorities or administrative courts.

Transporting hazardous substances through hydrogen pipelines will not lead to the classification of a facility as a high-risk or increased-risk facility, except in cases where transport occurs in a facility that has already been classified high or increased risk. This regulation ensures that the facility operator will not be subject to reinforced control obligations and extensive administrative duties.

Support mechanisms for research and development activities

According to the draft, support for strategic scientific research and development activities will be expanded to include hydrogen technologies. One of the key elements of the draft is financing through targeted grants of projects carried out within strategic research and development programmes and other tasks by the National Centre for Research and Development.

Organisational and financial support will be provided for industrial feasibility studies of hydrogen valleys.

Measurement of production and monitoring of renewable hydrogen transport

The draft introduces obligations for measuring the quantity of renewable hydrogen transported by means other than gas or hydrogen transport networks, as well as the registration of this quantity and its conversion into energy expressed in MWh.

To ensure the safety of trading, the minister overseeing climate affairs will produce an executive regulation defining the detailed legal framework for hydrogen measurement. This regulation will establish precise requirements for measurements and registration of the quantity of transported hydrogen, as well as the location of measurements and methods for converting the quantity of transported hydrogen into energy expressed in MWh.

Summary

The new regulations expand upon the hydrogen law draft published by the Polish government in 2022. The draft appears as a more mature version of the 2022 regulations, aligning with the recently adopted EU gas package.

The current draft, however, does not specify any support mechanisms for the production of green hydrogen. The Ministry of Climate and Environment is working on new solutions to support investments in green hydrogen, which will be based on a contract-for-difference mechanism. The draft is expected to provide a foundation for the further development of renewable hydrogen regulations, as green hydrogen will be a crucial component of the energy transition across the EU.

For more information on Poland’s hydrogen industry and regulations, contact your CMS partner or these CMS experts.