In effect, the Commission's legislative Package is intended to promote the use of blue hydrogen until at least 2030 provided that it achieves the same decarbonization as green hydrogen (i.e., 70% GHG reduction).  However, the European Parliament and Council may amend both the proposed definition and conditions of blue hydrogen and the proposed regulative incentives during their consideration of the Package and its adoption through the legislative procedure that will now follow.  Moreover, the European Commission will be empowered to develop much of the methodologies implementing the definitions of blue and green hydrogen.  Companies intending to engage in blue and green hydrogen operations in the EU/EEA would be well advised to closely follow these developments.

I.  The Legislative Package on Hydrogen and Decarbonized Markets

The Package is yet another piece of the "Fit for 55" agenda to achieve the EU's climate neutrality by 2050 and includes three legislative proposals: (i) a proposal for a recast of the EU Regulation on the Internal Markets for Renewable and Natural Gases and for Hydrogen ("Proposed Gas and Hydrogen Regulation")!(二) 关于欧盟可再生能源和天然气及氢内部市场共同规则的建议(“

Both green and blue hydrogen would benefit from this proposed beneficial regulatory framework provided they comply with the proposed definitions and requirements.  However, they would continue to be impacted differently under other parts of the EU's climate and energy rules, such as the Renewable Energies Directive ("RED II") and the proposal for a Regulation on a Carbon Border Adjustment Mechanism ("Proposed CBAM Regulation") and the Regulation on the Establishment of a Framework to Facilitate Sustainable Investment ("Taxonomy Regulation").

II.  Renewable and Low-Carbon Hydrogen

The EU's current energy regulatory framework fails to define renewable (aka "green") and low-carbon (aka "blue") hydrogen.  This legal uncertainty has hampered the role-out of green and blue hydrogen markets and infrastructure in the EU.  To correct this, the Package introduces new legal definitions of renewable and low-carbon hydrogen that the Commission will be empowered to detail by adopting specific calculation methodologies and threshold determinations in delegated acts.

The Proposed Gas and Hydrogen Directive includes definitions of renewable and low-carbon hydrogen that are in line with those of the proposal to amend the Renewable Energies Directive II ("Proposed Directive to Amend RED II").

• Renewable hydrogen is defined by reference to the definition of the Proposed Directive to Amend RED II, e., as hydrogen that (i) derives its energy content from renewable sources other than biomass!实现与化石燃料相比70%的温室气体排放减少量。
Low-clent 定义为含非可再生能源产生并满足70%与化石氢比较的温室气体排减阈值。

表示欧盟关于可再生(“绿化”)和低碳最大温室气体排放密度的规则大致相似,因为天然气和氢指令为两者都设置相同的去碳化效果标准(i.e. ,70%降温)。可再生和低碳氢减排阈值很可能使用“对开式”法计算,即计取勘探到生产过程的CO2排放,包括直到生产过程的运输,然而,委员会尚未确定绿色和蓝氢精确计算和测定方法(见下文)。

Thus建议可再生和低碳氢的主要差值将是氢生产过程,特别是用于制造氢的能源源(iem>e.g./em>电解器中)。In effect, the aim of this approach is to allow low-carbon hydrogen to play a role in decarbonization and facilitate the energy transition until 2030.  The amended RED II would continue to promote green hydrogen, and various EU legislation, such as the Proposed CBAM Regulation, would likely impact blue and green hydrogen differently.  However, both blue and green hydrogen meeting the proposed definitions would benefit from the Package's proposed dedicated hydrogen infrastructure and market outlined below at least until 2030.

The expectation is that by 2030 the EU will introduce a stricter GHG reduction threshold for the definition of low-carbon ("blue") hydrogen.  This threshold could be similar to that set under the draft technical screening criteria for gas investments under the Taxonomy Regulation, but that remains to be seen.

III.低卡通氢元

可再生和低碳认证: 可更新氢 需根据拟议指令认证,该指令要求委员会通过授权立法确定认证方法。

Hence, if an operator provides compliance with a recognized scheme, this will serve to satisfy the certification requirement for low-carbon hydrogen.

Next Steps

The European Parliament and Council must now consider the proposed Regulation and Directive for their adoption through the so-called "ordinary" legislative procedure.  This procedure allows the Parliament and Council to modify the proposals, for example to include further incentives and more flexible rules for low-carbon hydrogen.  The procedure is likely to be expedited so that the legislation is adopted within the next 18 months.

In the meantime, the Commission is also expected to start its preparatory work on the specific methodologies needed for the certification of renewable and low-carbon hydrogen.委员会将不得不作出技术决策,这些决策往往可能产生重大商业后果。受影响的公司或愿尽早与委员会接触进程。

The new rule requires FERC-jurisdictional Regional Transmission Organizations ("RTOs") and Independent System Operators ("ISOs") to revise their tariffs to include provisions specifically aimed at allowing DER aggregators to participate in the organized wholesale markets.  The rule also bars state retail regulators from prohibiting such participation, with one exception discussed herein.

FERC Chairman Chatterjee characterized the new rule as "a landmark, foundational rule that paves the way for the grid of tomorrow."  Commissioner Danly, however, dissented from the rule, saying FERC is exceeding its authority in barring state retail regulators from preventing aggregator participation in wholesale markets.

FERC's rule should be of interest to a wide range of electricity market participants, including utilities, generation companies, investors in storage and other electricity resources and electricity customers.

Background

FERC first proposed to allow DER aggregators to participate in organized electricity markets as part of its proceeding to remove barriers to the participation of electric storage resources.  The 2016 proposal recognized that individual DERs may be too small to participate directly in the organized wholesale electric markets on a stand-alone basis.  For example, they may not meet market rules regarding the minimum size requirements to participate or have difficulty satisfying all of the operational performance requirements.

The proposed rule on storage participation would have required each RTO/ISO to allow DER aggregations, including electric storage resources, to participate directly in the wholesale electric markets under rules that best accommodate the physical and operational characteristics of the aggregation.  When FERC issued its final rule on storage participation in 2018,[1] however, it found that it needed additional information before deciding what action to take regarding DER aggregation reforms.  Since then, FERC has held a technical conference on the issue and accepted proposals from two RTOs for DER aggregation participation.

The new DER aggregation rule

FERC's final rule, Order No.2222 发现,当前的RTO/ISO市场规则存在阻塞,使某些DER无法参加技术上有能力自己或通过聚合参与的市场。因此FERC修改其规则,要求每个RTO/ISO修改其关税以确保其市场规则适应DER聚合的参与。

The new rule allows a single DER to participate in both retail and wholesale programs and be compensated in each for providing distinctly different services.  This raises a concern with establishing a method to identify duplicate services.  To address this, FERC grants RTOs/ISOs flexibility with respect to implementing restrictions to minimize market impacts caused by the double counting of services provided by distributed energy resources in the RTO/ISO markets.

Federal-state jurisdiction

The Federal Power Act gives FERC authority over interstate wholesale sales and transmission of electricity, while the states have authority over generation and distribution facilities as well as retail sales.  The participation in FERC wholesale markets of resources on the distribution system or behind a retail customer's meter raises sensitive jurisdictional issues.Some parties questioned FERC's authority to impose the proposed reforms or sought clarification of federal and state jurisdictional boundaries.

Citing prior court opinions, FERC rejects the jurisdictional challenges, finding its "authority to issue regulations pertaining to distributed energy resource aggregations stems from both the Commission's jurisdiction over the wholesale sales by distributed energy resource aggregators into RTO/ISO markets and from its jurisdiction over practices affecting wholesale rates."[2]  Accordingly, FERC found that:

• Sales of electric energy by DER aggregators into an RTO/ISO market are wholesale sales subject to FERC's jurisdiction.
• RTO/ISO market rules governing sales in their markets by DER aggregators from demand resources (e.g., demand response and energy efficiency) are practices affecting wholesale rates.

FERC also clarified that:

• To the extent a DER aggregator makes sales of electric energy into RTO/ISO markets, it will be considered a public utility subject to FERC's jurisdiction
• An individual resource's participation in a DER aggregation would not cause that resource to become subject to requirements applicable to Commission-jurisdictional public utilities.

FERC declined requests to allow retail regulatory authorities or distribution utilities to either authorize or prohibit the participation of DERs and/or DER aggregators in RTO/ISO markets (i.e., to "opt in" or "opt out," respectively).FERC noted "establishing the criteria for participation in RTO/ISO markets, including with respect to resources located on the distribution system or behind the meter, is essential to the Commission's ability to fulfill its statutory responsibility to ensure that wholesale rates are just and reasonable."

Thus, a retail regulatory authority cannot broadly prohibit the participation in RTO/ISO markets of all DERs or of all DER aggregators as that would interfere with FERC's statutory obligation to ensure that wholesale electricity markets produce just and reasonable rates.[3]  Retail regulatory authorities may, however, prohibit DER aggregators from bidding the demand response of retail customers into the wholesale  markets.  In addition, noting the potentially greater burden on small utility systems, FERC will allow an opt-in mechanism for small utilities, i.e., those that distribute less than 4 million mWh per year.

Commissioner Danly's dissent

Commissioner James Danly dissented from the final rule on two grounds.  First, the Commission overstepped the extent of its jurisdiction by prohibiting retail regulators from broadly prohibiting  the participation in RTO/ISO markets of all DERs, or of all DER aggregators.  Commissioner Danly argued that, under the Federal Power Act, the states retain authority over the local concerns of choice of generation, siting of transmission lines, and the entirety of retail sales and distribution.  FERC's jurisdiction comes into play where a specific state prohibition collides with FERC's wholesale rate jurisdiction, where FERC is  "armed with principles of federal preemption and the Supremacy Clause."

Second, Commissioner Danly argued that the Commission should not encourage resource development by fiat: "If the promises of DERs are what they purport to be, the markets will encourage their development….Commission directives are unnecessary to encourage the development of economically-viable resources."

FERC's DER aggregation rule will become effective 60 days after the date of publication in the Federal Register, and each RTO/ISO must file the tariff changes needed to implement the requirements of the rule within 270 days after such publication.

[1] Electric Storage Participation in Markets Operated by Regional Transmission Organizations & Independent System Operators, Order No.841,83FR9580,162FERC SSH61127,at P78 (2018), 命令 onreh'g ,命令No841-A、84FR23902、167FERCNat'l Assn监管工具逗号vFERC 964F.3d1177Cir市/p> 964F.3dat1186Ct.at 773.

FERC's order approving the tariff should be of interest to a wide range of electricity market participants, including utilities, generation companies, customers and investors in storage and other electricity resources as it may set precedent for RTOs with respect to the terms and conditions under which storage resources may qualify as transmission resources.

Background

While storage resources generally operate as supply-side resources that earn revenue through energy market participation, their ability to both inject and withdraw energy from the grid allows them to be operated in a way that may substitute for potentially more costly transmission facilities.Midcontient独立系统操作符建议关税规定允许存储设施在选择解决MISO区域传输计划确定的问题时作为只传输资产处理。MISO称新类型资源为“存储设施只传输资产”。SATOA必须受MISO功能控制,并只能在允许SATOA提供区域计划所选择服务的必要范围内参与MISO市场万博体育app手机登录As discussed in an earlier post to this blog, MISO's proposal raised issues that FERC set for discussion in a technical conference that was held May 4, 2020.

Prior to the MISO tariff order, FERC viewed favorably only one proposal to classify electric storage resources as transmission for cost-based recovery purposes.  In 2010, FERC addressed a proposal from Western Grid Development LLC to install on the California ISO system batteries that, according to Western Grid, would facilitate reliability.[1]  FERC also issued a policy statement in 2017 that provided guidance regarding the ability of electric storage resources to receive cost-based rate recovery for certain services, such as transmission or grid support services, while also receiving market-based revenues for providing separate market-based rate services.

MISO's tariff

MISO's tariff provisions will allow a storage facility to be approved as the preferred solution to issues identified in a regional transmission plan and, as such, be treated as a transmission-only asset.  The tariff includes: (1) an evaluation process for a storage resource to be included in a regional plan!(2)成本和性能因素在评价中加以考虑选择存储资源为首选解决方案的标准开发运行指南服务传输函数的每一种存储资源。

To ensure the storage resources do not collect more than their costs from their market activities directed by MISO, any revenues collected from market activities will be credited through transmission rates.

The FERC order

FERC finds that MISO's proposal to make storage resources eligible for cost recovery as a transmission facility is just and reasonable because the resources' operation would be limited to serving a transmission function, and thus it is appropriate to recover costs in the same manner as  transmission facilities in the same transmission plan project category.

The order finds that the tariff is consistent with precedent "recognizing the viability of classifying electric storage facilities as transmission assets for cost-recovery purposes."  FERC recognizes, however, that it is breaking new ground.  The order notes that, while MISO's proposal is broader than Western Grid's facility-specific proposal, the Western Grid order and the 2017 policy statement stated "that Western Grid does not necessarily present the only scenario in which the Commission might conclude that storage costs can be included in transmission rates."

In the tariff order, FERC addresses a large number of narrow technical and implementation issues.  On broader issues, FERC found that the proposal preserves MISO's independence, even though MISO must assert functional control over the storage resource in order to address a transmission need.  This is because a SATOA's owner is responsible for managing the facility's state of charge to ensure readiness to address that need.  FERC also found that a SATOA's operations are unlikely to have significant real-time energy market impacts and thus only a limited impact on market prices.  SATOA's are not eligible to participate in MISO's capacity, ancillary services, or day-ahead energy markets.

FERC rejected arguments that MISO has not justified its proposal to treat SATOAs as transmission assets because all storage facilities (and similar supply-side resources) can provide the same benefits acting as a market resource.  The order says storage resource will not be included in transmission plans unless MISO has functional control of the asset.  MISO would not have such functional control over a market resource.

FERC also rejected the notion that MISO's proposal could include any generation asset in the definition of transmission.  The order notes that a storage asset must meet a multitude of requirements and pass muster in various comparative analyses against other potential solutions to show that is uniquely situated to act as the preferred solution to a specific transmission issue and thus qualify as a SATOA.

Commissioner Danly's dissent

Commissioner James Danly, the most recent appointee to the Commission by President Trump, dissented from the MISO order as "impermissibly blurring the line between generation and transmission."  The Federal Power Act recognizes that generation and transmission are two distinguishable categories of functions and reflects the real differences between them.  The commissioner finds that MISO's filing eliminates the distinction based on function and instead defines transmission facilities based on the service provided.

According to the dissent, "the output of generation is amenable to being sold in a competitive market construct in a way that building long-term, capital-intensive transmission infrastructure is not."  By assigning transmission status to facilities performing a generation function, MISO grants those facilities guaranteed recovery of cost and profit.  The commissioner is concerned that expanding the definition of transmission to include facilities that inject energy into the grid will invite more requests for such treatment and FERC will find it challenging to reject them due to discrimination claims.

Commissioner Danly would "reject MISO's filing and explicitly find that our holding in Western Grid was in error."

[1] Western Grid Development, LLC, 130 FERC ¶ 61,056 (2010)