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Tier 3: Thinking strategically
Whilst the bottom two layers of the Pyramid focus on improving how you currently operate across the key aspects of a legal function, the third tier is about thinking aspirationally.
Global | Publication | November 2023
On November 28, 2023, the European Commission (EC) adopted its first list of Projects of Common Interest (PCIs), i.e., projects within the EU territory, and Projects of Mutual Interest (PMIs), i.e., projects connecting the EU with other countries, including 166 projects implementing the European Green Deal.
On the same date, the Council of the EU (Council) and the European Parliament reached provisional political agreement on the directive to establish common rules for the internal markets in renewable and natural gases and in hydrogen (Directive). The Directive is intended to drive use of renewable and low-carbon gases, supporting the EU’s goal of climate neutrality by 2050. It is part of the broader hydrogen and decarbonised gas markets package which aims to create a regulatory framework for dedicated hydrogen infrastructure and markets and integrated network planning in the EU. The Council and the European Parliament will agree the remaining elements of this package at a later stage.
The EC’s list of PCIs and PMIs includes 166 projects, 65 hydrogen and electrolyser projects, and 14 carbon capture and storage (CCS). In short, the 14 CCS projects relate to: (i) CO2 networks between (a) the Netherlands, Belgium, and North Sea ports, (b) Benelux, Germany, Denmark and Norway, and (c) countries along the Rhine Corridor; (ii) transport and storage infrastructure in Croatia, Denmark, France, Greece, Hungary, Norway, the Netherlands, and the UK; (iii) hubs in the Mediterranean; and (iv) transport between Latvia and Lithuania.
As PCIs and PMIs, these projects will benefit from:
This list will now be submitted to the European Parliament and the Council for their scrutiny. Both co-legislators have two months (subject to potential extension by another two months) to either accept or reject the list in full, but may not amend it. Once the list of projects is adopted, the EC will work with project promoters and Member States to support rapid implementation of these projects, in line with the enhanced measures also proposed on November 28, 2023 in the EU Action Plan for Grids.
The Directive sets out common rules for the transmission, distribution, supply, and storage of gases, and the rules for the transport, supply and storage of hydrogen. Rules (including technical rules) on market design aim to remove certain regulatory impediment and streamline other regulation, ensuring competitive, consumer-centred, flexible and non-discriminatory markets for gas (including hydrogen). These goals are reflected in provisions addressing, amongst other things:
In addition, the Directive sets out consumer rights, covering basic contractual rights, switching rights and fees, rules on comparison tools, citizen energy communities, billing, smart and conventional metering, data management, out-of-court dispute settlement, and vulnerable customers.
The Directive also sets out rules applicable to transmission, storage and system operators of natural gas (including LNG), distribution system operators (DSOs) of natural gas (including closed distribution systems), and combined operators. These rules cover the obligations (including confidentiality) of such operators. In relation to DSOs, it sets out their rights regarding connection of new production facilities for renewable and low-carbon gases to the distribution system, and requires unbundling of DSOs. The Directive also requires unbundling of transmission system operators (TSOs), addressing ownership unbundling, independent system operators, independent TSOs, unbundling of dedicated hydrogen network operators, and unbundling and transparency of accounts. The Council and European Parliament amended the original EC proposal for the Directive to require unbundling of TSOs and DSOs for hydrogen.
In further provisions relating to hydrogen, the Directive sets out rules applicable to dedicated hydrogen networks, including existing hydrogen networks, geographically confined hydrogen networks, and interconnectors with ex-EEA countries. It addresses the rights and obligations of hydrogen network, storage and terminal operators. These provisions fill the gap in the current EU rules covering dedicated hydrogen networks regarding tariff-based investments in networks, ownership and operation, and harmonization regarding (pure) hydrogen quality. In relation to hydrogen networks more broadly, the Directive contains rules on integrated network planning, including network development and investment decisions, hydrogen network development reporting, and financing of cross-border hydrogen infrastructure. These provisions are intended to address the current differences between the EU-wide ten-year network development plan and national network development plans.
In addition, the Directive contains provisions on national regulatory authorities, addressing important issues including independence, duties and powers, and provides regimes for cross-border issues, and a consultation procedure for network codes and regulatory guidelines.
Finally, the Directive provides for Member States taking proportionate, non-discriminatory and transparent measures to ensure a level playing field, and for notification of technical agreements between a Member State and a third country concluded by TSOs, hydrogen network operators or other operators.
In terms of next steps, the political agreement on the Directive will now be subject to formal adoption by the Council and the European Parliament. We expect this to take place before April 2024, but the exact date may depend on a possible political agreement on the remainder of the legislative package. Following formal adoption, the Directive will need to be transposed in national law of the Member States. The Member States are expected to have two years to transpose the Directive, such that the rules in the Directive will start to apply in 2026 at the earliest.
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Whilst the bottom two layers of the Pyramid focus on improving how you currently operate across the key aspects of a legal function, the third tier is about thinking aspirationally.
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