In light of the European Commission’s imminent adoption of the Delegated Act of Article 27 in the revised Renewable Energy Directive (RED II), the Global Alliance Powerfuels has published a position paper, which makes concrete suggestions for the elaboration of the sustainability criteria for electricity sources for the production of renewable liquid and gaseous fuels of non-biological origin (RFNBOs).
The Global Alliance Powerfuels welcomes that the adoption of the Delegated Act (D.A.) will increase regulatory certainty and recognises its importance to ensure that the electricity used for the production of RFNBOs is fully renewable and that RFNBOs effectively contribute to the EU’s new goal of reaching GHG reductions of at least 55% by 2030. In addition, the rules set out by the D.A. will also extend to importers of RFNBOs into the EU, and global applicability and implementability of the specified criteria therefore need to be taken into account.
As laid out in Art. 27 of the RED II, when RFNBOs are produced from electricity sourced from the grid, four criteria must be fulfilled for the energy carriers to be considered as fully renewable. For the specification and elaboration of these criteria in the D.A., the Global Alliance Powerfuels suggests to
- require RFNBO producers to conclude a power purchase agreement (PPA) with a producer of renewable electricity (RE) to ensure that all electricity used for the production of RFNBOs is of renewable origin (renewability)
- specify that the electricity used for RFNBO production has to be consumed in the same quarter of an hour (15 min) during which the renewable electricity supplied under the renewables PPA is generated from 2027 onwards, but to introduce a phase-in period of hourly correlation until 2026. Alternatively, powerfuels producers should also be able to meet the requirement of temporal correlation by demonstrating that in the 15 minutes the electricity is supplied, the share of RE in the electricity price area (e.g. bidding zone in the EU) in which the electrolyser is located is higher than the average RE share in the country two years before. For this option to be admissible, the Commission should specify a minimum average share of renewable electricity for the country where the electrolyser is located.
- elaborate that for geographical correlation, electrolyser and power plants should be located in the same electricity price area, or in neighbouring electricity price areas as long as it can be demonstrated that there is no systematic grid congestion between the areas, and that market prices are equal in the relevant quarter of an hour.
- specify that contracted power plants are to be counted as additional if they are newly built and do not receive any financial support, or if they no longer receive such financial support and have been refurbished considerably, the cost of investment being more than 10% of the cost required to build a new plant.
To bridge the gap to commercial viability and compensate for the additional costs faced in the initial powerfuels market development phase to meet these criteria, support mechanisms should be implemented, e.g. Contracts for Difference for powerfuels plants. Taking into consideration the production of RFNBOs designated for import into the EU, and acknowledging the different properties of energy market models around the world, the D.A should refer to electricity price areas, throughout which wholesale prices are uniform, instead of bidding zones, and include specific provisions for RFNBOs produced in non-EU member states.