Regulation (EU) 2024/1789 of the European Parliament and of the Council of 13 June 2024 on the internal markets for renewable gas, natural gas and hydrogen, amending Regulations (EU) No 1227/2011, (EU) 2017/1938, (EU) 2019/942 and (EU) 2022/869 and Decision (EU) 2017/684 and repealing Regulation (EC) No 715/2009 (recast) (Text with EEA relevance)

THE EUROPEAN PARLIAMENT AND THE COUNCIL OF THE EUROPEAN UNION,

Having regard to the Treaty on the Functioning of the European Union, and in particular Article 194(2) thereof,

Having regard to the proposal from the European Commission,

After transmission of the draft legislative act to the national parliaments,

Having regard to the opinion of the European Economic and Social Committee (1),

Having regard to the opinion of the Committee of the Regions (2),

Acting in accordance with the ordinary legislative procedure (3),

Whereas:

(1) Regulation (EC) No 715/2009 of the European Parliament and of the Council (4) has been substantially amended several times. Since further amendments are to be made, that Regulation should be recast in the interests of clarity.

(2) The internal market for natural gas, which has been progressively implemented since 1999, aims to deliver real choice for all consumers in the Union, be they citizens or businesses, new business opportunities and more cross-border trade, so as to achieve efficiency gains, competitive prices and higher standards of service, and to contribute to security of supply and sustainability.

(3) By means of Regulation (EU) 2021/1119 of the European Parliament and of the Council (5), the Union has committed to cutting greenhouse gas emissions. The internal market rules for gaseous fuels need to be aligned with that Regulation. In that context, the Union has set out how to update its energy markets, including as regards the decarbonisation of markets for gas, in the communications of the Commission of 8 July 2020 entitled ‘Powering a climate-neutral economy: An EU Strategy for Energy System Integration’ and ‘A hydrogen strategy for a climate-neutral Europe’ (the ‘EU Hydrogen Strategy’), as well as in the European Parliament resolution of 10 July 2020 on a comprehensive European approach to energy storage (6). This Regulation should contribute to achieving the Union’s objective to cut greenhouse gas emissions at the same time as ensuring security of supply and the proper functioning of the internal markets for natural gas and hydrogen.

(4) This Regulation complements related Union policy and legislative instruments, in particular those proposed pursuant to the communication of the Commission of 11 December 2019 entitled the ‘European Green Deal’, such as Regulations (EU) 2023/857 (7), (EU) 2023/957 (8), (EU) 2023/1805 (9) and (EU) 2023/2405 (10) of the European Parliament and of the Council and Directives (EU) 2023/959 (11), (EU) 2023/1791 (12) and (EU) 2023/2413 (13) of the European Parliament and of the Council, which aim to incentivise the decarbonisation of the Union’s economy and ensure that it remains on a trajectory towards a climate-neutral Union by 2050, in accordance with Regulation (EU) 2021/1119. The main objective of this Regulation is to enable and facilitate such transition towards climate neutrality by ensuring the ramp-up of a market for hydrogen and an efficient market for natural gas.

(5) This Regulation aims to facilitate the penetration of renewable gas and low-carbon gas and hydrogen into the energy system, enabling a shift away from fossil gas, and to allow renewable gas and low-carbon gas and hydrogen to play an important role in achieving the Union’s 2030 climate objectives and climate-neutrality by 2050. This Regulation also aims to set up a regulatory framework which enables and incentivises all market participants to shift away from fossil gas and plan their activities to avoid lock-in effects and aims to ensure a gradual and timely phase-out of fossil gas, in particular, in all relevant industrial sectors and for heating purposes.

(6) The EU Hydrogen Strategy recognises that, as Member States have different potential for the production of renewable hydrogen, an open and competitive internal market with unhindered cross-border trade has significant benefits for competition, affordability and security of supply. Moreover, the EU Hydrogen Strategy stresses that moving towards a liquid market with commodity-based hydrogen trading would facilitate entry of new producers and be beneficial for deeper integration with other energy carriers and would create viable price signals for investment decisions and operational decisions. The rules laid down in this Regulation should thus facilitate the emergence of markets for hydrogen, commodity-based hydrogen trading and liquid trading hubs. Any undue barriers, including disproportionate tariffs at interconnection points, should be eliminated by Member States. While recognising the inherent differences, existing rules that enabled efficient commercial operations and trading developed for the markets for electricity and natural gas should also be considered for a market for hydrogen. While this Regulation lays down general principles applicable to the operation of the market for hydrogen, it is appropriate to take account of the stage of development of that market when applying those principles.

(7) Supporting the coal and carbon-intensive regions in the phase-out of fossil fuels and phase-in of renewable energy is a key element of the just transition policy. That support has to be pursued consistently with the relevant legal framework, in particular the Just Transition Fund, established by Regulation (EU) 2021/1056 of the European Parliament and of the Council (14), which allows funding of technologies for renewable energy. The Commission plays a key role in ensuring such support to national policies aimed at progressively reducing existing coal and other solid fossil fuel generation and mining capacity. That process requires funding to address the social and economic impact, including the reskilling of the workforce for the purpose of the clean energy transition of regions that undergo structural change. The support to coal and carbon-intensive regions will need to take into account the specific goals, scopes and criteria of each relevant Union funding programme. The Just Transition Fund does not provide for funding of technologies other than renewable energy.

(8) Directive (EU) 2024/1788 of the European Parliament and of the Council (15) provides for the possibility of a combined system operator. The rules laid down in this Regulation do not therefore require modification of the organisation of national systems that are consistent with the relevant provisions of that Directive.

(9) It is necessary to specify the criteria according to which tariffs for access to the network are determined, in order to ensure that they fully comply with the principle of non-discrimination and the needs of a properly functioning internal market, take fully into account the need for system integrity and reflect the actual costs incurred, insofar as such costs correspond to those of an efficient and structurally comparable network operator and are transparent, whilst including the appropriate return on investments, and enabling the integration of renewable gas and low-carbon gas. The rules on network access tariffs laid down in this Regulation are complemented by further rules on network access tariffs, in particular in the network codes and guidelines adopted pursuant to this Regulation, in Regulations (EU) 2022/869 (16) and (EU) 2024/1787 (17) of the European Parliament and of the Council and in Directive (EU) 2018/2001 of the European Parliament and of the Council (18) and Directive (EU) 2023/1791.

(10) It is, in general, most efficient to finance infrastructure by means of revenue obtained from the users of that infrastructure and to avoid cross-subsidies. Moreover, cross-subsidies would, in the case of regulated assets, be incompatible with the general principle of cost-reflective tariffs. In exceptional cases, cross-subsidies could nonetheless bring societal benefits, in particular during earlier phases of network development where booked capacity is low compared to technical capacity and uncertainty as to when future capacity demand will materialise is significant. Cross-subsidies could therefore contribute to reasonable and predictable tariffs for early network users and de-risk investments made by network operators, thus contributing to an investment climate that supports the decarbonisation objectives of the Union. As an alternative to the expected higher network tariffs that would otherwise have to be charged to early hydrogen network users, it should be possible for hydrogen network operators to spread network development costs over time by allowing Member States to provide for the possibility that future users pay part of the initial costs, by way of an inter-temporal cost allocation. Such inter-temporal cost allocation and its underlying methodology and features should be approved by the regulatory authority. It should be possible for Member States to accompany such mechanism by measures to cover the financial risk of hydrogen network operators, such as a State guarantee, provided that they comply with Article 107 of the Treaty on the Functioning of the European Union (TFEU). Where the financing of networks through network access tariffs paid by network users is not viable, the regulatory authority should be able to allow financial transfers between separate regulated services from natural gas and hydrogen networks, subject to certain conditions. Costs associated with feasibility studies related to the repurposing of natural gas networks to hydrogen networks should not be considered to be cross-subsidies. Cross-subsidies should not be financed by network users in other Member States and it is thus appropriate to collect financing for cross-subsidies only from exit points to final customers within the same Member State. Moreover, as cross-subsidies are exceptional, it should be ensured that they are proportional, transparent, limited in time and established under regulatory supervision, subject to notification to the Commission and to the European Union Agency for the Cooperation of Energy Regulators (ACER) established by Regulation (EU) 2019/942 of the European Parliament and of the Council (19).

(11) The use of market-based arrangements, such as auctions, to determine tariffs is to comply with Directive (EU) 2024/1788 and Commission Regulation (EU) 2017/459 (20).

(12) A common minimum set of third-party access services is necessary to provide a common minimum standard of access in practice throughout the Union, to ensure that third-party access services are sufficiently compatible and to allow the benefits accruing from a properly functioning internal market for natural gas to be exploited.

(13) Arrangements on third-party access should be based on the principles laid down in this Regulation. The organisation of entry-exit systems, which enable a free allocation of natural gas on the basis of firm capacity, was welcomed by the XXIV European Gas Regulatory Forum (Madrid Forum) in October 2013. Therefore a definition of entry-exit system should be introduced, which would help to achieve a level playing field for renewable gas and low-carbon gas connected to either the transmission or distribution level. Tariff setting for distribution system operators and hydrogen distribution network operators and the organisation of capacity allocation between the transmission and distribution levels for natural gas and hydrogen should be left to the regulatory authorities on the basis of the principles laid down in Directive (EU) 2024/1788.

(14) Access to the entry-exit system should be generally based on firm capacity. Network operators should be required to cooperate in a way that maximises the offer of firm capacity, which in turn enables network users to freely allocate the natural gas entering or exiting on the basis of firm capacity to any entry or exit point in the same entry-exit system.

(15) Member States should be able to establish full or partial regional integration where two or more adjacent entry-exit systems are merged. It should be possible for partial regional integration to encompass various balancing zones as an important step towards integrating fragmented markets for natural gas and improving the functioning of the internal market for natural gas.

(16) Where regional market integration is undertaken, the transmission system operators concerned and regulatory authorities should address issues having a cross-border impact such as tariff structures, the balancing regime, capacities at remaining cross-border points, investment plans and the fulfilment of tasks of transmissions system operators and of regulatory authorities.

(17) Conditional capacity should be offered only where network operators are not able to offer firm capacity. Network operators should define the conditions for conditional capacity on the basis of operational constraints in a transparent and clear manner. The regulatory authority should approve the conditions and ensure that the number of conditional capacity products is limited to avoid a fragmentation of the market for natural gas and to ensure compliance with the principle of providing efficient third-party access.

(18) A sufficient level of cross-border natural gas interconnection capacity should be achieved and market integration fostered in order to complete the internal market for natural gas.

(19) This Regulation aims to support the production of sustainable biomethane in the Union. In its staff working document of 18 May 2022‘Implementing the Repower EU Action Plan: Investment needs, hydrogen accelerator and achieving the bio-methane targets’, accompanying the communication of the Commission of 18 May 2022 entitled ‘REPower EU Plan’ (the ‘REPowerEU Plan’), the Commission proposed to increase significantly the production of sustainable biomethane in the Union up to 35 bcm per year by 2030.

(20) The coordinated mapping for the deployment of biogas and biomethane serves as a tool for Member States to determine the contribution of biomethane to their estimated trajectories from 2021 to 2030, including the expected total gross final energy consumption and the total planned installed capacity, as provided for in their integrated national energy and climate plans. Where Member States have established national trajectories for biogas and biomethane, they should specify in their national energy and climate plans policies and measures for their development, such as adopting national strategies on sustainable biogas and biomethane or setting national targets of annual production or consumption of biomethane, either expressed in absolute volumes or as a percentage of the volume of natural gas consumed by customers connected to the natural gas network. In order to facilitate that, the Commission has provided Member States with significant biomethane potential an analysis of their national potential, as well as suggestions how the potential could be best harnessed. Furthermore, pursuant to Article 25(2), point (b), of Directive (EU) 2018/2001, Member States may take into account for the transport sector targets referred to in Article 25(1) of that Directive biogas that is injected into the national gas transmission and distribution infrastructure.

(21) Increased cooperation and coordination among transmission system operators and, where relevant, distribution system operators is required to create network codes for providing and managing effective and transparent access to the transmission networks across borders, and to ensure coordinated and sufficiently forward looking planning and sound technical evolution of the natural gas system in the Union, including the creation of interconnection capacities, with due regard to the environment. The network codes should be in line with framework guidelines, which are non-binding in nature and which are developed by ACER. ACER should have a role in reviewing, on the basis of facts, draft network codes, including their compliance with the framework guidelines, and it should be enabled to recommend them for adoption by the Commission. ACER should assess proposed amendments to the network codes and it should be enabled to recommend them for adoption by the Commission. Transmission system operators should operate their networks in accordance with those network codes.

(22) In order to ensure optimal management of the natural gas transmission network in the Union, a European Network of Transmission System Operators for Gas (the ‘ENTSO for Gas’), should be provided for. With the aim of ensuring a fair representation of small-size, non-interconnected or isolated Member States, in addition to natural gas transmission system operators, those natural gas system operators which benefit from a derogation from Article 60 of Directive (EU) 2024/1788 pursuant to Article 86 of that Directive, should be eligible to be members of the ENTSO for Gas. The Commission, when approving the statutes of the ENTSO for Gas, may seek to ensure an appropriate differentiation of membership rights reflecting the different status of the members. The tasks of the ENTSO for Gas should be carried out in accordance with Union competition rules which are applicable to the decisions of the ENTSO for Gas. The tasks of the ENTSO for Gas should be well defined and its working methods should ensure efficiency, transparency and the representative nature of the ENTSO for Gas. Where appropriate, network codes can be developed jointly by the ENTSO for Gas and the European Network of Network Operators for Hydrogen (ENNOH) with regard to cross-sectoral issues. The network codes prepared by the ENTSO for Gas are not intended to replace the necessary national technical rules applicable to non-cross-border issues. Given that more effective progress may be achieved through an approach at regional level, transmission system operators should set up regional structures within the overall cooperation structure, whilst ensuring that results at regional level are compatible with network codes and non-binding ten-year network development plans at Union level. Cooperation within such regional structures presupposes effective unbundling of network activities from production and supply activities. In the absence of such unbundling, regional cooperation between transmission system operators gives rise to a risk of anti-competitive conduct. Member States should promote cooperation and monitor the effectiveness of network operations at regional level. Cooperation at regional level should be compatible with progress towards a competitive and efficient internal markets for natural gas and hydrogen.