Several European states have announced plans for the introduction of decarbonized hydrogen into their economy as a way of reaching ambitious environmental goals. A key element to ensure the sector’s smooth development is making sure the infrastructure for transporting hydrogen is in place. On 13 April, gas network operators from 21 European countries presented a plan for the development of a comprehensive “hydrogen backbone” network of mostly repurposed gas pipelines for transporting hydrogen. However, the current regulatory framework does not yet allow for an economically viable realization of these plans.

In a recent LinkedIn article, NERA experts Dominik Huebler, Lorenz Wieshammer, Leonie Janisch, and Paul Waidelich take a closer look at recent proposals by the German government and find that they are likely to inhibit development of both repurposed gas pipelines as well as new hydrogen-specific pipelines. The authors look at examples from other regulated sectors that have faced the challenge of developing new infrastructure with initially uncertain demand and provide a number of proposals for bringing risk and return into balance.

They also look at the specific local conditions that will need to be kept in mind when other countries develop their own frameworks.