Effects of the delegated act on renewable fuels of non-biological origin on production costs and distribution of hydrogen production capacities across Europe

A central aspect of the energy transition is the switch from fossil to renewable energy sources. Since not all fossil energy sources can be replaced purely by electrification, “green” molecules may serve as replacements. As part of the European Green Deal, the European Union adopted the Delegated Act (DA) on the definition of renewable fuels of non-biological origin (RFNBO). These RFNBOs cover all renewably produced non-biogenic energy carriers including hydrogen from water electrolysis. To produce “green” hydrogen according to the DA there are multiple conditions that need to be met. The required electricity supply for the electrolyzer plants can either be realized with island grids or with connection to the public electricity grid. The latter options are also required to either be in a sufficiently defossilized electricity grid, with renewable electricity supply in close temporal and spatial proximity or as redispatch measure. Furthermore, capacities need to be installed additionally. To investigate the effect of this regulation on the distribution of hydrogen production capacities between different countries, a sector integrated energy system of Europe and neighboring regions is set up in a consistent model according to the requirements of the DA and cost-minimized to quantify capacities and cost components. The study finds that defossilized grids pose a significant advantage regarding the marginal costs, while island grids experience high marginal costs due to a higher degree of autarky and less flexibility. Hence, it is recommended to explore possibilities to increase flexibilities in island grids and ramp-up the expansion of renewables to enable the comparative advantages from the defossilized grid option. • Implementing EU regulation for RFNBO production options in sector integrated ESOM. • Enabling comparative quantification of cost development and electrolyzer distribution. • Defossilizing electricity grids enables flexibilities and significant cost advantages. • High marginal costs in island grid RFNBO production may hinder competitiveness. • Marginal cost differences between regions can inform design of subsidy schemes.