Part III - Regulating Hydrogen Production

12 Offshore Production and Transport of Green Hydrogen A Case Study on Denmark and the Netherlands

Liv Malin Andreasson

12.1 Introduction

The interest in green hydrogen production in the North Sea is gaining momentum. The extent to which coastal states can regulate activities in the North Sea depends on whether the activities take place in the territorial sea or in the maritime zones beyond.¹ The territorial sea is considered part of the land territory and thus of the sovereignty of coastal states under the United Nations Convention on the Law of the Sea (UNCLOS).² Beyond the territorial sea, coastal states have been granted sovereign rights to explore and exploit hydrocarbons on their continental shelf (CS)³ and to develop renewable energy in their exclusive economic zone (EEZ) if they have declared one.⁴ The seabed of the North Sea is one CS and all North Sea states have declared an EEZ.⁵ Hence, the offshore exploitation of hydrocarbons and renewable sources is subject to the sovereign rights and functional jurisdiction of the coastal states of the North Sea.⁶

Based on their functional jurisdiction over the CS, Denmark and the Netherlands have produced large quantities of hydrocarbons from more than 200 offshore platforms.⁷ Due to the gradual depletion of offshore hydrocarbon resources and the need to meet EU and national climate change targets, Denmark and the Netherlands are increasingly focusing on the development of offshore renewable energy, in particular offshore wind. The ambition of the EU is to deploy 300 gigawatts (GW) of offshore wind by 2050.⁸ Currently, approximately 6.5 GW of offshore wind capacity has been installed in the Danish and Dutch North Sea, with the aim of reaching 105 GW by 2050.⁹ Such a large increase in offshore wind generation faces many challenges, such as ensuring sufficient capacity to bring the electricity ashore and managing intermittency and supply–demand imbalances to avoid negative prices.¹⁰ One potential solution to these challenges is the offshore conversion of wind energy into hydrogen.¹¹ Hydrogen serves a dual purpose in this context, both as a means of storing the electricity generated by offshore wind farms and as a direct energy carrier.

While commercial-scale hydrogen production in the North Sea has not yet been realised, many of the surrounding countries are actively exploring its offshore potential. Denmark and the Netherlands are particularly important in this regard, having implemented policies to promote offshore hydrogen production to facilitate their large-scale offshore wind energy ambitions.¹² The focus of this chapter is on the offshore production of hydrogen from offshore wind energy by electrolysis and the transport of this hydrogen to shore via pipelines. Although attempts have been made to convert electricity to hydrogen onshore, Denmark and the Netherlands recognise that this option does not solve the problem of a potential capacity shortage in offshore electricity cables.¹³

The following section reviews the general classification of hydrogen and provides a technical background to the concept of offshore power-to-gas. This is followed by an analysis of the EU and national policy frameworks relevant to the offshore production and transport of green hydrogen (Section 12.3). Finally, a comparative assessment of the Danish and Dutch legal frameworks pertaining to the offshore production and transport of green hydrogen is provided (Section 12.4). This assessment focuses on the extent to which the national legal frameworks constitute a barrier to the development of green hydrogen in the North Sea. Importantly, the legal challenges faced by Denmark and the Netherlands in relation to this development are indicative of the wider legal challenges that all North Sea states may face in similar endeavours.

12.2 Classification of Hydrogen and Offshore Power-to-Gas Technology

Hydrogen is currently mainly derived from fossil fuels, while renewable hydrogen accounts for less than 1 per cent of the total hydrogen production worldwide.¹⁴ Due to its potential to reduce carbon dioxide (CO₂) emissions in the chemical, industrial, transport, heating and cooling sectors, and as an alternative to manage the intermittency of renewable energy sources, many countries view renewable hydrogen as a viable option. Hydrogen can be classified as grey, blue or green depending on how it is produced. As an energy carrier, hydrogen emits only water and water vapour when burned.¹⁵ However, its production can be CO₂ intensive. The classification of hydrogen can vary between countries, but it is generally considered ‘grey’ when produced using fossil fuels, such as through steam methane reforming.¹⁶ If the CO₂, a by-product of hydrogen production from fossil fuels, is captured and permanently stored, the resulting hydrogen is often classified as ‘blue’.¹⁷ Hydrogen produced from renewable sources is commonly referred to as ‘green’.¹⁸ Interestingly, the European Commission uses different terminology. While the industry commonly uses colour coding to classify hydrogen, the European Commission distinguishes between low-carbon hydrogen (effectively blue) and renewable hydrogen (effectively green).¹⁹ The criteria set by the EU for classifying hydrogen as renewable are explained in more detail below.

There are several options for producing green hydrogen offshore. By integrating offshore hydrocarbon and offshore wind energy systems, existing hydrocarbon production platforms can be used to convert (surplus) wind energy into hydrogen.²⁰ In the Danish and Dutch North Sea several hydrocarbon platforms (and the associated physical infrastructure) will eventually reach the end of their economic lifetime and will have to be removed.²¹ The prospective development of offshore hydrogen will give these platforms a new purpose before eventually having to be permanently removed, depending on their lifetime for hydrogen production or other potential future uses.²² The use of such platforms for hydrogen production could therefore defer the decommissioning costs incurred by Denmark and the Netherlands.²³ In addition to the possibility of using (disused) offshore hydrocarbon platforms, new offshore platforms or artificial islands can be developed for hydrogen production.²⁴ Such platforms and islands can serve as hubs, collecting energy from nearby wind farms and converting it into hydrogen.²⁵

Denmark and the Netherlands are exploring the possibility of locating wind farms further offshore.²⁶ These wind farms can be connected to the onshore electricity grid either via alternating current (AC) or direct current (DC) cables. While AC cables become economically unviable beyond 100 km from shore and energy losses are excessively high, DC cables minimise energy losses but increase overall development costs.²⁷ It is therefore vital to find the most cost-effective and resilient method of transporting offshore wind energy to shore. In addition to using electricity cables, hydrogen can be produced from offshore wind energy and then transported to shore using existing or newly developed gas pipelines.²⁸ As the cost of using existing gas pipelines or developing new ones is often lower than constructing new DC cables, hydrogen transport is an economically viable option, especially for offshore wind farms located far from the coast.²⁹

As mentioned, this chapter is dedicated to examining the legal framework for offshore production of hydrogen by electrolysis and its transport by pipeline. The discussion will focus on the offshore deployment of electrolysers, the development of dedicated hydrogen pipelines and the use of (disused) offshore hydrocarbon infrastructure for these purposes. However, it should be noted that the supply of water and electricity is essential for the electrolysis process. The water supply can be facilitated by converting seawater to demineralised water³⁰ and the electricity supply can be facilitated by connecting offshore electrolysers to the onshore grid, the offshore grid or offshore wind farms.³¹ Recognising that the latter aspect plays a role in determining the classification of hydrogen, a brief discussion of the conditions under which hydrogen can be classified as renewable in the EU follows.

Connecting offshore electrolysers directly to offshore wind farms is theoretically considered a simpler means of ensuring renewable hydrogen production. This is because it is more difficult to ensure the renewable nature of the electricity in cases where electrolysers are connected to the onshore or offshore grid. This issue has been addressed by the European Commission in two Delegated Acts adopted in 2023.³² These Acts establish criteria to ensure that the hydrogen produced is derived from renewable energy sources and results in a greenhouse gas emission reduction of at least 70 per cent. In particular, the Additionality Delegated Act provides detailed rules for determining when electricity used to produce hydrogen is considered renewable.³³ Three criteria have been introduced to confirm the renewable status of hydrogen. First, the additionality criteria aim to link increased hydrogen production to the expansion of new renewable electricity generation.³⁴ As such, the Act requires hydrogen producers to enter into power purchase agreements with new and unsupported renewable electricity generation installations.³⁵ Secondly, the temporal and geographical correlation criteria ensure that hydrogen is produced when and where renewable electricity is available.³⁶ For the offshore area, the geographical correlation condition is met if the renewable electricity installation under the power purchase agreement is located in an offshore bidding zone³⁷ interconnected with the bidding zone where the electrolyser is located.³⁸ As a result of these legislative changes, it is now possible to determine when hydrogen produced by offshore electrolysers qualifies as renewable hydrogen, regardless of whether the electrolysers are connected directly to renewable electricity installations or to the grid.

12.3 EU and National Policies for Offshore Hydrogen

The European Commission has put forward a number of initiatives to promote renewable hydrogen, including the European Green Deal³⁹ and the Hydrogen Strategy.⁴⁰ Some of the key actions proposed in these initiatives are to increase the demand and supply of hydrogen and to design a legal framework to enable this.⁴¹ With the ambition to deploy at least 40 GW of renewable hydrogen by 2030,⁴² the Hydrogen and Decarbonised Gas Market Package was adopted, to inter alia, facilitate the integration of renewable gases into the existing natural gas system.⁴³ The intention is to refine the principles of the current EU Directive 2009/73/EC (2009 Gas Directive) and to extend its scope to include hydrogen infrastructure.

However, none of these initiatives explicitly address the offshore development of renewable hydrogen. Such development was first promoted in the Offshore Renewable Energy Strategy, which proposes concrete ways to support the long-term sustainable development of the offshore energy sector.⁴⁴ In this communication, the European Commission stresses that offshore hydrogen production is a viable option for bringing renewable energy generated offshore to the mainland.⁴⁵ It recognises that innovative projects, such as offshore hydrogen production and artificial energy islands, face particular challenges because the current legal framework was not designed with such projects in mind.⁴⁶

Denmark and the Netherlands are at the forefront of promoting the development of renewable hydrogen and have adopted a vision for the future role of hydrogen in the energy system in their national hydrogen strategies. By 2030, Denmark intends to develop an electrolysis capacity of 4–6 GW and the Netherlands aims for an installed electrolysis capacity of 3–4 GW.⁴⁷ However, it is not specified whether these indicative targets will be developed onshore and/or offshore. While neither Denmark nor the Netherlands have adopted specific hydrogen legislation, greater clarity on the regulation of hydrogen, and in particular hydrogen networks, can be expected in the future. Denmark has taken steps to amend its Gas Supply Act⁴⁸ to facilitate the integration of renewable gases, including hydrogen, into the natural gas system.⁴⁹ Conversely, the Netherlands has not (yet) proposed concrete measures to integrate hydrogen into its current natural gas legislation. However, the government has provided insights into the potential regulatory framework for the hydrogen market and related networks.⁵⁰

12.4 Comparative Assessment of National Legal Frameworks Relevant to the Offshore Development of Green Hydrogen Infrastructure

Given the intentions of Denmark and the Netherlands to promote the offshore development of green hydrogen, this section provides a comparative analysis of their legal frameworks governing the offshore infrastructure required for the production and transport of green hydrogen. It also identifies potential legal barriers that could hinder the offshore deployment of such infrastructure.

12.4.1 Offshore Hydrogen Production

While the Netherlands is exploring the possibility of using (disused) offshore hydrocarbon infrastructure for hydrogen production and transport,⁵¹ Denmark is focusing on developing new offshore infrastructure or an artificial island for power-to-hydrogen applications.⁵² Four possible approaches to the deployment of offshore electrolysers are therefore envisaged: (i) on existing offshore hydrocarbon platforms that are still in operation; (ii) on existing offshore hydrocarbon platforms that are no longer in operation; (iii) on new offshore platforms; and (iv) on artificial energy islands. These four options are assessed in the following sections.⁵³

Hydrogen Production on Existing Operational Hydrocarbon Platforms

This section focuses on the legal framework pertaining to the installation of an electrolyser on an operating offshore hydrocarbon platform. The Subsoil Act (Denmark)⁵⁴ and the Mining Act (the Netherlands)⁵⁵ regulate the offshore extraction of hydrocarbons, including the installations and equipment necessary for such extraction. According to these laws, a hydrocarbon licence is required in order to extract these resources from the seabed.⁵⁶ The question that arises is whether the existing licence also permits the installation and operation of an electrolyser.⁵⁷ However, as the definitions of ‘raw material’ (Subsoil Act) and ‘mineral’ (Mining Act) exclude hydrogen from their scope of application, an electrolyser cannot be installed on an operational offshore hydrocarbon platform under the current licence.⁵⁸ While the holder of such a licence may request modifications, such modifications do not extend to cover other activities or minerals.⁵⁹ As a result, the Subsoil Act and the Mining Act provide no guidance on the use of an operational offshore hydrocarbon platform for purposes other than hydrocarbon activities.

The next question is therefore whether there are any other national laws governing the installation of an electrolyser on such a platform. In the Netherlands, the only alternative would be a permit under the Environment and Planning Act,⁶⁰ which regulates (the development of) offshore activities, unless these activities are governed by sector-specific laws, such as the Mining Act. For the purposes of this chapter, sector-specific laws refer to laws tailored to regulate specific offshore energy activities, such as hydrocarbon exploitation and wind energy generation. A law that regulates all offshore (energy) activities that are not governed by sector-specific laws, is referred to in this chapter as a general legal framework.

According to the Environment Activities Decree⁶¹ – which further defines the scope of the Environment and Planning Act – the development of an offshore electrolyser would be subject to a restricted area permit. If an electrolyser is installed on an existing offshore hydrocarbon installation, the activity falls within the restricted area of that installation and requires a permit in accordance with Articles 7.46 and 7.47(1) of the Environment Activities Decree.⁶² This restricted area includes the offshore hydrocarbon installation and a radius of 500 metres around it.⁶³ Therefore, if hydrogen is to be produced on an operational offshore hydrocarbon platform, the relation and interplay between the hydrocarbon licence and the restricted area permit needs to be clarified. In contrast, in Denmark there is currently no explicit legal basis and therefore no general permitting regime for offshore activities that are not regulated by sector-specific laws.⁶⁴ In the absence of a specific hydrogen law and a general legal framework for offshore activities, it is uncertain which rules apply to the development of offshore electrolysers in Denmark.⁶⁵

Reuse of Non-operational Hydrocarbon Platforms for Hydrogen Production

This section focuses on the legal framework pertaining to the reuse of non-operational offshore hydrocarbon platforms for hydrogen production. The question is whether the current legislation allows for such reuse and, if so, for what purposes. The Subsoil Act (Denmark) and the Mining Act (Netherlands) places an obligation on the licence holder to remove abandoned or disused offshore hydrocarbon platforms.⁶⁶ However, following amendments to the Dutch Mining Act, the reuse of such platforms is now possible.⁶⁷ Once an offshore hydrocarbon platform is fully or partially out of operation, the licence holder is required to notify the Minister of Economic Affairs and Climate Policy.⁶⁸ Although the term ‘out of operation’ is not defined, a literal interpretation implies that the platform is no longer used for the extraction of natural gas.⁶⁹ Following the notification, the licence holder must submit a removal plan⁷⁰ or apply for an exemption from this requirement.⁷¹ If an exemption is granted, the obligation to remove the platform is postponed for a period of time to be determined by the Minister.⁷² However, there is no specific indication as to the length of time for which this may be granted.⁷³ An exemption can also be sought for the reuse of offshore gas pipelines.⁷⁴ A number of options have been identified for the reuse of offshore hydrocarbon infrastructure, including underground storage of CO₂ and hydrogen activities.⁷⁵ The reuse of such infrastructure for purposes other than those for which it was originally intended is subject to the standard permitting procedures applicable to the specific type of reuse activity.⁷⁶ As mentioned in the previous section, a restricted area permit must be obtained before any offshore hydrogen activities can be carried out in the Dutch North Sea.

Similarly, Denmark has explored the possibility of reusing offshore hydrocarbon platforms. However, the provisions on the removal of such infrastructure in the Subsoil Act have not been amended to cover reuse.⁷⁷ As in the Netherlands, removal is subject to a decommissioning plan.⁷⁸ Such a plan must be submitted to and approved by the Danish Energy Agency in accordance with the Guidelines on Decommissioning Plans for Offshore Oil and Gas Facilities or Installations.⁷⁹ Interestingly, the guidelines stipulate that the plan must specify ‘the (parts of) installations being converted to another use or continuing operations as part of another development’.⁸⁰ Consequently, the reuse of offshore hydrocarbon infrastructure appears to be an option under these guidelines.⁸¹ So far, the Danish Energy Agency has only mentioned that some of the offshore hydrocarbon infrastructure could be retained for alternative purposes, including natural gas and CO₂ storage.⁸² Notably, the Danish government has decided to cancel all future licensing rounds for hydrocarbon production and to cease existing production by 2050,⁸³ which may allow for the reuse of offshore hydrocarbon infrastructure. However, such reuse would require amendments to the Subsoil Act to establish the legal basis and relevant regulations. In both Denmark and the Netherlands, the infrastructure, together with the decommissioning obligation, will have to be transferred from the hydrocarbon licence holder to the hydrogen permit holder. It is therefore necessary to clarify the type of permit required and how responsibilities, including future removal, will be transferred to the new permit holder in the case of two different entities.⁸⁴

Development of New Platforms for Hydrogen Production

To facilitate offshore hydrogen production, new offshore platforms can be constructed to accommodate electrolysers. In the Netherlands, the construction of such platforms would require a restricted area permit.⁸⁵ However, in contrast to the above scenarios, if the platform is developed outside the restricted area of an offshore installation, a permit for construction activities within the restricted area of the North Sea is required in accordance with Articles 7.16(1)(a) and 7.17(1)(b) of the Environment and Planning Decree.⁸⁶ The process of obtaining a restricted area permit is non-competitive and involves an applicant seeking permission to use a designated area of the North Sea or a designated area around an installation in the North Sea. The competent authority will only grant a permit if the activity meets certain conditions set out in Section 8 of the Environment Quality Decree.⁸⁷ Additional conditions may be imposed, including requirements to remove, compensate for or mitigate adverse effects on the North Sea.⁸⁸ In contrast, as mentioned above in the section ‘Hydrogen Production on Existing Operational Hydrocarbon Platforms’, there is currently no general permitting regime in Denmark for offshore activities that are not regulated by sector-specific legislation.

In both the Netherlands and Denmark, legislation tailored to sector-specific activities, such as hydrocarbon activities, includes detailed provisions for infrastructure development, operation and safety. The lack of sector-specific legislation for offshore hydrogen infrastructure may therefore create uncertainty about the rules that apply to such infrastructure. To address this uncertainty, specific rules for the development, operation and safety of offshore electrolysers could be included in existing legislation, such as hydrocarbon legislation, or through the adoption of a specific hydrogen law.

Development of Artificial Energy Islands for Hydrogen Production

Like naturally formed islands, artificial islands can serve to collect the electricity generated by offshore wind farms, host electrolysers that convert the electricity into hydrogen and enable the transport of hydrogen to the mainland via pipelines.⁸⁹ The infrastructure required to collect electricity from offshore wind farms (such as transformer and converter stations) and hydrogen production installations (such as electrolysers), typically demands a substantial amount of space.⁹⁰ Given these space requirements, the development of an island for these purposes may be a more technically feasible and cost-effective solution than the deployment of large modular offshore platforms for electricity and hydrogen infrastructure.⁹¹

Denmark plans to construct an artificial energy island in the North Sea to enable large-scale development of offshore wind energy and the production and supply of green hydrogen.⁹² At the end of 2021, Denmark adopted the Act on the Design and Construction of an Energy Island in the North Sea.⁹³ The Act is an important step in the realisation of the island, as it establishes the overall legal framework for its construction and provides broad authority for the preparation and design of the island.⁹⁴ However, as the Act only regulates the construction of the island, the conditions for its operation and use are less clear. One example is the development of the energy infrastructure on and around the island. This includes hydrogen infrastructure, which is not covered by the provisions of the Act.⁹⁵ Furthermore, contrary to the cost-effectiveness argument above, the Danish government has decided to postpone the tender for the island.⁹⁶ The decision is based on concerns about the high cost of the current island design, which has led the government to investigate alternative design options.⁹⁷ No concrete information has yet been provided on what these options might be.

Similarly, the Dutch government recognises that the cost-effective integration of more offshore wind energy and the offshore production of green hydrogen may require the establishment of energy hubs, including an artificial energy island.⁹⁸ However, there are no concrete plans for such developments.⁹⁹ Furthermore, no specific legislation has been adopted in the Netherlands for the construction of an artificial energy island. Although the Environment and Planning Act is relevant to the construction of the island,¹⁰⁰ it does not provide clarity on how such an island should be operated and used, or how the hydrogen infrastructure to be developed on it should be regulated.¹⁰¹

12.4.2 Offshore Hydrogen Transport

Having discussed the options of using (disused) hydrocarbon platforms, constructing new platforms or developing artificial islands for offshore hydrogen production, it is necessary to consider the transport of the hydrogen to shore, where it can be consumed, stored or reconverted. Three alternatives for offshore hydrogen transport by pipeline are envisaged: (i) using operational natural gas pipelines – that is, blending hydrogen with natural gas; (ii) repurposing disused natural gas pipelines to exclusively transport hydrogen; and (iii) developing new dedicated hydrogen pipelines.¹⁰² These three options are assessed in the following sections.

Transport via Existing Natural Gas Pipelines

In cases where electrolysers are installed on operational offshore hydrocarbon platforms, existing pipelines can theoretically be used to transport hydrogen to shore. However, the characteristics of the gas transported through these pipelines changes when hydrogen is blended with natural gas.¹⁰³ Offshore pipelines transporting natural gas to the onshore transmission network usually qualify as upstream pipelines and regulation of such pipelines is limited. In Danish and Dutch gas legislation, no gas quality standards have been adopted for such pipelines.¹⁰⁴ Nevertheless, upstream pipeline operators must ensure that the gas they deliver to the onshore transmission network meets the entry specifications (gas quality standards) applicable to that network.¹⁰⁵ If the gas delivered to the onshore transmission network cannot be processed to meet the entry specifications, the upstream pipeline operator has the discretion to reject the off-specification gas.¹⁰⁶ Hence, unless onshore gas quality standards are met, and it is not technically feasible to upgrade or change the gas quality at the onshore entry point, hydrogen transport in upstream pipelines is unlikely to be accepted.¹⁰⁷ The primary issue arising from this is whether Danish and Dutch gas legislation allows hydrogen to be injected into the onshore transmission network.¹⁰⁸

In view of the influence of EU gas legislation on the regulation of the Danish and Dutch natural gas networks, it is important to first assess this legislation. Pipelines serving downstream transport of natural gas are regulated by the 2009 Gas Directive.¹⁰⁹ Although its title and scope indicate that it applies only to natural gas, ‘other types of gases’ are subject to the provisions of the Directive if they can be ‘technically and safely injected into, and transported through, the natural gas system’.¹¹⁰ Currently, EU gas standards do not include rules on the permissible concentration of hydrogen in the downstream natural gas network. As a result, the permitted concentration of hydrogen in national gas networks varies considerably and in a number of EU Member States hydrogen injection is not (yet) allowed.¹¹¹ To harmonise cross-border gas flows, the EU proposes a threshold of up to two vol.% hydrogen content at interconnection points.¹¹² Although the EU leaves it up to its Member States to decide whether to allow hydrogen blending in their gas networks, this proposal essentially means that from 2025 network operators will be obliged to accept at least this hydrogen content at interconnection points.

The applicability of national gas legislation to the injection of hydrogen into the natural gas network depends on how the term ‘gas’ is defined in the Gas Supply Act (Denmark) and the Gas Act (the Netherlands).¹¹³ One common prerequisite in these laws is that the gas to be injected into the natural gas networks must consist primarily of methane or another substance equivalent to methane.¹¹⁴ This would not be the case if a high concentration of hydrogen is injected. To determine whether an acceptable concentration of hydrogen has been adopted, it is necessary to consult national gas quality regulations. Although the amended Danish Gas Supply Act, opens up the possibility of blending hydrogen into the natural gas network,¹¹⁵ no specific threshold for the hydrogen content has been set.¹¹⁶ However, in principle it should be possible to specify the permitted hydrogen content, though this would require amendments to the Danish Gas Safety Act and the Executive Order on Gas Quality.¹¹⁷ By contrast, in the Netherlands, 0.5 mol.% hydrogen is allowed in certain parts of the natural gas network.^{118, 119} In view of the promotion of hydrogen blending in natural gas networks, it remains to be seen whether a new proposal will be made to increase the hydrogen content threshold at national level.

Transport via Repurposed Natural Gas Pipelines

Similar to the reuse of offshore hydrocarbon platforms, offshore gas pipelines repurposed for hydrogen transport may no longer be considered pipelines under national hydrocarbon laws.¹²⁰ This raises the question of whether it is permissible to reuse such pipelines for the transport of hydrogen and what the applicable legal regime would be. Since pipelines are not considered to be installations, the obligation to remove installations under UNCLOS does not apply.¹²¹ Yet the removal obligation may be extended to pipelines which are considered to be part of (production) installations.¹²² As mentioned above in the section ‘Reuse of Non-operational Hydrocarbon Platforms for Hydrogen Production’, such installations and pipelines may be reused for purposes other than those for which they were originally intended. Given that reuse only postpones the decommissioning of pipelines, the legislator is confronted with the same issues as described for the reuse of offshore hydrocarbon platforms. In addition, when such pipelines are reused for hydrogen transport, gas quality requirements still need to be met as these pipelines are connected to the onshore transmission network.

Offshore natural gas pipelines have been authorised under the Subsoil Act (Denmark) and the Mining Decree (the Netherlands).¹²³ Again, the same situation arises as for the reuse of offshore hydrocarbon platforms. Such pipelines will no longer be subject to the provisions of these laws if they are repurposed for hydrogen transport. Not only would a new permit have to be applied for, but the pipelines would no longer be subject to the operational and safety requirements of these laws.¹²⁴ However, some clarity has been provided in Denmark by the amended Gas Supply Act, which is discussed in more detail in the next section.

Development of New Hydrogen Pipelines

An alternative to the use of (disused) offshore natural gas pipelines is the development of new offshore hydrogen pipelines.¹²⁵ However, there is currently no dedicated onshore hydrogen network to which such pipelines can be connected. Until such a network is in place, hydrogen can be delivered directly to onshore customers, such as industrial clusters, via direct pipeline connections. As amendments to the Danish Gas Supply Act have effectively brought hydrogen within its regulatory scope and the Act applies in its entirety to the EEZ, it applies to hydrogen pipelines directly connecting offshore electrolysers to onshore customers.¹²⁶ The development of such pipelines is subject to approval by the Minister for Climate, Energy and Utilities.¹²⁷

The Danish Gas Supply Act also lays down rules for upstream pipeline networks. This includes pipelines operated or constructed as an integral part of gas production installations, and those used to transport gas from such installations to onshore landing terminals.¹²⁸ Although the term ‘gas production installations’ is not explicitly defined, it is reasonable to interpret it as including electrolysers used for the production of hydrogen.¹²⁹ Pipelines transporting hydrogen from offshore electrolysers to onshore landing terminals are therefore likely to fall within the definition of upstream pipelines.¹³⁰ The Minister for Climate, Energy and Utilities is responsible for issuing rules on access to such pipelines.¹³¹ However, the Gas Supply Act does not contain any provisions requiring prior authorisation for the development of such pipelines. The Subsoil Act, which applies to upstream natural gas pipelines, provides for such authorisation, but does not cover upstream hydrogen pipelines.¹³²

In contrast, the Dutch Gas Act only applies to hydrogen insofar as it can technically and safely be injected into the existing natural gas network.¹³³ Consequently, dedicated hydrogen pipeline infrastructure is not covered by the provisions of the Act. Therefore, neither the provisions on direct pipelines¹³⁴ nor those on upstream pipelines¹³⁵ provide a legal basis for the development of offshore hydrogen pipelines. Instead, the legal basis for the development of dedicated offshore hydrogen pipelines would be the general permitting regime described above in the section ‘Development of New Platforms for Hydrogen Production’. However, there are no specific regulations governing the operation and safety of such pipelines as there are for natural gas pipelines.

12.5 Conclusions

Green hydrogen, which is expected to play a key role in achieving net-zero CO₂ emissions by 2050, is being actively promoted by Denmark and the Netherlands. This coincides with their plans for large-scale offshore wind developments, where the offshore production and transport of hydrogen will be an important support to these efforts. The comparative assessment of the Danish and Dutch policy and legal frameworks for offshore green hydrogen production and transport infrastructure highlights two key points: first, both countries are committed to promoting green hydrogen production, but detailed plans for onshore and offshore hydrogen development have yet to be defined; second, neither Denmark nor the Netherlands has implemented specific hydrogen legislation. The successful offshore implementation of a green hydrogen infrastructure depends on the existence of a robust and enabling legal framework. However, as the analysis shows, the offshore development of green hydrogen in Denmark and the Netherlands faces challenges due to legal uncertainties. Whether using (disused) offshore hydrocarbon platforms or developing new offshore platforms or artificial islands for hydrogen production, specific legal arrangements are needed. These arrangements should address and remove uncertainties related to reuse, permitting procedures, operational responsibilities and safety concerns. The analysis suggests that the simplest regulatory option may be to install electrolysers on existing offshore hydrocarbon platforms. This is because most of the necessary infrastructure is already in place and this approach is being considered in both countries, albeit to varying degrees.

The use of (disused) offshore natural gas pipelines for hydrogen transport faces legal challenges related to the definition of gas and the applicable gas quality standards in the Danish and Dutch gas legislation. Denmark has made progress in dealing with both the development of dedicated hydrogen transport infrastructure and the injection of hydrogen into the natural gas network by amending its Gas Supply Act, but there is still a need to clarify the permissible hydrogen content in the existing natural gas network. Conversely, the Netherlands has clarified the permissible hydrogen content in the existing natural gas network, but faces uncertainties due to the fact that its Gas Act does not apply to dedicated hydrogen transport infrastructure. These findings underline the importance of aligning national gas legislation with the forthcoming EU hydrogen regulation. Irrespective of the alternative chosen for the offshore transport of hydrogen by pipeline, it is essential that appropriate provisions are in place to address uncertainties regarding reuse, permitting procedures, operational responsibilities and safety concerns. Such provisions can be incorporated into existing gas legislation or through the adoption of specific hydrogen legislation.

The recommendations arising from the comparative assessment of the Danish and Dutch legal frameworks provide valuable guidance for other North Sea states interested in promoting offshore green hydrogen developments. These recommendations can be adapted to the specific needs of each country and their applicability will depend on factors such as the scale of planned offshore wind developments, the potential for repurposing hydrocarbon infrastructure and the existing regulatory framework for hydrogen. This tailoring to specific circumstances is also evident in the assessment of Denmark and the Netherlands. Both countries are making progress in supporting offshore hydrogen developments, but their approaches differ. Denmark is exploring the deployment of an artificial island for hydrogen production and has implemented legislation to facilitate this initiative. In contrast, the Netherlands appears to be prioritising the repurposing of offshore hydrocarbon infrastructure, and relevant legislation is now aligned with this strategy. However, despite the progress made, the legal challenges identified in both countries need to be addressed in order to create an attractive investment environment for offshore green hydrogen developments.

13 How to Build Your Own Electrolyser Pitfalls and Challenges of the Permitting Procedures in Finland

Elena Tissari

13.1 Introduction to the Renewable Hydrogen Permitting Regime in Finland

In Finland, permitting practices for renewable hydrogen electrolysers are only just starting to develop. Permitting procedures are still fragmented and there is no so-called one-stop shop for hydrogen electrolyser permits.¹ Several different permits by different authorities are required and the permit procedures are usually independent of each other.² This chapter investigates the current permitting regime and makes suggestions for improvements.

Complicated permit procedures can be a challenge for setting up new hydrogen electrolysers to produce renewable hydrogen in Finland. They can take a considerable amount of time and the permitting process is one of the key factors that significantly impacts decisions on investment in renewable hydrogen, according to a Finnish government study on the opportunities and limitations of the hydrogen economy and its development in Finland.³ Because of this, a seamless permit procedure would work as an advantage to Finland and is something envisaged by the Finnish government.⁴ A well-functioning and relatively easy permitting procedure will be an advantage in attracting foreign investment for renewable hydrogen electrolyser projects and can help Finland in meeting its renewable hydrogen production goals.⁵

Luckily, most permitting applications can be done online and the authorities can also be contacted digitally.⁶ The different authorities dealing with permits in Finland are mainly municipal authorities and the Regional State Administrative Agency; for energy projects like hydrogen production the Energy Agency is also relevant.⁷ Usually, the permit procedure for industrial plants, such as electrolysers, consists of an environmental permit under the Environmental Protection Act (527/2014), a water use permit under the Water Act (587/2011), a building permit and possible changes to zoning under the Land Use and Building Act (132/1999). Several other permits, such as those related to safety, are also needed for building an electrolyser, but they will not be covered in this chapter.

As an example of a currently ongoing renewable hydrogen project permitting procedure time frame, it is estimated that the permitting process for a 200-megawatt hydrogen and synthetic methane production plant in Kristinestad will take approximately 1–1.5 years.⁸ This project has already received some of the permits, including for water use, but is still missing a handful of permits, such as environmental, chemical and change in the zoning plans, which is needed for the realization of the plant.⁹ Another ongoing renewable hydrogen project is a 300-megawatt hydrogen production plant in Kokkola producing hydrogen from renewable electricity and ammonia.¹⁰ The permit process for this hydrogen plant, which will be Finland’s biggest hydrogen plant, is estimated to take a total of three years.¹¹

Public hearings or obtaining statements are often also part of permit procedures and can take extra time.¹² In order to stay within the project schedule, it is therefore important to get well acquainted with the permit procedures and plan accordingly.¹³ It is usually foreseeable how long processing a particular permit can take – for example, the maximum time for processing the environmental and water use permits should be twelve months, in accordance with the amended Act on the Handling of Environmental Protection and Water Matters in the Regional Administrative Agency (898/2009).¹⁴ However, it is not possible to know in advance whether the authorities are satisfied with all the documentation. This is one of the reasons why it is good to become well acquainted with the permit process and requirements and also why authorities offer guidance in filling in the applications.¹⁵ This includes both extensive guidance documents online for filling in particular permits as well as the ability to schedule a meeting where the authorities help you apply for a permit in person.¹⁶ The permit authorities are usually very approachable and available for answering questions; at least many foreign investment companies have praised their interactions with Finnish public authorities.¹⁷

Because of these long permit processing times and their impact on investments, the government hopes for a smoother and faster permit process.¹⁸ The National Climate and Energy strategy envisions a maximum one-year permit handling time for green projects.¹⁹ This has already been passed by the government and introduced into legislation as a temporary amendment of the law on the handling of environmental protection and water matters in the Regional Administrative Agency (1144/2022).²⁰ It establishes a fast-track priority permit handling process for renewable energy projects that boost the green transition, including renewable hydrogen projects.²¹ Section 13.4 of this chapter will cover the new fast-track procedure for renewable energy projects, which is also relevant for hydrogen electrolysers.

The following sections will detail which permits are necessary for renewable hydrogen electrolysers, starting with zoning, land use and building (Section 13.2) and then moving on to permits related to the environment (Section 13.3). At the end of this chapter, there will be a section covering the latest developments in the permitting regime relevant to renewable hydrogen electrolyser projects (Section 13.4). The following sections will also delve into the challenges of the permitting procedure which can act as pitfalls since they can deter investments in renewable hydrogen, and without investment new electrolysers cannot be built.

13.2 Challenges of the Permitting Procedures Related to Zoning, Planning and Building

Land use planning in Finland is organized hierarchically.²² At the top are national land use objectives that are set by the government.²³ The national land use objectives are binding, and the policy framework is established to offer guidance for land use for the whole country.²⁴ Regional land use plans are then created to guide regional development.²⁵ Based on the national objectives and regional land use plans municipalities will take the next steps in zoning and planning.

Municipalities are responsible for local master plans and local detailed plans.²⁶ Local master plans are made on the municipal level, which creates a general structure for the municipality.²⁷ Every municipality must prepare a local master plan.²⁸ Based on the Act on Municipalities (410/2015)²⁹ there exists the right to make a proposal for the municipality to draw up a plan.³⁰ So, for example, a renewable hydrogen production company could propose that the municipality draw up a local master plan to include zoning areas for hydrogen production. However, all decision power is still left to the municipality, which is responsible for drawing up such general plans.³¹ The most specific form of planning is the local detailed plans, which outline which land plots can be used for certain activities and how buildings should be arranged.³² It is also possible to request the municipality to make changes to the local detailed plans if necessary, but just as for local master plans, the municipality will have the power to decide to act on it or not.³³ The municipalities give planning permissions and issue building permits. They create building ordinances, which act as their primary tools to control construction.³⁴ Municipalities are therefore the most important actors regarding zoning and construction in Finland. The rules set out in the municipal building ordinances can vary significantly between different municipalities.

When creating the zoning plans, the zoning and planning authorities have to take into account various factors related to safety and environmental protection.³⁵ One condition is that industrial production plants are generally not allowed to be located near major groundwater areas,³⁶ due to concerns about pollution of the water supply.³⁷ Industrial areas are usually planned and zoned further from densely populated areas,³⁸ especially where hospitals and schools are located.³⁹ Additionally, proximity to areas important for nature is avoided.⁴⁰ This is due to possible hazards that the zoning authorities have to take into account.⁴¹ The zoning authorities have to consider all these factors when they create their plans and therefore it is not up to the permit applicant. In zoning, the major decisions are made by the authorities and the applicant cannot usually choose a location that is not already designated for industrial purposes. The zoning plans in Finland are therefore quite rigid and it is important to consider them carefully: they need to allow the setting up of a new hydrogen production plant in the area.⁴² Industrial production plants are only allowed in areas that are already reserved for industrial and storage operations.⁴³

After permission from the municipality is received for the use of a plot of land dedicated to industrial purposes, a valid building permit under the Land Use and Building Act (132/1999) is always needed before any construction of the facility can take place.⁴⁴ The municipal construction authority will grant the building permit.⁴⁵

When getting a zoning plan and a construction permit you mainly have to deal with the municipal authorities which are responsible for the local master plans and local detailed plans as well as the municipal building ordinance. Dealing almost exclusively with the municipal authorities can provide a couple of challenges that can hinder the setting up of electrolysers.

Firstly, many municipalities are quite small but still need to provide various and often specialized services.⁴⁶ This may lead to the municipal authorities being overloaded with tasks which can lead to longer permit approval and handling times.⁴⁷ Overdue permit processing times and long waits until approval is granted slow down investment projects and can lead to delays in investments because large amounts of capital are at a standstill.⁴⁸ Investors have felt that the processes taking a long time are particularly an issue with the approval of land use plans and with building permits.⁴⁹

Another issue is that when things are decided on a municipal level, even when based on national objectives and guidelines, there will be large discrepancies between municipalities in what is permitted, and which conditions must be met, as well as how things are handled. This creates uncertainty for the investors.⁵⁰ Especially small and medium-sized enterprises view this uncertainty as a problem, and it is something that plays a negative role in their investment decisions.⁵¹

Also mentioned was that zoning plans created by zoning authorities are rigid and sometimes changing them can be difficult. Usually, industrial plants can only be set up on land that is already designated for industrial use in the zoning plans. There is a right to prompt the municipality to draw up specific plans or make necessary changes to already existing plans. But this is all at the discretion of the municipality and therefore there is no guarantee that they will decide to act on it. This could also be considered a factor that causes uncertainty, which can affect investment decisions – especially if the municipal authorities already have a lot on their hands due to their many responsibilities, which can negatively affect permitting and therefore investments. In such situations, it seems unlikely that the municipality would agree to change its original zoning plans. However, because large new investments also benefit the municipality and the local economy, municipalities should be willing to create space for industry and to draw up new plans if necessary. At least for some ongoing hydrogen projects, changes in the zoning plans were required and are now taking a long time to be approved.⁵²

A further issue is that compared to zoning and planning in other countries, Finland has a high level of regulation and operational restrictions, which may constitute a barrier for investment.⁵³ However, this is less so for energy project development than for other industrial projects as in Finland there are no separate burdensome sector-specific regulations for energy projects, which exist in many other countries and can present a challenge.⁵⁴

Long waiting times and bureaucracy are identified as particular issues in the Finnish zoning and construction permit regime by investors and are therefore the biggest challenge in the permitting process.⁵⁵ Changes are currently being made to the system, which should bring some improvements. Based on a proposal that was adopted by the Parliament on 1 March 2023, the Land Use and Building Act (132/1999) will be amended and renamed the Zoning Act.⁵⁶ The amendments and new title come into force on 1 January 2025.⁵⁷ A new separate Building Act will also enter into force on 1 January 2025.⁵⁸ The new amendments aim at smoothing the construction process, boosting a circular economy and digitalization as well as improving the quality of construction.⁵⁹ Making the initial permitting process smoother would be an integral part of facilitating the construction process as a whole and it is hoped that when the amendments come into force they will have the desired effect.

13.3 Permits Related to the Environment and Their Challenging Bureaucracy

One of the most important types of permits needed for a hydrogen electrolyser is the environmental permit. Any activities that can negatively affect the environment require an environmental permit under the Environmental Protection Act (527/2014).⁶⁰ An environmental permit is needed for activities that affect water, air or soil, as well as activities that cause any noise or vibrations.⁶¹ A precondition for receiving the environmental permit is that the activities do not cause health concerns or significant environmental pollution, or risk causing such pollution.⁶² An environmental permit is necessary for energy projects as well as the production of steel and chemicals,⁶³ which are often tied together with renewable hydrogen production in Finland. The EU Industrial Emissions Directive (2010/75/EU)⁶⁴ is transposed to Finnish law mainly in the Environmental Protection Act (527/2014) and not as a separate act or decree, which is why considerations and assessments about emissions are part of the environmental permit.⁶⁵ Information about possible emissions, their effects and efforts at mitigation are required as part of the process of applying for an environmental permit; assessments on emissions are still required, but not under a separate permit. A renewable hydrogen electrolyser project also needs a water permit under the Water Act (587/2011) because large amounts of water are used for the electrolysis to produce renewable hydrogen and because a large hydrogen plant may have effects on water bodies on or surrounding the property where it is to be located.⁶⁶

The environmental permit needs to be applied for digitally, at the regional state administrative authority or a municipal environmental protection authority,⁶⁷ depending on the size of the project.⁶⁸ Because renewable hydrogen electrolysis projects need both a water use permit and an environmental permit, the permit needs to be applied for at the Regional State Administrative Authority.⁶⁹ If both an environmental permit and a water use permit are needed for the project, they can be applied for together and as a result only one permit is provided.⁷⁰ The reason these particular permits can be applied for together is that they are handled by the same authority and have some overlapping elements, especially in terms of environmental protection of waters and waterways. As stated earlier, the permitting process is still very fragmented; however, as the environmental and water permits cover similar things to an extent, they are a special case of permits that can be applied for at the same time.⁷¹

The environmental permit application needs to include basic information about the operator, the name of the facility, its location and the industry it is part of.⁷² Other information that must be provided as part of the permit application is, for example, an assessment of the activity’s effects on the surrounding nature and environment,⁷³ as well as a summary of the activities for which the permit is intended; this information will be used for the purpose of presenting the application to the public as part of the public consultation process related to permit applications.⁷⁴ For electrolyser permits, information on the fuels used, their storage, preservation and consumption, as well as the energy used or produced and the use of water is also relevant,⁷⁵ as is information on the raw materials, chemicals and other materials needed for production.⁷⁶ The same goes for their storage, preservation and consumption,⁷⁷ along with an assessment of the efficiency of the usage of energy and materials.⁷⁸ The necessity for these items will depend on which specific type of electrolyser will be used, for example whether any chemicals are involved in the process.

What information the environmental permit application needs to include is quite comprehensive, but this only symbolizes the fact that Finland takes environmental protection very seriously. However, strict environmental protection also brings more bureaucracy. A lot of bureaucracy can act as a barrier to investment.⁷⁹ One reason suggested for why bureaucracy negatively affects investment is that bureaucracy is interested in maximizing its own scope and influence and therefore has adverse effects on the incentives for investment.⁸⁰ This is how it is modelled in public choice literature.⁸¹ Another point of view, also from public choice literature, proclaims that governments’ coercive activities, such as licensing or permitting, act as restrictions and divert efforts away from investment.⁸² Therefore, economic theory shows that bureaucracy can deter investment so that increased bureaucracy regarding environmental permits can be considered a difficulty for building new renewable hydrogen electrolysers.

There are other concerns with environmental permits that may also influence investment decisions. The more thorough the permit application documentation the better the chances of the permit being granted the first time around; it also makes the process easier for the authorities, as they do not need to request additional materials and information, which could delay the permit process. A delayed permit is also a disadvantage for the investors,⁸³ as already discussed to some extent when the influence of zoning and building permits on investment decisions was covered. In general, the Finnish permit process seems to be mainly designed from the point of view of the authorities, making it as easy and efficient as possible for them, rather than for the stakeholders who need the permits. To promote the building of more hydrogen electrolysers, the permit process should consider the stakeholders more.

There have been already some improvements in this regard as the Confederation of Finnish Industries (EK) has conducted surveys on how investors feel about the Finnish regulatory and permitting regime.⁸⁴ The companies were also able to give their opinions on how the permitting regime should be improved and which improvements they considered the most significant.⁸⁵ Particular points of complaint by investors were the long permitting times and increased bureaucracy related to the environmental permits.⁸⁶ The potential investors who took part in the survey wished in particular for legislative changes.⁸⁷ The government took note of this and implemented some changes in the form of a temporary amendment to the existing law.⁸⁸ This will be discussed in the next section.

13.4 Accelerated Permitting Procedure for Green Transition Projects: An Improvement or a Pitfall?

The permitting process in Finland is generally rather fragmented; however, for hydrogen projects, Finland aims to have a seamless permitting process in place in order to attract renewable hydrogen production and especially investments in renewable hydrogen production.⁸⁹ Part of this aim is the temporary legislative amendment presented in this section. The new priority procedure for green transition projects will be applied to environmental and water permits for renewable hydrogen electrolysers,⁹⁰ according to which the processing time should be a maximum of twelve months.⁹¹

The Finnish Parliament has passed a law on temporary amendment of the law on the handling of environmental protection and water matters in the Regional Administrative Agency (1144/2022). The temporary amendment adds Article 2a to the Act on the Handling of Environmental Protection and Water Matters in the Regional Administrative Agency (898/2009).⁹² This temporary amendment provides a fast-track procedure for investment projects accelerating the green transition.⁹³ The Finnish Ministry of the Environment defines green transition as ‘a shift towards economically sustainable growth and an economy that is not based on fossil fuels and overconsumption of natural resources’.⁹⁴ This definition is quite fitting for renewable hydrogen production by electrolysis.

The temporary amendment will be in place between 2023 and 2026 and it covers permits under the Environmental Protection Act (527/2014) and the Water Act (587/2011), which are handled by the regional state administrative agencies.⁹⁵ Overall, as well as permit handling, the fast-track procedure will also apply to appeals concerning the permits in administrative courts.⁹⁶ This amendment further brings the Finnish legislation in line with EU Regulation 2020/852⁹⁷ establishing a framework to facilitate sustainable investment.⁹⁸

With regard to renewable hydrogen, the fast-track procedure will apply to permit applications concerning ‘the production and utilization of hydrogen, with the exception of the production of hydrogen from fossil fuels’.⁹⁹ Therefore, it will cover projects installing electrolysers for renewable hydrogen production. This definition only singles out hydrogen production from fossil fuels, but not hydrogen produced by nuclear energy, which is also carbon neutral, despite not generally falling under the definition of renewable hydrogen. Therefore, even electricity from nuclear energy could be used to run the electrolyser and it could still be considered a renewable hydrogen project in the Finnish context.

The main reason for proposing this amendment is that the biggest hindrance to large renewable energy and infrastructure development, such as renewable hydrogen projects, is usually the permitting process, which can take a considerable amount of time.¹⁰⁰ Another benefit of the law is that while projects supporting a green transition get priority, projects that cause harmful environmental impacts will not benefit from the fast-track permit handling.¹⁰¹ This means that green energy projects can be realized more quickly than carbon-intensive energy projects.¹⁰²

To qualify as an investment project boosting a green transition, the project has to follow the ‘do no significant harm’ principle.¹⁰³ The obligation not to cause significant harm is a key principle of international environmental law,¹⁰⁴ but it is new to Finnish environmental legislation.¹⁰⁵ The do no significant harm principle is part of the EU taxonomy for sustainable financing and is used as a condition of receiving funding under the EU Recovery and Resilience Facility.¹⁰⁶ Under the do no significant harm principle the project cannot cause harm to any of the six objectives of the EU taxonomy on environmental sustainability, laid down in Article 17 of the EU Regulation 2020/852: (1) climate change mitigation; (2) climate change adaptation; (3) the sustainable use and protection of water and marine resources; (4) circular economy; (5) pollution prevention and control; and (6) the protection and restoration of biodiversity and ecosystems.¹⁰⁷

However, in the context of Finnish permit applications, the do no significant harm principle is applied in a context that is outside the EU reporting obligation.¹⁰⁸ This means that the technical evaluation criteria established by the EU regulation for the do no significant harm principle does not have to be applied here. Instead, a different assessment method will be applied.¹⁰⁹ This will include assessing the permit application in the context of the do no significant harm principle through different technical, scientific and legal questions.¹¹⁰ This means that while the do no significant harm principle can be found in the EU taxonomy and largely follows the same definitions in the Finnish permitting context, the technical criteria used for the assessment are different to what is in place at the EU level.

The use of the do no significant harm principle and having a separate assessment criterion for it is new in the permitting context and adds an additional layer of assessment to the permitting process because before the permit application is processed the applicant must prove it complies with the do no significant harm principle. The permit authorities also have to determine that the application meets the do no significant harm criteria as well as the other criteria that qualify the permit for prioritized permit processing, which is all on top of the normal permit procedure for environmental and water permits.¹¹¹ As this needs to be done on a project-by-project basis, it might initially delay the permit process rather than speeding it up; this is a new layer of assessment, and standardized interpretation of such assessment criteria usually takes time to be established in practice.¹¹² This has created concerns among legal professionals, as they fear that the application of the do no significant harm principle could create a bottleneck and water down some of the positive impacts of the fast-track procedure and its effect on the timelines for the realization of renewable energy projects.¹¹³

A key benefit of the fast-track procedure is to ensure that investments can proceed without delay. To do this, the maximum permit processing times are shortened. If the time to get the necessary permits is shorter, the projects can be realized faster. If projects can be up and running faster, that means production can start sooner, and the investment will be recouped faster. This will be a benefit for the investors, who have complained of long permit processing times with the result that investments are at a standstill.¹¹⁴ However, some legal professionals are already wary about how fast-track procedure will play out in reality as the concept is new, and it adds two additional assessment steps:¹¹⁵ an assessment on whether the project is eligible for the fast-track process in the first place – does it meet the criteria of a renewable energy project that boosts green transition – and whether it meets the technical and scientific criteria of the do no harm principle, which is new in the context of the Finnish permitting landscape. As there is no standardized practice for these assessments and they are both new, it will take some time for the authorities to get used to them and create their assessment standards. This is why it is likely that when the fast-track procedure is first in place, it might in effect lead to further delays instead of, as intended, speeding up the permit process for environmental and water permits.

However, if the faster procedure for environmental and water permits works as intended and ends up benefiting investors and therefore attracting more investment in renewable hydrogen electrolysers it can be deemed a welcome improvement in the challenging permit procedure. It will, though, take some years before any actual results can be seen on whether the amendment was beneficial or not in terms of investments into renewable hydrogen production, and this will be a point for future research on this topic.

13.5 Conclusion

To conclude, there are a couple of essential points that need to be made. The Finnish permitting landscape remains fragmented and many different permits are needed. Positive notes are that most permits can be applied for easily online, but a number of attachments in the form of different assessments, plans and statements are required, which is deemed bureaucratic by investors. Long permit approval times are also named by investors as barriers to investment and are a problem for both building and environmental permits. Issues with the permitting regime influence the investment decisions of small and medium-sized enterprises in particular, as the long waiting times and bureaucracy affect them the most.

One of the main types of permits that are necessary for renewable hydrogen electrolyser projects and that are covered in this chapter are zoning permissions and building permits under the Land Use and Building Act (132/1999). This process mainly takes place on the municipal level, which can have some drawbacks for efficiency and negatively influence investment decisions. This is because small municipalities are responsible for many specialized tasks which can lead to long permit approval times for building permits.

Another important group of permits that are necessary for the realization of renewable hydrogen electrolyser projects are permits related to the environment. These are environmental and water permits. If a new production plant is set up that only produces renewable hydrogen, a separate emissions permit is not necessary. That is only needed in cases where the same installation also produces something else that falls under the requirements. Obtaining an environmental permit is highly bureaucratic, which can be a barrier to investment into renewable hydrogen.

Recently a law on the temporary amendment of the law on the handling of environmental protection and water matters in the Regional Administrative Agency (1144/2022) was passed which aims at easing the permit procedure for green investment projects, including hydrogen electrolysers, and addresses some of the issues with the permitting regime. The most important takeaways from the amendment are that it applies to environmental and water permits and it sets the maximum permit processing time at twelve months. This is a step in the right direction to improve the permitting process for renewable hydrogen electrolysers, and it is hoped that it will have the intended effect on boosting investments in this area.

Despite some improvements, a number of potential issues remain that may influence investment decisions in renewable hydrogen in a negative way have been identified in this study.

14 Giving Hydrogen the Green Light and Putting It on the Fast-Track? Consenting Hydrogen Developments in Aotearoa New Zealand

Jennifer Campion

14.1 Introduction

Readers who enjoyed science lessons at school may recall an experiment in which hydrogen is made by applying a direct current to water and then seeing bubbles of hydrogen and oxygen.¹ This process – called ‘electrolysis’ – uses electricity to split water into its two component molecules, hydrogen and oxygen; hydrogen gas can then be stored and used like a battery to generate electricity when required.² This reaction takes place inside an electrolyser and is the process by which low-carbon, renewable-energy-derived ‘green’ hydrogen is made.³ However, before the science classroom result can be replicated on an industrial scale, concerns around safety, purity of product and reliability of technology must be addressed.⁴ Because of this, there are strict safety design standards for electrolysers, which must conform to the standards required by the country of installation.⁵ Developers of electrolytic hydrogen projects must also obtain the necessary resource consents and permits.

This chapter discusses the permitting regime for electrolysers in New Zealand. Two types are currently used on a large scale in New Zealand: alkaline (AEL) and polymer electrolyte membrane (PEM) electrolysers.⁶ Both PEM and AEL electrolysers use an electric current to split water molecules into hydrogen and oxygen, but they use different types of electrolyte solution and different materials for the membrane and electrodes.⁷ The type of electrolyser used will depend on the project’s needs, although PEM electrolysers are often preferred, because they offer greater flexibility.⁸ Irrespective of what type of electrolyser is chosen, resource consent will be needed before the project can proceed. This chapter asks what permits will be needed and what processes must be followed in order for an electrolytic hydrogen project to receive resource consent.

New Zealand may not initially seem the most ‘obvious’ choice for examining the way in which electrolytic hydrogen projects are permitted. After all, many states are currently considering how low-carbon, renewable-energy-derived ‘green’ hydrogen can support decarbonisation goals, and are investigating what may be the most appropriate applications and transition pathways for hydrogen within their energy systems and economies, and a number of national hydrogen strategies and polices have been published recently.⁹ New Zealand is no exception, having published its Vision for Hydrogen in New Zealand Green Paper in September 2019.¹⁰ However, unlike those states which are considering a range of hydrogen options,¹¹ New Zealand’s focus is firmly on green hydrogen,¹² which means the resource consent process for electrolysers is critical to New Zealand’s hydrogen ambitions.¹³ The Vision indicated the government’s intention to develop a hydrogen roadmap;¹⁴ an Interim Hydrogen Roadmap was released in August 2023, with a final Hydrogen Roadmap anticipated by the end of 2024.¹⁵ These policy documents signal New Zealand’s desire to position itself as a hydrogen exporter (and to contribute to the decarbonisation of other energy markets, particularly in Asia),¹⁶ with the domestic hydrogen opportunity largely supplementing existing renewable energy activities.¹⁷ Even so, developments in New Zealand are still at an early stage and the green hydrogen market in New Zealand is a ‘nascent industry’.¹⁸ Indeed, the existing hydrogen market in New Zealand is dominated by major industrial manufacturers (methanol production, ammonia and urea production, refining and steel production) and the majority of hydrogen is produced in-house from domestic natural gas via steam methane reforming facilities, with a smaller proportion of electrolytic hydrogen for steel production.¹⁹

Because electrolysers are the hydrogen production devices with the most potential to support environmentally friendly, green hydrogen developments, consideration of the requirements for obtaining resource consent for an electrolytic hydrogen project offers a useful entry point for consideration of the way that New Zealand’s regulatory framework for hydrogen supports its green hydrogen Vision. More immediately, the chapter makes a practical contribution to the hydrogen transition in New Zealand by setting out the current process for obtaining resource consent for electrolytic hydrogen projects.

Although there is no specific, dedicated regime for permitting electrolysers in New Zealand, a range of requirements must be met, particularly in relation to health and safety. Some of these are set out in legislation, while others, particularly technical specifications, are contained in standards.²⁰ Because compliance with these requirements will need to be demonstrated through the resource consent application process, this chapter focuses on that process, and notes these requirements in relation to it.

For context, the chapter begins with a brief overview of New Zealand’s hydrogen regulatory environment (Section 14.2). It then considers New Zealand’s resource management framework (Section 14.3), before discussing the specific requirements for resource consent for electrolytic hydrogen projects, with reference to a successful recent resource consent application (Section 14.3.2). The chapter then notes concerns about the efficacy of the resource consent process for supporting hydrogen developments, and suggested reforms (Section 14.4), before offering concluding remarks.

14.2 Regulating Hydrogen in New Zealand

Despite current and planned hydrogen developments, there is no dedicated, hydrogen-specific regulatory framework for the production, transportation and storage of hydrogen in New Zealand.²¹ Instead, a range of legislation, regulations and industry standards may be applicable.²² For example, the Gas Act 1992 provides the legislative framework for the regulation, supply and use of gas in New Zealand, including hydrogen, and the protection of public health and safety and property.²³ Equally significant for electrolytic hydrogen projects is the Electricity Act 1992, which regulates the supply and use of electricity, and sets out safety requirements to protect electrical workers and the public.²⁴ The Health and Safety at Work Act 2015 sets out principles, duties and rights in relation to workplace health and safety, and covers hazardous activities, workplaces and facilities, while the Hazardous Substances and New Organisms Act 1996 covers storage and use of gas containers.²⁵ The Land Transport Act 1998 governs technical aspects of land transport and vehicle safety and provides for the safe transport of dangerous goods.²⁶

In the Interim Roadmap the government committed to developing regulations to enable safe operation of hydrogen projects, and is focused on ‘making changes needed to enable safe use of near-term activities such as production, storage and distribution, and applications like heavy road transport’.²⁷ To date, regulatory reform has been largely focused on amending provisions relating to natural gas to include coverage of hydrogen, and on ensuring adequacy of health and safety regulations, including hydrogen safety standards.²⁸ Recent consideration of how well New Zealand’s current regulations,²⁹ standards³⁰ and health and safety requirements will cover anticipated hydrogen developments has identified the need for regulatory reform.³¹

A recent review concluded that hydrogen can generally be accommodated within the purpose of existing legislation, but the fit is imperfect and two significant issues arise: firstly, ‘the novel uses and forms of hydrogen [cause] potential misalignment across legislation’;³² and, secondly, some legislative provisions are ‘too prescriptive and therefore [exclude] hydrogen and its requirements’.³³ The review concluded that ‘all proposed [hydrogen] activities were covered by legislative purpose … [but] the existing regulatory frameworks fell short on fundamental criteria’.³⁴ Nevertheless, although ‘none of [New Zealand’s] regulatory frameworks are strictly “fit for purpose” to facilitate the future hydrogen economy … many of the issues that need to be resolved are not urgent or are relatively minor changes’.³⁵

The review identified forty-four Acts and ninety-three Regulations and Rules that are potentially relevant to hydrogen.³⁶ There is not scope in this chapter to discuss all of these regulations in detail, but an application for resource consent for an electrolytic hydrogen project will, in particular, need to demonstrate how the project will comply with requirements concerning safety, so these regulations are briefly addressed in the context of resource consent applications.

14.3 Obtaining Resource Consent for Electrolytic Hydrogen Projects

Before constructing and operating an electrolytic hydrogen project in New Zealand, resource consent will need to be obtained. Depending on the size, location and type of the intended development, a hydrogen project may require a number of resource consents. In addition to obtaining consents for hydrogen projects, developers may also need to obtain them for the renewable energy projects that provide electricity for the electrolysis that converts water to hydrogen: for example, electricity generated from wind farms.³⁷ These consents are issued under the Resource Management Act 1991, which is the main piece of legislation that regulates the environmental impacts of activities in New Zealand.³⁸ Thus, consent applications are primarily concerned with the way the environment may be affected and the way resources, such as water, will be used in the hydrogen development, rather than with the technical specifications of the electrolyser. That said, a range of regulations apply to the safe operation of electrical equipment, especially where this will be occurring in a potentially hazardous environment, so technical specifications and details of how the project will comply with these requirements will be included with the application. Building consents may also be needed to construct the hydrogen facility.

14.3.1 Resource Management Act 1991

Since its enactment, the Resource Management Act 1991 (RMA) has played a central role in regulating the development of renewable energy generation in New Zealand.³⁹ Despite this, the RMA has been criticised for failing to achieve its purpose, for inadequately protecting the environment and for not enabling development.⁴⁰ At the time of writing, new legislation had recently been enacted that was intended to replace the RMA over the next decade.⁴¹ This would have produced a significantly different environmental management regime; however, following a change in government in late 2023, this legislation was repealed, with further reform expected in future.⁴²

The RMA’s purpose is to ensure that natural and physical resources are managed sustainably.⁴³ The RMA does this in a decentralised way by requiring regional and district councils to manage natural and physical resources in their area.⁴⁴ These councils must prepare district or regional plans, which provide a framework for development in their region or district.⁴⁵ This means that, although the RMA provides the consenting framework, the consents are needed because of regional plans as well as national regulations. Additionally, the local plans and policies governing resource management can differ between districts and regions, and there may also be differences within a district, city or region. Complicating this interplay, the effects that certain activities may have on resources are managed through a hierarchy of planning documents developed under the RMA, which contain policies, standards and rules that prescribe whether an activity is permitted, or requires resource consent, or if it is prohibited.⁴⁶ These include National Environment Standards and National Policy Statements and Regional Policy Statements, as well as plans and strategies under other legislation.⁴⁷ Sometimes these National Environment Standards will override local rules to ensure a consistent set of rules across all councils. Thus, national direction balances localised decision-making; however, the different priorities of these policies may have to be reconciled.⁴⁸ This has particular relevance for hydrogen developments because, on the one hand, national policy is being developed to support green hydrogen but, on the other, the regulations that will determine whether a project is consented to are much more localised. This may not be particularly problematic where a region is intended to be a ‘hydrogen hub’, but it does mean developers who are considering locating projects in different regions may be subject to different requirements in each region. For this reason, it has been suggested that a National Environment Standard for hydrogen would be helpful.⁴⁹

The RMA classifies activities into six primary categories: ‘permitted’, ‘controlled’, ‘restricted’, ‘discretionary’, ‘discretionary, non-complying’ and ‘prohibited’.⁵⁰ These categories determine whether a resource consent is required for particular activities. Rules in regional and district plans determine within which category an activity falls. The RMA prescribes the type of consent required and the process for obtaining a resource consent.⁵¹ Types of resource consents include land use consents,⁵² subdivision consents,⁵³ coastal permits,⁵⁴ water permits⁵⁵ and discharge permits.⁵⁶ For an electrolytic hydrogen project, the consent application would be expected to include land use consents, water permits and discharge permits. The duration of land use consents is unlimited, unless specified in the consent; the duration of other types of consent is a maximum of thirty-five years or the time specified in the consent.⁵⁷ The holder of a resource consent must comply with its conditions, which may include monitoring and reporting requirements.⁵⁸ Consents may be transferred.⁵⁹

Because these consents relate to resource use, they do not deal with health and safety issues. These issues are instead governed by legislation: for example, the Electricity (Safety) Regulations 2010 provide for the management of electrical hazards by setting out requirements covering electrical safety, design, construction, installation, prevention of damage and the supply and use of electricity (including generation connected to electrolysers). Electrolysers will need to be certified as compliant with these Regulations and certifications must be achieved prior to the project becoming operational.⁶⁰ Similarly, the Health and Safety at Work (Hazardous Substances) Regulations 2017 provide for the management of hazardous substances by setting our requirements for labelling and signage, storage, separation distances, control of substances and emergency preparation.⁶¹ Compliance with these Regulations will be demonstrated by a Location Compliance Certificate, which must be provided by an approved New Zealand certifier.⁶² And the Pressure Equipment, Cranes and Passenger Ropeways Regulations 1999 provide for the management of pressure equipment, and prescribe requirements for design, verification, manufacturing, inspection, certification, operation and maintenance. Again, compliance with these Regulations will be demonstrated by certification by an approved New Zealand certifier.⁶³ Even though these safety requirements are prescribed by legislation, they also arise within the scope of the consent process because a risk management process and assessment will be prepared and included with the documents in the resource consent application to fulfil the information requirements under the relevant district plan.

An application for resource consent can be made to the district council or regional council that administers the district or regional plan under which the resource consent is required.⁶⁴ The application must be accompanied by an assessment of environmental effects.⁶⁵ The council will determine whether the application will be publicly notified.⁶⁶ If the application is not publicly notified, it will take up to 20 working days; if the application is publicly notified, submissions can be lodged and a hearing held, which can take up to 130 working days.⁶⁷ The council will issue a decision and the applicant and any submitters have a right of appeal to the Environment Court against that decision.⁶⁸

When determining resource consent applications, consenting authorities must consider the environmental impacts of allowing the activity, as well as any mitigating or offsetting proposals.⁶⁹ Public support for, and opposition to, the application must also be considered. The RMA encourages public participation; this means that some projects have faced significant opposition and applicants can become involved in protracted hearing and appeal processes.⁷⁰ For hydrogen projects, safety can be a particular concern; even where an applicant can demonstrate compliance with health and safety regulations, safety concerns may still engender public opposition to a hydrogen project.

The RMA also requires consideration of the values and interests of the Indigenous Māori people when determining applications for resource consents.⁷¹ Court assessments of the adverse effects the proposed land use would have on Māori values, interests and their relationship to their ancestral lands has resulted in the refusal of consent for some renewable energy projects.⁷² Māori opposition could have particular significance for hydrogen projects for two reasons. Firstly, many Māori tribes own, or have rights over, land adjacent to renewable energy sources or facilities. This may enable them to locate hydrogen production facilities on their own land, but they may also be opposed to these developments.⁷³ Secondly, freshwater has enormous significance to Māori, and their views on using it for electrolysis will need to be considered: analogously, in relation to hydro-electric power, tribal spokespersons have noted that ‘the water itself might be renewable, the rivers themselves are not’.⁷⁴ Māori opposition to an electrolytic hydrogen project could result from opposition to the renewable energy activities that power the electrolysis, rather than opposition to the hydrogen project per se, as was seen in the following recent example of an opposed application for resource consent. This example also demonstrates the resource consents that may be needed for electrolytic hydrogen projects.

14.3.2 Example: Hiringia Energy Limited and Ballance Agri-Nutrients Limited Resource Consent Application

Hiringa Energy Limited and Ballance Agri-Nutrients Limited entered into a Joint Development Agreement to build facilities that use wind-powered electricity generation to produce green hydrogen and baseload renewable electricity for the Ballance Plant, which uses natural gas to produce ammonia and urea.⁷⁵ Hiringia and Ballance applied to establish a renewable wind energy facility and associated hydrogen production, storage, offtake and refuelling infrastructure.⁷⁶ Seven resource consents had previously been issued by the Taranaki Regional Council for the Ballance Plant, which covered the taking of water for the project as well as discharges to air, land and water.⁷⁷ Although specific consents were not sought for the electrolyser, it was described in the application along with the green hydrogen activities the project will support and that way received scrutiny and approval, as part of the resource consent application.

The application demonstrates the significance of regional plans to resource consent applications in New Zealand. Although the RMA provides the consenting framework, the consents are needed because of regional plans as well as national regulations: the applicants sought consents under the South Taranaki District Plan (2015) and the Regional Fresh Water Plan for Taranaki, as well as the Resource Management (National Environmental Standards for Freshwater) Regulations 2020 and the Resource Management (National Environmental Standard for Assessing and Managing Contaminants in Soil to Protect Human Health) Regulations 2011.⁷⁸

The application was made under the COVID-19 Recovery (Fast-Track Consenting) Act 2020. This fast-track consenting approach has been retained beyond the COVID pandemic, and is now discussed.

14.4 Resource Management Act Reform

During the COVID-19 pandemic, a temporary fast-track consenting process was introduced.⁷⁹ Following this experience, a more permanent fast-track process was introduced in the Natural and Built Environment Act 2023; although this Act has now been repealed,⁸⁰ the fast-track process has been retained.⁸¹ The process has two application steps: firstly, a referral application, which involves applying to use fast-track consenting; and, secondly, a substantive application, which involves applying for resource consent or lodging a notice of requirement.⁸² If the fast-track application is unsuccessful, the application may still proceed on the standard track. For successful fast-track applications, this is expected to reduce consenting time by an average of eighteen months per project.⁸³

Does this support New Zealand’s hydrogen aspirations? In principle, the fast-track process should reduce the problems of time and cost. However, even if the consent is granted promptly, it can still be challenged. As noted, both general public and Indigenous opposition can be a significant hurdle for hydrogen projects. For example, in the Hiringia and Ballance application referred to above, the fast-tracked consent was granted despite objections from environmental groups and some local Māori (who objected to the proposed location of the wind turbines), who then appealed against the granting of the project’s resource consent.⁸⁴ In the High Court decision to dismiss the appeal, the Court held that the expert panel had ‘properly considered’ the application.⁸⁵ That decision was also appealed; the appeal was dismissed in December 2023.⁸⁶ Despite the applicant’s eventual success in court, the litigation highlights the delays that hydrogen projects can face if a project is not supported, and – because the resource consent application in that example was a fast-track application – also highlights the limitation of the fast-track consenting process to achieve the desired efficiencies in energy development. The appeal against the consent being granted has eroded the temporal gains that the fast-track consent process offers, which suggests that consenting process abridgements that are designed to deliver procedural efficiencies to resolve substantive concerns over resource development may only be effective where a renewable energy project is supported (or at least not significantly opposed) by the community. This is not something that can necessarily be addressed via refinements to the consenting process; consultation and engagement with stakeholders may prove more effective. This may be a particular consideration for hydrogen projects, which can face significant public opposition.⁸⁷

Of course, public opposition is not the only reason for delays in the consenting process. Obtaining consent for hydrogen developments may be particularly challenging because of regulatory uncertainty. It has been observed that New Zealand’s ‘[r]egulation relating to use of green hydrogen in infrastructure and resource management is the [regulatory] area posing the most uncertainty’ for hydrogen developers.⁸⁸ A consequence of the many considerations that consenting authorities must take into account has been that applications take time to process – and projects can be held up, with the delay sometimes being significant, until consent is obtained.⁸⁹ Uncertainty over the way the existing regulatory frameworks permit and constrain hydrogen activities exacerbates this situation; consequently, ‘hydrogen projects meeting a specific set of criteria of being nationally significant may experience streamlined risk assessment and resource consent processes’, whereas ‘it may be more difficult for local authorities to consider the unique risks of hydrogen and it may be better for a central body, such as the [Environmental Protection Authority], to manage the consenting process … [which] would reduce the burden on Councils in understanding the unique risks associated with hydrogen’.⁹⁰

This need for a consistent, national body-led approach was also picked up in the submissions received following the release of the Vision Green Paper, with several supporters of hydrogen noting ‘the lack of a clear regulatory framework for hydrogen’ and raising ‘issues about uncertainty with regulatory coverage, regulatory boundaries, consenting under the RMA and what standards are relevant’.⁹¹ A National Environment Standard covering hydrogen was recommended by some submitters, who suggested that this could ensure consistent rules and guidelines for hydrogen use across different territorial authorities.⁹²

The suggestion of a National Environment Standard for hydrogen, and for a national-level agency to consider hydrogen resource consent applications, highlights the limitations of the localised decision-making process developed under the RMA to support New Zealand’s national hydrogen Vision – and the limitations of improvements, such as the streamlined, fast-tracked consenting approach, to address delays in processing consent applications which are rooted in uncertainty over the application of current regulations to hydrogen activities. The suggestion is a sensible one and, along with updates to regulatory coverage to ensure hydrogen activities are within the scope of current legislation, regulations and standards, may provide sufficient regulatory changes to support the hydrogen Vision. However, without community support, hydrogen may not achieve its potential either. Any changes to the consent process must still provide for community engagement and participation. Regulatory certainty must be achieved through consenting processes that support national hydrogen policies while taking account of community concerns.

14.5 Concluding Remarks

This chapter asked the question ‘which permits or resource consents are needed in order to build and operate an electrolyser in New Zealand?’ and identified resource consents that may be needed and the process for applying for these. Implicit in that discussion is the broader question of whether ‘New Zealand’s resource consenting regime supports its hydrogen Vision?’ Although legislation is in place that facilitates hydrogen development, there is still uncertainty and complexity. For resource consents, uncertainty can cause delays, which may frustrate the very progress the Vision is promoting. This is something that should be considered as further reform of New Zealand’s resource management framework occurs.

Ultimately, New Zealand is interested in developing its hydrogen capacity and has the potential to do this successfully. But, to achieve this, a supportive regulatory regime that facilitates the desired hydrogen developments will be needed. While, in theory, hydrogen appears to be within the scope of existing regulations, a hydrogen-specific framework would help tremendously with removing uncertainties and the delays these can cause.