This chapter focuses on the new gas directive and regulation (the Gas Package) from the perspective of the hydrogen ‘revolution’, and the importance allocated to its future role in the ongoing energy transition and in the achievement of the ambitious net zero target by 2050. Particular attention is given to key regulatory concepts and pillars in the new Gas Package, aimed at creating the conditions for a more cost-effective transition and creating an internal market in hydrogen and low carbon gases: these are unbundling, tariff regulation and third-party access. The chapter first describes these concepts as developed by the new measures and questions whether these concepts, which have been effectively transposed from natural gas regulation to hydrogen regulation, are suitable to achieve a cost-effective transition to a decarbonised gas market. In particular, the chapter will examine whether the proposed terminology, although fundamental, is sufficiently clearly and comprehensively defined in the new measures. Second, the chapter questions whether the new Gas Package establishes the necessary stable regulatory framework for incentivising hydrogen investment, by highlighting where the Gas Package could have been more comprehensive but also flexible in its treatment of concepts such as unbundling, on the tariff regime and third-party access provisions. It also queries whether the challenges of regulatory balancing can be adequately dealt with by way of the ‘regulatory holiday regime’ as proposed in the Gas Package.

Both the European Union and the Netherlands have recently announced their ambitions on the production and consumption of (renewable) hydrogen. A significant increase in hydrogen production and consumption in the Netherlands will require the development of large-scale hydrogen infrastructure such as hydrogen transport and storage. This chapter examines the development of such infrastructure in the Netherlands. First, it briefly discusses plans of group companies of N.V. Nederlandse Gasunie’s (Gasunie), the operator of the Dutch nationwide natural gas network, and of other natural gas infrastructure in the Netherlands and northern Germany, for the development and operation of hydrogen transport, storage and import infrastructure. Second, it explores the current Dutch legal framework regulating these hydrogen activities. Third, it offers a first appraisal of the European proposals on third-party access to hydrogen infrastructure as well as of their proposals for exempting new hydrogen infrastructure. Together, this provides the reader with a brief overview of the current Dutch legal framework for hydrogen activities, the potential future EU legal framework for access to hydrogen infrastructure in the Netherlands and the resulting challenges for developing such infrastructure.

Chapter Three provides an overview of the supporting mechanisms under China’s Renewable Energy Law and their effects in driving large-scale renewable energy investment in China. This chapter provides an in-depth analysis of the contributing factors, mainly from legal and regulatory perspectives, to the curtailment of renewable energy in the Chinese context. It also discusses newly adopted administrative measures to facilitate the integration of renewable energy. This chapter sheds light on the limited role of market reform in achieving large-scale renewable energy penetration in China and highlights the future direction of market development based on the latest reform objectives.

Chapter Five delves into fuel switching in the context of market and law reform in China’s gas sector. With the objective of increasing natural gas supply and consumption, the reform of the gas sector in China has taken a significant step forward since December 2019, with the establishment of an independent pipeline operator (i.e. PipeChina) and the promulgation of essential regulations on tariffs and third-party access. This chapter discusses the overall regulatory governance of China’s gas sector, assessing the extent to which market reform and newly promulgated regulations can drive the desired outcomes of increasing natural gas supply and consumption to accelerate fuel switching.

Underinvestment, overinvestment or mistargeted investment are common across sectors at all development stages. They penalize the poorest when it slows down increase in access rates, all users when it leads to congestion, environmental impacts or low quality, and taxpayers as their costs are passed on to final prices or subsidies. These failures are due to poorly designed processes, corruption and capture of politicians or civil servants, and collusion between service providers. Regulation is often part of the problem because cost-plus/rate-of-return regulation tends to stimulate overinvestment, price/revenue cap regulation tends to result in underinvestment, regulated firms can underinvest to exclude potential entrants, regulatory designs omitting to include service obligations and/or access rules lessen incentives to invest, and some regulatory commitments are unrealistic or non-credible. Regulatory failures and uncertainties increase the risk premia built into the financing cost of investment, contributing to further investment mismatch. Regulation can be part of the solution with the adoption of hybrid price regulation approaches and well-designed access prices and rules.