There has been welcome changes to the Renewable Transport Fuel Obligation (RTFO) announced by DfT which could accelerate hydrogen deployment. The hydrogen industry has been lobbying for some of these changes for some time and they are welcomed at the same time as we have the commencement of the UK Government’s hydrogen business model support for green electrolytic hydrogen.
Under the RTFO suppliers of relevant transport fuels in the UK are placed under an obligation to demonstrate that they have supplied a defined percentage of the total fuel they supply in an obligation period, from renewable transport fuels. Suppliers may meet their obligation by redeeming Renewable Transport Fuel Certificates (RTFCs) or by paying a fixed sum for each litre of fuel for which they wish to 'buy-out' of their obligation.
Green hydrogen (for example from wind or solar power electrolysis) is one such renewable transport fuel that can be directly used in transport applications.
The process of making green hydrogen from electrolysis needs electricity and that electricity needs to be renewable for obvious reasons.
As you might expect there are checks and balances on where the electricity has come from for the purposes of the RTFO and the concept of additionality (demonstrating that the renewable power is in addition to existing renewable generation or put another way, you have taken power from a new renewable generating station) has been been very narrowly applied and has been a major headache for the green hydrogen industry. This has held back development at a time when everyone wants to see deployment. Prior to these changes which have now been made, hydrogen producers were generally required to have a direct connection between renewable energy production, such a wind turbine or solar array, and a hydrogen plant. The new provisions allow the use of contractual arrangements like power purchase agreements, and the use of previously curtailed renewable generation to be used.
From now on to satisfy additionality and to get the full RTFC allocation for your green hydrogen you must evidence one of the criteria listed below:
- Direct line, no grid connection- i.e. a private wire connection with a renewable generating plant
- Direct line, grid connection: The renewable generating plant is connected directly to the hydrogen production plant and the electricity grid, and the hydrogen production plant can evidence that its consumption has been provided by the renewable generating plant without importing electricity from the wider grid.
- Additional capacity via an electricity grid: The renewable generating plant (or a proportion of it) was specifically built, upgraded, life-extended or brought back into service for the purposes of providing electricity via an electricity grid to a given hydrogen production site.
- Curtailment and wastage: The renewable electricity used is electricity which would have led to curtailment or been wasted if not consumed by the hydrogen production site.
- Other: The supplier can provide evidence relating to a case not specified above that satisfies the RTFO Administrator that the renewable electricity is additional.
For cases (a) to (c) above the supplier must show the renewable electricity consumed is from new generation capacity at a new, upgraded, life extended or recommissioned site. For new, upgraded or recommissioned sites, evidence should be provided to demonstrate that the new production capacity came online at the same time or after the hydrogen production site started operating. For life-extended sites, it should be demonstrated that the electricity production site would have ceased being able to operate without investment as a result of demand from the hydrogen production site and that this life-extension was completed at the same time or after the hydrogen production site started operating.
For cases (c) and (d) above,
- a renewables power purchase agreement (PPA), or equivalent contractual mechanism, must be in place between the electricity producer and the hydrogen producer for an amount of electricity equivalent to the amount that is claimed as additional renewable electricity. Both direct/sleeved and virtual PPAs are permitted. Where the same legal entity operates both the electricity and hydrogen production sites, a PPA is not required but equivalent documentation must be provided to demonstrate that the claimed renewable electricity was supplied to the grid exclusively for use by the hydrogen production site and was not consumed or sold for use elsewhere.
- In addition a so called “temporal correlation” between electricity generation and electricity consumption must be demonstrated. For each balancing period it must be demonstrated that the amount of renewable electricity consumed by the hydrogen production site was no more than the renewable electricity supplied by the renewable generating stations used by the hydrogen production site.
- Lastly for cases (c) and (d), suppliers must also take into account grid technical losses when determining the amount of additional renewable electricity supplied.
So more flexibility for hydrogen projects to source the renewable generation they need to produce green hydrogen and be able to claim valuable RTFCs.