Gas operators urge EU support for hydrogen infrastructure buildout

A new report from European gas operator associations has said significant government support will be required to develop the bloc’s hydrogen infrastructure and unlock early use.

The report by the European Network of Transmission System Operators for Gas (ENTSOG) and the European Network of Network Operators for Hydrogen (ENNOH), called for “EU-level de-risking mechanisms” to address the investment challenge hydrogen infrastructure faces.

It concluded that early investment in hydrogen infrastructure is essential to break the current “chicken-and-egg” deadlock between production, transport, and demand, warning that waiting for market maturity risks delaying sector growth.

While acknowledging that national support mechanisms can help develop domestic infrastructure, the report asserted that no single financing or de-risking instrument can enable large-scale deployment alone.

EU involvement must therefore include sharing the financial and operational risks tied to complex cross-border projects.

The report suggested two complementary mechanisms for accelerating and de-risking infrastructure projects: a European inter-temporal cost allocation (ICA) framework with revenue guarantees for network operators during early market development, and a special purpose vehicle to lock in long-term hydrogen transport bookings before demand fully materialises.

Together, these resemble Germany’s amortisation model, which defers early revenue shortfalls on the assumption that hydrogen demand and pipeline revenues grow over time.

The key difference is scale. Germany’s national scheme has earmarked €24bn ($28.2bn) for operators, while a comparable EU scheme would be vastly larger. As with Germany’s arrangement, the EU would be liable for the shortfall should demand fail to materialise.

A from think tank, the Institute for Energy Economics and Financial Analysis (IEEFA), criticised Germany’s amortisation scheme, arguing that under a “limited uptake” scenario, it could contribute around $34.7bn in unrecovered pipeline costs to the German taxpayer.

Like Entsog and Ennoh, German policymakers and network operators argue that early overbuild is necessary to provide long-term investment certainty and avoid future bottlenecks.

During a H2 View webinar, Tobias Bühnen, Policy Manager at trade Body Gas Infrastructure Europe, said early infrastructure would be critical, but a limited view on near-term demand made it difficult for gas operators to justify investments.

“We need to make some investments today that are relevant for future needs. If we wait 10 years and then see that now supply and demand is rapidly growing, and then decide…to build the infrastructure, it’s a bit late,” he said.

“What we as infrastructure operators currently observe as the highest bottleneck obstacle is the financing and de-risking question.”