Legal Regulation of Green Hydrogen in Ukraine

by Maryna Hritsyshyna

Ukraine has incredibly large potential for renewable energy production. According to the atlas of energy potential of renewable energy sources of Ukraine, as prepared by the Institute of Renewable Energy Sources, the potential of installed capacities for renewables in Ukraine is 874 GW, where 688 GW is wind energy and 82.76 GW is solar energy. As for the assessment of green hydrogen production in Ukraine, according to the most basic scenario, Ukraine’s renewable energy potential is 537 GW of installed capacities, though this could rise to 771 GW pursuant to a more optimistic scenario. On the basis of these figures, the potential for green hydrogen production in Ukraine is 505,133 million cubic meters.

Taking into consideration the country’s abundant natural resources for renewable energy production, Ukraine can produce green hydrogen not only for its own needs but also for export to other countries.

 

Ukraine’s place in EU strategic documents

Green hydrogen plays a key role in the EU’s climate neutrality goals. At the same time, EU countries will not be able to cover internal demand for green hydrogen. For this reason, and due to the renewable energy potential of Ukraine for green hydrogen production, the following strategic documents at EU level contain plans regarding Ukraine:

— The Hydrogen Strategy for a Climate-Neutral Europe dated 8 July 2020, where Ukraine is identified as a priority partner;

— The Green Hydrogen for a European Green Deal is a 2x40 GW Initiative, according to which Ukraine will have 8,000 MW of electrolyser capacities for green hydrogen and 1,800 MW for ammonia by 2030;

— The Green Hydrogen Investment and Support Report, according to which Ukraine requires EUR 20.1 billion in investment to construct capacities for a 10,000 MW electrolyser.

All these strategic documents and studies at EU level underline Ukraine’s potential to become an active participant of the EU hydrogen market as an exporter. Moreover, the recent Hydrogen Study of the Energy Community also confirmed that due to the significant renewable resources Ukraine could, indeed, become an exporter of green hydrogen.

At the same time, production and supply of green hydrogen from Ukraine are possible only after the implementation of legal regulations at state level.

 

Existing legal regulations for green hydrogen in Ukraine

In order to export green hydrogen to the EU, it’s important to have legal regulation of production and transportation in Ukraine. However, legal regulation of Ukraine’s energy sector is based on the implementation of the Third Energy Package. For this reason, the Law of Ukraine On the Natural Gas Market does not contain any regulation for hydrogen and the infrastructure for its transportation. At the same time, the Electricity Market Law and the Law of Ukraine On Alternative Sources of Energy do not contain rules for the use of electricity from renewables for hydrogen production.

In other words, the laws of Ukraine do not contain even the definition of green hydrogen. The Law of Ukraine On Alternative Types of Liquid and Gas Fuel includes only the definition of biohydrogen as hydrogen obtained from biomass and that it’s a type of biogas.

The absence of any rules regulating green hydrogen production and transportation in Ukraine through gas pipelines leads to uncertainty for potential investors. Moreover, the lack of legal regulation of green hydrogen is one of the barriers to the development of hydrogen projects in Ukraine.

 

Hydrogen strategy in Ukraine

Policy support for green hydrogen is very important for the development of hydrogen projects in Ukraine. Many countries announced their targets and regulatory framework for green hydrogen through hydrogen strategies. The first hydrogen strategy was announced by Japan in 2017. In 2020, several EU countries developed and approved their hydrogen strategies, including Germany, Spain, Norway and the Netherlands.

Ukraine does not have a hydrogen strategy yet. However, according to the decision of the National Security and Defence Council of Ukraine of 30 July 2021, and enacted by the Presidential Decree of 28 August 2021, the Cabinet Ministers of Ukraine shall approve Ukraine’s hydrogen strategy by 31 December 2021 and approve an action plan for its implementation, which should include relevant amendments to legislation.

Work on a national hydrogen strategy by the Ministry of Energy of Ukraine is already under way in Ukraine with assistance from USAID and support of the World Bank. On 11 August 2021, the first meeting of a working group on the development of the Hydrogen Strategy of Ukraine was held in the Ministry of Energy together with representatives of the Ministry of Environment and Natural Resources, the State Agency for Energy Efficiency, industry organisations, and experts. It should be noted that taking into account the industry’s novelty, the Hydrogen Strategy of Ukraine should be a dynamic document. However, it is unclear when the Hydrogen Strategy of Ukraine will be approved.

 

Preparatory work before Hydrogen Strategy in Ukraine

According to analysis undertaken by the International Renewable Energy Agency (IRENA) on green hydrogen policies, an effective hydrogen strategy requires extensive work that starts with research and development (R&D) programs, vision documents, and roadmaps.

R&D programs have been launched by the Gas Transmission System Operator of Ukraine and Regional Gas Company (RGC). The behaviour of hydrogen and blended hydrogen with natural gas is the subject of study by RGC. The RGC hydrogen project commenced in February 2020 and will continue till 2025. This research project has been conducted at five special landfills: Volyn, Dnipropetrovsk, Zhytomyr, Ivano-Frankivsk and Kharkiv Regions. As a result, RGC managed to reproduce gas distribution network conditions at test sites and plans to perform over 180 experiments. The Gas Transmission System Operator of Ukraine has an H2 system readiness project in 2021-2026 to assess the transmission system of Ukraine as to readiness to accept hydrogen.

As for vision documents, IRENA means documents that give answers to the questions “why”, “why hydrogen”, “why this jurisdiction”, and “why now”. In addition to strategic documents at EU level, Ukraine also signed the Joint Declaration of Intent on Establishment of Energy Partnership with Germany in August 2020 to expand cooperation between the two countries in the energy sector. One of the priority issues of this document is development of the “green” hydrogen sector in Ukraine.

Ukraine does not have an approved roadmap for the “green” hydrogen sector. However, the Ministry of Energy of Ukraine has, in cooperation with the United Nations Economic Commission for Europe (UNECE), prepared a draft roadmap for hydrogen production and use in Ukraine and a draft Roadmap for the use of hydrogen in Ukraine in road transport.

According to the draft Roadmap for hydrogen production and use in Ukraine, the implementation of hydrogen technology can be divided into three stages: at the first stage (2021-2023), assessment of the Ukrainian economy for the “green transition” and launch of the hydrogen economy; at the second stage (2024-2026), policy prioritisation, hydrogen market and supply chain development and demonstration; at the third stage (2027-2029), Smart Portfolio of Policies and Strategic hydrogen project development, regulatory reform, technological development. Each of the stages contains a list of legislation and economic measures. However, these stages do not comply with the targets for Ukraine set out in the Green Hydrogen for a European Green Deal A 2x40 GW Initiative, which states Ukraine shall have 8,000 MW of electrolyser capacities by 2030.

Notwithstanding the fact that roadmaps are still not approved in Ukraine, these documents are important for the development of Ukraine’s Hydrogen Strategy. Alongside strategic documents for the hydrogen economy and for the realisation of hydrogen projects, it is crucial to have regulations for production and transportation of green hydrogen.

 

Legal regulation necessary in Ukraine for hydrogen projects

A number of pilot hydrogen projects were recently announced in Ukraine. In August 2021, Naftogaz of Ukraine NJSC and the German gas trader RWE Supply & Trading signed a Memorandum of Understanding to study the possibilities of cooperation so as to create a complete value chain for green hydrogen, including ammonia, produced in Ukraine.

One of the largest green hydrogen pilot projects is the Danube hydrogen valley project, which aims to create an energy cluster in the south of Ukraine in Odesa Region. The project includes 5 GW of wind and solar power plants and 3 GW of electrolysers. It is planned to implement the project by 2025.

In addition to these pilot projects, there have also been announcements about the commencement of a hydrogen project by Eco-Optima group and the Green Hydrogen Industrial Cluster by DTEK.

However, in order to begin the development of hydrogen projects, it’s important to understand permit requirements. According to information from Hydrogen Europe, the production of 1 kg of green hydrogen via electrolysis requires 8.92 litres of water. However, under Article 48 of the Water Code, the use of up to 5 cubic metres of water per day qualifies as special water use that is subject to payment and is carried out based on a permit for special water use. Taking into account this requirement, it is likely that the realisation of hydrogen projects will also require a permit for special water use.

Hydrogen belongs to the list of individual hazardous substances according to the Cabinet of Ministers of Ukraine Resolution No. 956 About Identification and Declaration of Safety of Objects of Increased Danger of 11 July 2002. At the same time, the production of hazardous substances is high-risk work that can be performed only on the basis of a permit. Taking into account the physical features of hydrogen as an explosive material, a permit for high-risk work will also probably be required. However, these permits apply for all projects in the energy sector and do not include rules for the production of green hydrogen.

In general, the laws of Ukraine do not contain any specific regulation for green hydrogen production and its transportation. Moreover, the cost of green hydrogen is currently very high in comparison with other fuels. At the same time, there are a lot of questions regarding feasibility studies for hydrogen projects and off-takers for green hydrogen. Bearing in mind that, according to the Green Hydrogen Investment and Support Report, Ukraine needs to attract EUR 20.1 billion of investment for the construction of 10,000 MW electrolysers, it is vital that Ukraine has transparent and stable regulations in place for green hydrogen projects for investors.

Notwithstanding the absence of any regulations on hydrogen production, Ukraine has the following national standards for hydrogen:

— DSTU ISO 14687:2021 (ISO 14687:2019, IDT) Hydrogen fuel quality. Product specification;

— DSTU ISO/TR 15916:2021 (ISO/TR 15916:2015, IDT) Basic considerations for the safety of hydrogen systems;

— DSTU ISO 22734:2021 (ISO 22734:2019, IDT) Hydrogen generators using water electrolysis. Industrial, commercial, and residential applications.

It should be noted that these standards entered into force from 1 May 2021 and were adopted in Ukraine for the harmonisation of national standards with international standards. However, these standards are not sufficient for legal regulation of green hydrogen production.

The development of hydrogen projects is important for Ukraine so that it can reach climate neutrality goals together with EU countries. However, to attain the desired results, it is crucial that the Hydrogen Strategy of Ukraine be approved and that the necessary regulations for the development of hydrogen projects in Ukraine be adopted.

Maryna Hritsyshyna is a counsel at Sayenko Kharenko