Who should bear the costs of repurposing or retiring these stranded gas assets? And indeed how do we identify those costs? How if at all should this process be reflected in tariff methodologies? Should transition costs be borne by the taxpayer? Can we learn any useful lessons from the treatment of stranded electricity assets in Europe in the late 1990s?
Stranded assets are physical assets recorded on a corporate balance sheet whose investment value cannot be recouped and must be written off. The EU Hydrogen Strategy indicates that repurposing and re-using parts of the existing natural gas infrastructure may provide an opportunity for a cost-effective energy transition in combination with (relatively limited) newly built hydrogen dedicated infrastructure. Repurposing of ‘redundant’ gas assets for the transport of hydrogen might be beneficial to both gas and hydrogen end-users where there is an identified need for hydrogen infrastructure. In their recent White Paper ACER/CEER advise that this could only become clear from a detailed and sophisticated cost-benefit analysis (CBA) approach, taking into account that repurposing of the gas infrastructure comes at a cost as well.
As for cost allocation through tariffs, ACER/CEER also recommend that repurposed gas network assets should be removed from the RAB of the gas network operators and that unbundling rules should be applied in order to avoid cross-subsidies between users of the gas network infrastructure and of the hydrogen network infrastructure by, at least, separating activities, RABs, and costs (accounting unbundling) between the entities that own and operate the hydrogen infrastructure and the entities that own and operate the gas infrastructure.
Cross- subsidisation between users of different networks should be avoided, since it is not likely that all gas network users will become hydrogen networks users, or at least not at the same time. This would mean that the users of today’s gas networks should not be paying towards a future hydrogen network. Some regulatory authorities may try to resolve this by prohibiting their gas TSOs from engaging in ancillary activities such as the roll out of a new hydrogen network, but this may not fully resolve the problem of how to deal with capital costs that gas TSOs already want to incur in order to cover the future process of network conversion to hydrogen, as the Dutch regulator has recognized in its recent gas tariff methodology decision.
Introduction to the Debate and Opening Presentations
14.00 – 14.05 Introduction to the Debate
Leigh Hancher| Florence School of Regulation
14.05 – 14.15 Ilaria Conti (FSR)
14.15 – 14.25 Dennis Hesseling (ACER)
Panel Discussion: Introductory Remarks, Polls, and Comments
Moderator: Leigh Hancher: Florence School of Regulation
14.25 – 14.45 Introductory remarks from the panellists
Annegret Groebel (CEER) , Catherine Galano (Frontier Economics) ; Lisa Fischer, (E3G ); Jan Ingwersen (ENTSOG)
14.45 – 14.50 Polls
14.50 – 15.20 Comments on the polls outcome and Q&A from the audience
15.20 – 15.30 Concluding remarks
Alberto Pototschnig | Florence School of Regulation
Leigh Hancher | Florence School of Regulation and Tilburg University
The focus of the debate series is on recent court cases, regulatory decisions, EU legislation, or public consultations to be discussed by a panel of experts. Learn more about the FSR series.
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