Clean hydrogen in France

Background

Renewable and low-carbon hydrogen is a key priority to achieve Europe’s clean energy transition as part of the wider Green Deal ambition. The French Government presented on 9 September 2020 its own national hydrogen strategy, aiming at installing 6.5 GW of clean hydrogen production by 2030 and mobilising €7billion for that goal. To enable this strategy, the French Government has now issued the foundations of a much‑needed dedicated legal framework through an Ordinance dated 17 February 2021 (the Ordinance).

What’s in the Ordinance?

Three important issues for sponsors and investors are included: 

• It provides key definitions of “renewable hydrogen” (from renewable electricity such as wind and solar) and “low-carbon hydrogen” (opening the door to nuclear energy);
• It lays down the principles of a traceability system to certify the content of hydrogen production across the supply chain, under the umbrella of a national registry;
• The Ordinance sets the architecture for a new subsidy scheme, with significant differences compared to current systems for renewables: (i) tender procedures will be mandatory (no open counter) in order to prioritise competitive projects and retain control on the budgetary costs; (ii) the public subsidy may include an initial financial aid to cover a portion of the construction costs; (iii) and an operating aid will be granted as part of an up to 20-year contract, entered into directly with the State. 

Next steps

The practical impact of the Ordinance will depend on the implementing regulations, expected in the coming months. They will help investors better understand the economics of the support scheme as well as to prepare future contractual architectures and legal documentation. For now, open questions remain about (i) the distinction between low-carbon and renewable hydrogen, (ii) the upcoming regulations on transport and distribution as well as safety rules, and (iii) the articulation of this framework with the on-going EU-wide support scheme (IPCEI), for which many French companies are currently preparing bids.