Additional Costs of Green Hydrogen from RFNBO Electricity Criteria

RFNBO electricity sourcing criteria play a central role in shaping the conditions for green hydrogen production in Europe and are currently subject to an accelerated review process by the European Commission.

The production of green hydrogen in the European Union is defined by the RFNBO electricity sourcing criteria set out in the Delegated Act 2023/1184. These criteria determine under which conditions electricity used for electrolysis can be classified as fully renewable, with additionality, temporal and geographical correlation as central design elements.

While designed to ensure environmental integrity and system consistency, the criteria also directly shape the cost structure, operational flexibility and procurement options of hydrogen projects. In light of growing concerns regarding their impact on project feasibility and costs, the European Commission has brought forward the review of the framework to 2026.

The analysis presented in this paper combines modelling-based insights, practical perspectives from industry participants in the electrolysis cooperation forum and selected stakeholder positions to assess the cost implications of the current framework. The following key messages summarize the main findings of this paper:

• The current RFNBO electricity sourcing criteria lead to significant additional costs for green hydrogen.
  Both modelling-based analysis and practical insights indicate that the electricity sourcing requirements materially increase hydrogen production costs and thus have a strong impact on project economics.
• Additionality and temporal correlation affect costs through different mechanisms and with different magnitudes.
  While temporal correlation primarily limits operational flexibility and reduces electrolyzer utilization, additionality alters the underlying cost basis of electricity procurement. In most cases, additionality emerges as the more significant cost driver.
• The combination of these criteria constrains viable business models and slows down the market ramp-up.
  The regulatory requirements lead to lower utilization, higher capital intensity and restricted procurement options. As a result, robust business cases are more difficult to establish and project implementation is delayed.
• Policymakers and industry see a need for adjustments to improve project economics and market dynamics.
  Both industry perspectives and policy positions indicate that targeted adjustments – in particular regarding additionality, temporal correlation and their grandfathering periods – are necessary to reduce costs and enable investment in green hydrogen production.

More information

• Cooperation Forum Elektrolysis