The European Union Agency for the Cooperation of Energy Regulators (ACER) published its first official recommendation on how member states should apply inter-temporal cost allocation on July 28.

To address this issue, the EU Hydrogen and Decarbonised Gases Regulation (2024) allows member states to introduce inter-temporal cost allocation, enabling hydrogen network operators to recover infrastructure costs gradually over time by spreading them across both early and future users.

ACER stressed that, while the development of an EU-wide hydrogen network is central to Europe’s decarbonisation plans, the market remains in its early stages and demand is uncertain. This creates financial risks for both investors and users.

“Building infrastructure capable of accommodating future demand could result in a situation where, during the initial ramp-up phase, a limited number of users bear the burden of high network costs,” the agency stated.

In its 13-page recommendation, ACER has called for:

• Close coordination between national regulators and operators
• Realistic demand forecasting, including sensitivity analyses
• Transparency around cost estimates, especially for repurposed gas assets
• Flexibility to adjust the cost recovery period if assumptions change
• Separate treatment for transmission and distribution networks where needed

ACER cautioned that applying inter-temporal cost allocation mechanisms poses a regulatory challenge. As these schemes may operate for decades, national hydrogen market rules — including tariff structures and access conditions — will likely need to evolve as EU-wide standards are finalised.

As cross-border hydrogen trade expands and networks become more interconnected, countries must ensure their frameworks are flexible enough to adapt over time.

H2 View understands that Germany’s WANDA scheme is currently the only inter-temporal cost allocation mechanism in place in the EU, while Denmark, Austria and the Netherlands are exploring similar approaches.

The German scheme sets a long-term cost allocation framework for the national hydrogen core network, introducing a uniform “ramp-up tariff” from 2025 to spread infrastructure costs out to 2055 and avoid high charges in the early years. Early revenue shortfalls are expected to be balanced by surpluses in later years as network use increases.

ACER’s guidance will be reviewed and updated every two years as the EU hydrogen market evolves and national regulatory frameworks mature.