Tunisia as the New Hub for Green Hydrogen?

Client Alert
24 June 2022 By MERIEM REZGUI

Green hydrogen is a key element of the October 2022 new EU energy strategy. Produced from renewable energy sources, green hydrogen can be stored and transported. It is both green and convenient to use. Germany must urgently reduce the dependency on Russian Gas and green hydrogen complies with the long-term goals of decarbonization. Tunisia is ideally positioned as cooperation partner: Geographically located in the proximity of Europe, with abundant solar and wind energy potential, and a long-standing cooperation with Germany in the field of renewable energies.

I. The Tunisian-German Energy Collaboration

Tunisia and Germany concluded, on 15 December 2020, the “Tunisian-German Alliance for Green Hydrogen” (the “Agreement”) based on the countries’ long-standing cooperation in the energy sector. Under this Agreement, Germany granted Tunisia € 31 million in funding for various missions including:

    • Establishing a pilot hydrogen production unit;
    • Studies;
    • Capacity building; and
    • Establishing an institutional and regulatory framework.

The market for green hydrogen is an emerging niche in Europe, for which Tunisia is seeking to position itself, hence the importance of a European Tunisian alliance and collaboration.

Recently, green hydrogen production gained momentum in Tunisia during the emerging international hydrogen discussion. Tunisia’s energy transition policy aims to reduce emission intensity by 46% by 2030 and green hydrogen production will aid this goal.

The Wuppertal Institute, in a study conducted on behalf of the German Government, emphasizes that Tunisia has a significant potential for the development of the hydrogen sector. The Agreement illustrates the importance of developing a low-carbon economy based on hydrogen and is an opportunity for Tunisia to launch a successful energy transition.

In 2020, the European Union published the European Hydrogen Strategy (EHS) which aims to translate the theory of green hydrogen’s positive effect on decarbonization efforts into practice through investment, regulations, market creation, and research and innovation.

The EHS envisions the installation of at least 6 Gigawatts (GW) of renewable hydrogen electrolysis in Europe. The EHS also estimates that hydrogen will become an integral part of the European energy system between 2025 and 2030, with 40 GW of renewable hydrogen electrolysis producing up to ten million tons of renewable hydrogen. This will require a high production of hydrogen in the EU and, potentially, importing hydrogen from neighboring countries. The EU’s objective will thus be to establish an open and competitive cross-border hydrogen market with the neighboring countries, namely Tunisia.

II. The Tunisian Regulatory Framework for Green Hydrogen

There is currently no specific regulatory framework for green hydrogen in Tunisia. Green hydrogen is included within the overall framework of renewable energy generation and environmental law.

Energy Law

The current legal and regulatory framework for renewable energy generation in Tunisia is governed by legislation in the power sector:

    •  Law No. 62-8 of 3 April 1962 Establishing and organizing the Tunisian Electricity and Gas Company and giving it a monopoly in the sector;
    • Law No. 96-27 of 1 April 1996, supplementing Law No. 62-8 and abolishing the monopoly of the public utility on power generation activity;
    • Law No. 2015-12 of 2015 organizing the activity of power generation from renewable energy by private investors;
    • Governmental Decree No. 2016-1123 of August 2016 on conditions and procedures for renewable energy project implementation;
    • Order of the Minister of Energy, Mines and Renewable Energies of 9 February 2017, approving the standard contract for the transmission of electrical energy produced from renewable energies for own consumption, connected to the high and medium voltage networks and the purchase of the surplus by STEG.

Law No. 2015-12 (the 2015 Law) is the most important piece of legislation regarding renewable energy in Tunisia. The 2015 Law established a legal regime for the implementation of projects to produce electricity from renewable energy whether for self-consumption, to meet the needs of local consumption, or for export. It also aims to set up a legal regime governing installation, equipment, immovable property, and tools needed to generate and draw electricity from renewable energy sources.

Governmental Decree No. 2016-1123 (the 2016 Decree) provides the terms and conditions to implement projects for the production and the sale of electricity from renewable energy. The 2016 Decree states that electricity generation projects carried out from renewable energies shall be within the framework of needs and means determined by the national plan for electrical energy produced from renewable energies, either for self-consumption purposes or in order to sell it entirely and exclusively to the public body which undertakes to purchase it.

Environmental Law

Tunisian environmental legislation is based on Law No. 88-91 of 2 August 1988 and related decrees regarding environmental impact studies, namely Decree No. 91-362 of 13 March 1991 and Decree of 11 July 2005.

As per the abovementioned legislation, only power facilities of a capacity exceeding 300 Megawatts are required to issue an environmental impact study. The question of whether this requirement will be applicable to the hydrogen is still under discussion.

The transportation of hydrogen by road for industry use is government by Decree No. 2002-2015 of September 2002 on technical rules relating to the equipment and fitting out of vehicles used for the transportation of hazardous products and materials.

Tunisian environmental legislation is currently silent on the topic of hydrogen production.

III. Challenges Faced by Companies, Investors, Associations and Other Stakeholders

Notwithstanding the developments and potential, the Tunisian green energy industry faces challenges that must be resolved in order upscale production.

Storage and Transport

The export of green hydrogen is a gateway to industry development. However, the costs of storage and transport can be significant. Existing natural gas pipelines can be converted for hydrogen transport, this nevertheless will require new construction or retrofitting which can be costly.

Likewise, the transportation of hydrogen via shipping, if opted for, will first require adaptation to the decentralized expansion paths of hydrogen production to connect longer distances than pipelines. To do this, the hydrogen will require liquification, which is both costly and energy-consuming. There are currently no commercial ships for hydrogen transport and investment in this sector may be costly and unreliable.

Land Availability

The production of hydrogen often requires a close source of renewable energy, usually built into land. The availability of land is often a problematic issue for investors in the field of renewables in Tunisia. Most land currently suited for renewable energy is under undivided, collective, or state ownership. Aside from ownership issues, agricultural land is often classified by the Ministry of Agriculture as a prohibited zone that cannot be used for renewable energy installations.

The Land Legislation also does not provide the right for private pipelines to connect electrolysis facilities to the gas network.

The current Land Legislation, therefore, requires amendment regarding private pipelines and ownership of land to facilitate the production of renewable energy.

Unclear Regulatory Status

The question of whether electrolysis should be considered a hazardous industry which requires specific authorizations has not yet been clarified.

Similarly, the current environmental legislation does not specify whether the production of hydrogen by electrolysis would require an environmental impact study similar to the requirements for gas extraction and gas storage. Expert opinions indicate that power generation from hydrogen should also be added to the list of activities subject to an environmental impact study. If an environmental impact study were required, it would also need to include the issue of water desalination.

It is worth noting that Decree No. 64-10 of 17 January 1964 approving the technical specification of the supply of gas in Tunisian territory (security, standards, etc.) does not cover the injection of hydrogen into the gas network. This remains a topic to be specifically regulated under Tunisian legislation.

With respect to power production from hydrogen, the current power sector legislation does not include any technical provision regarding the use of hydrogen for power generation. This also remains an area for development which will allow growth in the sector.

Another challenge faced by the investors in hydrogen production is the lack of regulation regarding the manufacture and use of synthetic fuel from hydrogen. Law No. 91.45 of 1 July 1991 relating to petroleum products governs import, export, refining, recovery, storage, distribution, and pricing. This regulation gives a monopoly to the state on the manufacture and supply of oil products, including defining the price structure of these products. Should hydrogen production fall under the same monopoly, investors may be discouraged therefore, this topic requires specific clarification by the Tunisian legislator.

IV. Tunisia as a Green Partner of the EU

The development of the Tunisian hydrogen industry will be encouraged through an enhanced cooperation with Europe.

On a local level, the gas turbines of the national company of electricity and gas, STEG, are effectively “hydrogen ready”. Production could be switched to hydrogen instead of natural gas with minimal adjustments. This would enable Tunisia to reduce its current import bill of petroleum products which weighs heavily on the state budget due to the volatile prices of oil on the international market.

On an international level, Tunisia is well placed to send hydrogen to Europe due to its geographical proximity and the potential to produce green hydrogen on a large scale. As an added benefit, the export of green hydrogen to Europe can boost the development of local skills and know-how in this emerging and promising field.

What next?

As a key initial measure, the EU should opt for the promotion of green hydrogen projects in Tunisia. This would not only contribute to the climate neutrality goals of both Tunisia and the EU countries, but also develop both European industrial leadership and local economies. New electrical interconnections across the Mediterranean would foster an integrated electricity market.

Tunisia should be named an official “Green Partner” of the EU which will strengthen partnerships in the hydrogen field, including expert discussions, pilot projects, educational exchange, transfer of know-how and direct investments into new hydrogen projects in Tunisia.

Both the EU and Tunisia should emphasize their joint determination to implement green energy initiatives and to continue cooperating, especially at the technical level to develop Tunisia’s transition to a green energy state.

If you would like more information about this topic then please contact us.

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This client alert is a public document for informational purposes only and should not be construed as legal advice. Readers should not act upon the information provided here without consulting with professional legal counsel. This material may be considered advertising under certain rules of professional conduct. Copyright © 2022

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