power2market: Dear Mr Mitteregger, thank you very much in advance for taking the time for this interview and providing interested readers with more insights into the exciting activities of RAG Austria AG (RAG), which you manage as CEO.

In view of the climate and environmental targets in Europe and Austria, keyword climate neutrality 2040, the energy sector is undergoing enormous change. RAG has been involved in the development and operation of energy storage systems for the last few decades and plays an important role in the EU-wide storage business. For the past decade, RAG has been conducting intensive research into hydrogen storage in depleted pore deposits. How is RAG dealing with the transformation in the energy sector?

Markus Mitteregger: The challenges are enormous and can only be overcome by working together across all sectors. For me, cross-sector means electricity - gas - heat/electricity. Renewable electricity production alone will not be able to cover the enormous energy demand and, above all, is not a secure supply. Interaction along the entire value chain is required in order to be able to continue to guarantee energy supply security. In general, only gaseous, liquid or solid energy sources can store energy on a large scale so that a sufficient quantity and output is available exactly when it is needed in winter, for example. Electricity itself cannot be stored!

In order to effectively meet these challenges of a consistent and affordable supply, joint action is therefore required from the most important players in the electricity, heating, industry and transport sectors as well as from politicians, interest groups and end consumers. Our future energy landscape must be secure, open to technology, climate-friendly and networked.

The storage business means flexibility and we have already demonstrated this several times in RAG's history. Being ready when energy is needed in winter, during crises or price peaks, for example, and conversely being ready to store large quantities of energy at any time when there is a massive oversupply. In addition to our high level of technological innovation, our success is driven above all by the great flexibility of our reliable and ambitious employees, who focus on providing services for our customers now and in the future.

And it was precisely for these services in the future that we launched our research activities into hydrogen storage over 10 years ago. Hydrogen is seen as the energy carrier of the future and can be used to "preserve" electricity. We have worked out how we can best realise this in our projects such as Underground Sun Storage. We have also expanded our partnerships with renowned players from university research and industry in order to create synergies and jointly develop solutions and drive forward real projects.

The natural gas storage facilities were more heavily utilised in 2024/2025 compared to previous winter periods. They now need to be refilled in summer 2025. What effects do you expect in terms of price development? How does RAG view Germany's request for a (partial) exemption from reaching the obligatory storage filling level?

MM: Developments have shown what an important contribution gas storage facilities make to security of supply, network stability and prices. Prices are more stable as a result and therefore more predictable for consumers.

We are aware that security of energy supply costs money, but compared to the costs that arise when uncertainty determines the market, such as whether energy may be unavailable, these storage costs are considered to be of secondary importance. This applies both in economic and business terms. Particularly on cold winter days with little wind power and during the resulting peaks in demand, it is important to have an energy source in stock that can meet this demand with the required output even during this short period. Our customers are required to physically bring the quantities of energy required to fill the storage facilities into the storage facilities on site so that the storage facilities can be filled in a timely and cost-efficient manner in summer 2025. We support you in minimising maintenance times and ensuring maximum availability of the storage facilities, even during the injection period. As far as the filling level is concerned, we can only say that negotiations are currently underway at European level. As the last withdrawal period 2024/2025 showed, the RAG storage facilities have an impact in Austria, Germany and far beyond - to Italy, Slovakia and Ukraine. The strategic gas reserve, which has proven to be a solid price-dampening base and can also be seen as a kind of "national energy defence" for heat, electricity and gas supply, was and is important for Austria. In our view, not extending it beyond 2027 would be considered negligent.

The move away from fossil fuels such as conventional natural gas and the simultaneous ramp-up of the hydrogen economy require parallel operation of the natural gas and hydrogen infrastructures. How is RAG tackling these complex tasks in order to guarantee the security of the natural gas supply - as far as it is able - but also to drive forward the hydrogen ramp-up?

MM: We are convinced that natural gas will continue to play an important role in the energy mix for several decades to come. That is why we are also working on the utilisation of methane without CO2 emissions. Keyword methane splitting: In this process, the CH4 molecule is split - on the one hand into so-called turquoise hydrogen and on the other hand into pure carbon, which is a valuable soil additive in agriculture.

Until hydrogen production is established in countries in North Africa or western Ukraine and a safe hydrogen import route has been created, we are focussing on local production, storage and use of hydrogen. Just as around 60 years ago, when a network was formed between production and consumers with the utilisation of domestic natural gas, the gradual development of the hydrogen network will take place in the same way. In so-called clusters and with the utilisation of specific possibilities of the natural gas network.

The EUH2STARS project, which is already working on the real implementation of a hydrogen economy in the greater Linz area, already includes two feasibility studies: one for the construction of a new hydrogen storage facility and one for the conversion of an existing natural gas storage facility to hydrogen. However, further scaling steps will have to be taken quickly in order to guarantee the storage requirements in relation to the amount of energy. This is currently underway and it is realistic to be able to offer our customers the first services for summer electricity storage in the form of green hydrogen and feed-in to the gas grid as early as 2026 and then implement further projects as required. The need for storage will continue to increase in the coming decades due to the import of hydrogen, as these imports are expected to be intermittent and consumption will also fluctuate. We are confident that we will be able to manage the hydrogen storage requirements that will then be needed.

The regulatory framework under which we will offer this service is essential for the success of these projects. Cooperation with political decision-makers and other industry players is extremely important, as the transition to hydrogen is not only a technical challenge, but above all a political and economic one. Clear and realisable framework conditions need to be established in order to accelerate the ramp-up of the hydrogen economy. A viable subsidisation regime and cooperation between all players to promote the location is a basic prerequisite.

In view of the still high hydrogen production/transport/storage costs in the near future, the question arises as to whether the hydrogen economy will first develop from the local to the regional and national to the international level or whether very large projects - keyword for example HydrogenBackbone - will be more promising for the hydrogen ramp-up? What is RAG's view/strategy in this regard?

MM: The challenge in ramping up the hydrogen economy is that all levels of the value chain have to be driven forward simultaneously. An international infrastructure can only be operated efficiently with corresponding production volumes. However, local consumers are dependent on a continuous supply and also need storage facilities. Therefore, as long as the international import routes do not yet deliver the desired import volumes, it makes sense to first build or convert local and regional networks and thus enable the use of hydrogen. We are already doing this in the area of the "Upper Austria Centre" starter network and see great potential for implementation in the Upper Austrian industrial area. In addition, the conversion from natural gas utilisation to hydrogen utilisation must be carried out gradually, especially in industry, as many processes must first be tested for hydrogen and then converted.

Following the successful operation of the Pilsbach and Rubensdorf hydrogen storage facilities in recent years, RAG is ready for the next scaling steps. This will require co-operation and partners to keep costs affordable. Electricity production in particular, which is faced with overproduction on many days of the year, recognises the need for seasonal storage services in order to make the further expansion of renewable electricity production economically viable. Battery storage systems and pumped storage systems cannot hold these quantities of electricity and also cannot keep them available for as long as they are needed for longer "dark doldrums".

A serious statement on the costs of constructing and operating an underground hydrogen storage facility (UHS) can only be made on the basis of the specific requirements of the customer's performance profile and therefore a specific project, taking into account all storage-specific parameters. Based on a fictitious, medium-depth reservoir with a planned working gas volume of approx. 100 million Nm³, a comparable cushion gas volume, the necessary wells and a standard customer performance profile (comparable in performance to natural gas storage facilities currently available on the market), we currently calculate a range for investments, i.e. CAPEX, of at least €600 - €700/MWh (incl. cushion gas).

Based on the (roughly) comparable compressibility of natural gas and hydrogen and the different energy content of 1 m³ each (approx. 11 kWh for natural gas vs. 3.54 kWh for hydrogen), this alone results in an approx. 3-fold fee to be able to store the same energy content. Taking other hydrogen-specific factors into account, we believe that a storage fee of at least €30 to €40/MWh/year is currently required to economically construct and operate UTS in a network with other UTS (with redundancies from other storage facilities and with almost full commercialisation). A stand-alone UHS would otherwise be more expensive.

In any case, it should also be mentioned here that, in our view, only around 20-25% of the hydrogen consumed is stored in a hydrogen market, resulting in storage costs in the region of 20 ct/kg of hydrogen. I think that this order of magnitude of costs for such an insurance service seems economically viable.

The long-term goal is to network the hydrogen economy across regions and to utilise the cheaper electricity production in other regions of the world. The "hydrogen backbone" forms the basis for the development of an international infrastructure. A well-developed, transnational hydrogen network is essential to guarantee the supply of hydrogen across borders, promote trade in hydrogen and integrate it with the European and global market. As a landlocked country, Austria has special needs to be connected to such a "hydrogen backbone". To this end, the local conditions (transit country and storage options) must be utilised in the best possible way in order to compensate for the disadvantage of not having access to the sea. Short hydrogen transport routes play a decisive role here and the use of large-volume hydrogen storage facilities in the country should provide significant relief.

What legal framework conditions are necessary for the construction and operation of commercially usable hydrogen storage facilities and how quickly could European standards be developed and implemented in this regard?

MM: Firstly, it is important that regulations and standards do not hinder or even prevent a market ramp-up. Regulation per se does not create a market. For example, EU Directive 2024/1788 in the Gas Industry Act stipulates that negotiated storage access is possible, with a transitional period until 2033 - after which regulated storage access is possible. Preventing the ramp-up of a non-existent market with such a regulation is certainly critical, as investments would hardly be made in such an environment. In order to enable a ramp-up, this transitional period in Austria must be used for negotiated storage access and the deadline of 2033 or its meaningfulness must be questioned at European level, as this date cannot be explained objectively, especially since such a date does not exist for H2 import terminals in comparison.

Underground hydrogen storage is currently only possible as an ancillary right for authorised miners as "storage of H2". The MinRoG should be amended to the effect that H2 is seen as a raw material in the MinRoG, thus creating a viable authorisation regime for H2.

Last year, the "H2 cross border" project, a sub-project of the "H2EU+Store" programme, took a valuable first step. The project partners succeeded in realising the first hydrogen delivery from Austria to Germany under the current framework conditions and rules.

The green hydrogen certified by TÜV Süd was blended into the existing natural gas network in Austria and transferred to the bayernets transport network in Burghausen. With the support of the German project partners, the first quantities of hydrogen were already delivered to the customer in Bavaria in September 2024. This was the first hydrogen transport across borders and pipeline-bound from Austria to Germany.

The implementation of a guarantee of origin database has made it possible to issue the first guarantees of origin for hydrogen in Austria. As there is currently no compatible database in Germany - the implementation and operation of the gas guarantee of origin register is planned for 2026 - the cross-border transfer of guarantees of origin is not yet possible. As a result, this project highlights a specific need for action for cross-regional trade.

Thank you again for the interview and for your valuable time.