Negligible chances for extensive production of cost-effective green hydrogen in Europe
Following the invasion of Ukraine by Russia, the impetus for a rapid clean energy transition has never been stronger. This position was confirmed by the European Commission’s (EC) REPowerEU initiative, a plan to phase out Europe’s dependence on fossil fuels before 2030 and to increase the resilience of the EU energy system.
The plan confirmed the commitment to achieve the European Green Deal’s long-term goal of making the EU climate-neutral by 2050 and to implement the Fit for 55 package presented in July 2021. Delivering on these objectives will require the EU to develop, implement and scale up innovative renewable energy solutions and increase clean energy share in the energy mix.
According to EC, hydrogen has the potential to become a significant contributor to this energy mix shift. The ambition is to produce 10 Mt (million tonnes) and import an additional 10 Mt of renewable hydrogen into the EU by 2030. Just in the European Union (EU), hydrogen is expected to meet 24% of energy demand in 2050. In 30 years, the gas basket is planned to contain: 20% of natural gas and 80% of decarbonised gases – including primarily renewable hydrogen.
Hydrogen currently accounts for less than 2% of the European energy mix but is expected to represent around 14% by 2050. Achieving these targets would require however a rapid acceleration of the development of hydrogen pipeline infrastructure, hydrogen storage facilities, and port infrastructure. It would also require a significant step up in the production of renewable energy to power the electrolysis.
EU Hydrogen Strategy (European Hydrogen Backbone) recognises the importance of producing green hydrogen at locations with sufficient solar and wind resources. Only at such locations, low- cost green hydrogen can be produced to compete with present-day fossil-based hydrogen, and in the long run with natural gas. Europe however is not a location with fine solar and wind resources and other world regions represent more competitive conditions to generate cost-effective green hydrogen.
Regardless of the significant strategic and financial commitment to the development of hydrogen capabilities in the EU, there are important structural barriers that will plausibly hinder or even make it impossible to meet such ambitious objectives.
Types Of Hydrogen and Why Does It Matter
This most abundant element in the universe must be produced by separating it from other elements in water and/or fossil fuels. Although its production requires energy, hydrogen is emission-free at the point of use. The origin of primary energy used for the manufacturing of hydrogen determines its competitiveness and life cycle emissions. The used naming terminology refers to the level of CO2 emissions produced during the hydrogen manufacturing process rather than to a specific production technology. Depending on production methods, hydrogen can be grey, blue, or green. Other subcategories exist differentiating pink, yellow, and turquoise hydrogens apart from the three main categories. Still, naming conventions can vary across countries and over time but overall, green hydrogen is the only type produced in a climate- neutral manner.
Cooperative or Competitive European Hydrogen Strategy?
National hydrogen policies in Europe demonstrate a great variety of approaches and motivations. There is little if any coordination taking place at the member-state level. While some countries already developed hydrogen strategies before 2020, the publication of the EU Hydrogen Strategy provided a boost for others. Since then, over half of the European countries have published their strategies or commenced their development. The other half is currently under preparation.
Nonetheless, there are emerging differences between the states regarding the scale, and sophistication of the hydrogen plans. Countries are placing their bets differently depending on national factors, such as their domestic energy mix and decarbonisation priorities.
The EU has a strong preference for green hydrogen, but this is not self-evident in national policies. While some countries (Netherlands, Germany, and Spain) are setting ambitious targets for green hydrogen in line with the EU’s plans, others (France and Hungary) aim for the blue scenario. Norway has been considering producing blue hydrogen via carbon capture, utilisation, and storage (CCUS) systems. Finally, there are states (Italy) that do not specify their attitude towards a particular type of hydrogen and have emphasised its “technological neutrality.”
For several countries (Poland and Sweden), hydrogen development is viewed primarily as a domestic issue, with little thought given to international engagement. For others (Germany and the Netherlands) the plans for an integrated European hydrogen pipeline infrastructure – connecting the renewables-rich countries with the industrial demand centres in north-western Europe – are prioritised.
Another misalignment exists in the approach to hydrogen import which is more relevant for some member states (Germany, Spain, and the Netherlands) which have already launched their own hydrogen diplomacy initiatives. France (and to some degree Poland), on the other hand, opposes the idea of imports altogether and views this as creating new dependencies and geopolitical risk. Most member states, however, are adopting a very cautious approach, wary of overcommitting before a European hydrogen market materialises, if at all.
Although under these circumstances, developing a coordinated EU approach for the entire continent seemed to be difficult and premature, the “European Hydrogen Backbone” has been pushed through. This new hydrogen plan was presented without greater debate among the member states and received without enthusiasm by many countries.
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