The EU has already made strides with hydrogen energy – but there’s so much more that can be done in order to secure a more sustainable and secure future.
To achieve a 55% reduction in emissions by 2030, the share of electricity in final energy consumption must increase from 23% today to approximately 35% within the next six years. In addition to direct electrification, the adoption of renewable and low-carbon hydrogen is imperative for decarbonizing hard-to-abate industrial and transportation sectors. However, only a few projects have reached the final investment decision since the 2020 EU Hydrogen strategy. It is imperative to kickstart the first hydrogen production projects promptly. Achieving this requires a streamlined EU regulatory framework and expedited procedures for support schemes.
Hydrogen Week in Brussels, which took place at the end of November, showcased this chemical’s pivotal role in decarbonizing industries and reshaping heavy mobility. Amid discussions on renewable and low carbon hydrogen, challenges emerged, with slow regulatory implementation hindering projects. The International Energy Agency’s Global Hydrogen Review 2023 urgently emphasized the need for swift action. In this article, we distill key insights from Hydrogen Week, navigating obstacles and strategies crucial for realizing hydrogen’s potential in our sustainable future.
Hydrogen, particularly derived from renewable and low-carbon sources, plays a pivotal role in decarbonizing challenging industries and heavy mobility.
The production of hydrogen through the electrolysis of water, with its sole greenhouse gas emissions tied to the electricity utilized, is gaining attention in Europe. Hydrogen, particularly derived from renewable and low-carbon sources, plays a pivotal role in decarbonizing challenging industries and heavy mobility. Its adaptability across diverse sectors positions it as a cornerstone in achieving a carbon-neutral future. The global industrial consumption of fossil hydrogen contributes nearly 1 billion tons of CO2 emissions annually, with the EU accounting for 70-100 million tons. Furthermore, hydrogen in the form of synthetic fuel offers a crucial solution to mitigating the environmental impact of hard-to-abate transport sectors like maritime and aviation.
The EU has the potential to lead in this strategic industry, enhancing its industrial base while contributing to the energy transition and sovereignty.
Hynamics, the renewable and low-carbon hydrogen subsidiary of the EDF group, applauds the acknowledgment of hydrogen’s role in the EU’s Fit for 55 package, aiming to decarbonize the European economy. The EU has the potential to lead in this strategic industry, enhancing its industrial base while contributing to the energy transition and sovereignty. Despite having a robust technological foundation and pioneering industrial stakeholders, numerous hydrogen projects face challenges, leading to project abandonment and a failure to reach final investment decisions.
One significant obstacle is the persistently high level of uncertainty. The recent International Energy Agency Global Hydrogen Review 2023 reveals that only 4% of announced hydrogen production projects set for completion by 2030 have taken a final investment decision. Europe, despite its leadership in hydrogen strategies and ambitious goals, grapples with regulatory uncertainties and the sluggish implementation of public support schemes, hindering project realization.
Europe, despite its leadership in hydrogen strategies and ambitious goals, grapples with regulatory uncertainties and the sluggish implementation of public support schemes, hindering project realization.
Renewable and low-carbon hydrogen faces challenges in competitiveness against fossil hydrogen, with a 40% increase in investment costs over the last two years and exposure to higher electricity prices. The intricate sourcing of renewable electricity, especially in countries like Germany, adds complexity and cost. Public subsidies are indispensable for short- to medium-term project viability. The European Hydrogen Bank’s launch is a positive step, but the allocated budget falls short of EU objectives. Allowing projects to combine various support schemes for a defined period could kick-start the market effectively.
Furthermore, unclear signals impact both project developers and hydrogen users, affecting clean hydrogen demand in the long run. Geopolitical and economic contexts, exemplified by the war in Ukraine and inflation, have disrupted investment costs. National-level changes, such as the drastic contraction of greenhouse gas reduction quota prices in Germany, destabilize business cases. Those policies instabilities highlight the delicate balance between decarbonization ambitions and protecting traditional economic fields, making the path to European targets uncertain.
The lack of clarity in sustainability criteria regulation for hydrogen production exacerbates the situation. The European regulatory framework’s finalization is overdue, and adopting a pragmatic approach, as seen in the United Kingdom, can provide clear and stable regulations. This approach relies on the carbon intensity of hydrogen, allowing for a more efficient regulatory framework.
As international competition escalates, European leadership in clean hydrogen technologies faces threats. Chinese electrolyzer manufacturers, propelled by a cost-driven strategy, could make a rapid entry into the European market. In the United States, the Inflation Reduction Act hints at significant subsidies to scale up their clean hydrogen industry. The race to master the entire clean hydrogen value chain intensifies, with early adopters gaining a competitive edge. The complexity of industrial-scale electrolysis necessitates efficient and reliable suppliers, emphasizing the importance of launching initial industrial pilot projects promptly.
Despite these challenges, Europe leads in clean hydrogen patents. Efforts to decarbonize the European electricity mix can provide access to competitive, renewable and low-carbon electricity in the medium term, facilitating substantial hydrogen production to meet industrial demand. Key players, including Hynamics and the EDF Group, stand ready with mature projects awaiting the finalization of the regulatory framework and the commitment of announced public funding. They aim to contribute to the emergence of this strategic value chain, aligning with climate objectives and fostering energy independence.
Source : Politico