The European Commission has revealed its long-awaited hydrogen strategy, bringing into existence the European Clean Hydrogen Alliance to bring the contribution of hydrogen consumption for energy purposes from 2% up to 14% by 2050. Despite not ruling out ‘blue’ hydrogen from CCUS, the strategy outlines a possible cumulative investment of half-a-trillion euros in green hydrogen in Europe, powered by as much as 120 GW of renewable capacity.
Some have speculated that green hydrogen could provide as much as half of the fight towards net-zero emissions by 2050, so a target of between 13% and 14% will come as a disappointment to some. But in the near-term, several concrete steps have been set out which will help the industry take-off, and there’s plenty of time for hydrogen’s share to increase beyond this figure.
In the strategy entitled: A hydrogen strategy for a climate-neutral Europe, the commission notes the early momentum gathering in the sector: Between November 2019 and March 2020, the pipeline of electrolyzer projects has swollen by over 2.5 times (from 3.2 GW to 8.2 GW), with 57% of this within Europe’s borders; and since 2017, the number of members of in the Hydrogen Council has grown from 13 to 81, attracting the likes of BP, Shell and Total. The cost of electrolyzers to produce hydrogen from electricity has also fallen by 60% in past 10 years and could fall by more than the same amount again by 2030.
So, the purpose of the report is to instill some confidence for investors in the sector, and those developing gigawatt scale renewable projects to power electrolyzers across the continent. With the energy market typically going through investment cycles of 25 years, the European Clean Hydrogen Alliance has been established off the back of the European Battery Alliance, to oversee hydrogen’s contribution towards the EU’s plan to reach net-zero emissions by 2050.
While priority will be given to green hydrogen, as it falls most in line with the bloc’s decarbonization targets, in the short- and medium-term the strategy highlights that other forms of low-carbon hydrogen are needed, using CCUS technologies along with steam reforming methane, outlining an expected €11 billion in investment. The full plan follows a very similar template to the German hydrogen strategy announced several weeks ago.
In the first of the three phases outlined in the strategy, between 2020 and 2024, the EU’s objective is to install at least 6 GW of renewable hydrogen electrolyzers across the bloc, producing 1 million tons of clean hydrogen. To cut down on the need for rapid infrastructure reforms, these early electrolyzers will be first placed adjacent to both renewable generation sources and demand centers, creating local hydrogen clusters or “hydrogen valleys.” These will initially be focused on industry and mobility, replacing existing hydrogen feedstocks at refineries, steel plants and chemical complexes, while hydrogen refueling stations are developed for the uptake of fuel-cell buses and early fuel-cell trucks.
One interesting tactic taken here is the focus on large scale electrolyzers, of up to 100 MW, and their production at scale. While this could mark a step away from modular electrolyzers being produced by the likes of Enapter, it’s likely that the EU believes that this sub-sector will manage its own growth through privately funded projects, where larger production centers will be more readily developed through public funding.
Phase Two of the strategy aims to gradually introduce hydrogen into new applications, including steel-making and energy storage, and push for larger penetration within the transport sector, while a greater share of hydrogen is blended into the existing natural gas mix. Running between 2025 and 2030, this phase aims to see at least 40 GW of renewable hydrogen electrolyzers installed by 2030, and the production of up to 10 million tons of hydrogen across the EU.
It is during this phase that the commission expects to see green hydrogen become cost competitive, falling to a cost of around €1.50 per kg due to a combination of economies of scale within electrolyzer production, as well as negative pressure being applied on grey hydrogen through carbon pricing. This will also have to be boosted by demand-side policies, specific to each sector, to incentivize the switch away from CO2-intensive operations, or through mandating a minimum share of green hydrogen which must be used in a company’s energy supply.
Towards the end of this stage, and into the 2030s, the EU’s logistical infrastructure will start to develop such that hydrogen can be viewed as a vector for energy storage. The bloc will aim to create a pan-European hydrogen grid, while also extending into the MENA region, where it expects to source as much as 40 GW of additional electrolyzer capacity. This will largely involve the repurposing or reusing of the existing natural gas infrastructure across the continent. At this point, policy will aim to bring into play an open and competitive EU hydrogen market “with unhindered cross-border trade and efficient allocation of hydrogen supply among sectors” according to the report, allowing huge export opportunities for early movers in the sector.
By 2030, the newly formed alliance aims to have facilitated the investment of between €24 and €42 billion in electrolyzer addition, with as much as €340 billion allocated for the associated wind and solar capacity, which will include retrofitting existing renewables resources. €65 billion will be pumped into hydrogen transport, distribution, storage and refueling networks. Other costs will be allocated for project specific alterations. For example, it will cost between €160 million and €200 million to convert an average EU steel-making facility to run on green hydrogen.
The final phase to 2050 will see as much as €470 billion of cumulative investment in production capacity alone, with hydrogen starting to be used as seasonal storage, as renewable power becomes more and more abundant. As networks start to mature and electrolyzers are deployed on a large scale, hydrogen-derived synthetic fuels will start to be used within the ‘hard-to-decarbonize’ sectors, with biogas starting to replace natural gas in the creation of heavy fuels used in the aviation and maritime sectors. In total it is expected that the strategy will support up to 1 million jobs across the EU.
Through the entire process, the commission identifies the need to improve the public’s perception surrounding hydrogen, to improve the leverage of investment, while additional research will be funded in alternative production methods including hydrogen from marine algae, direct solar water splitting or from pyrolysis with solid carbon as a byproduct.