How to build up a market for clean hydrogen, how to bridge the gaps? That was the title of a high-level conference organised by the Portuguese EU-Presidency in April. The Portuguese government has shown a specific interest in the hydrogen economy and has already planned to extend the extremely successful auctions for renewable electricity to renewably produced hydrogen.
Hydrogen has seen unprecedented development in the year 2020. From an innovative niche technology, it is fast becoming a systemic element in the European Union’s efforts to transition to a climate-neutral society in 2050. It will become a crucial energy vector and the other leg of the energy transition – alongside renewable electricity – by replacing coal, oil and gas across different segments of the economy. The rapid development of hydrogen is not only important for meeting the EU’s climate objectives but also for preserving and enhancing the EU’s industrial and economic competitiveness.
The year 2020 has seen the emergence of hydrogen strategies in many European countries and for the EU as a whole. European countries with a hydrogen strategy include Austria, France, Germany, the Netherlands, Norway, Portugal and Spain. Regional and geographic characteristics differ across the European Union, and disparities exist. Member States will have different paces of change and adaptation when it comes to hydrogen, and a mixture of different technological solutions and support schemes will be required.
Today, neither low carbon nor renewable hydrogen is cost-competitive when compared to hydrogen produced via unabated fossil gas. Costs for renewable hydrogen need to be brought down rapidly to meet the strategic objective of the EU’s hydrogen strategy: the development of renewable hydrogen.
Most of the national hydrogen strategies build upon the EU-Hydrogen Strategy which was presented on July 8, 2020, alongside its Strategy on Energy System Integration by the European Commission. The aim of the strategy is a climate-neutral Europe as part of its efforts to deliver the European Green Deal.
The strategy defines a target of 1 million tonnes of hydrogen and an electrolyser capacity of 6GW by 2024, and 10 million tonnes and 2x40GW by 2030. These strategies aim to create an enabling environment for the development of a secure, safe, affordable and just hydrogen economy in Europe.
The EU Hydrogen Strategy represents the first step towards success. Now, the EU needs to “act” to turn ambition into reality. The current hydrogen policy and regulatory elements of hydrogen are distributed over gas, electricity, fuels, emissions and industrial frameworks, with limited overarching coordination. It is time that hydrogen moves from an afterthought to a central pillar of the energy system and its key role in delivering climate neutrality means it merits a dedicated framework.
During the high-level conference of the EU Presidency, a dedicated paper was proposed called “Hydrogen Act” which is not intended as a single piece of legislation, it is intended to be a vision for an umbrella framework aimed at harmonising and integrating all separate hydrogen-related actions and legislations. The Hydrogen Act focuses on infrastructure and market aspects, describing three phases of development: the kick-start phase, the ramp-up phase and the market-growth phase.
To meet the 2024 and 2030 targets of the EU’s Hydrogen Strategy, the kick-start phase will require, for a limited period of time, exceptions and derogations from existing EU rules, such as relaxation and/or reform of EU state aid rules. Considering the challenges the hydrogen sector is confronted within the context of the EU’s Green Deal, the European economy recovery post COVID19 and the Hydrogen Strategy, dedicated guidelines on state aid for hydrogen technologies should be promoted.
Moving forward, the Hydrogen Act describes different methods to incentivise market functioning on the production and the demand side, including quotas targeted at the promotion of among others clean steel and ammonia. On the infrastructure side, the regulation of hydrogen networks requires a gradual approach in line with market and infrastructure developments. This ramp-up phase should start at the earliest as of 2025 to contain the funding via taxpayers’ money to a minimum. The final phase describes the period where hydrogen will have achieved market growth.
Clear science-based definitions for the different production methods of hydrogen are required. To establish a robust system of carbon reduction, the CO2 content of energy carriers and vectors will become the “new currency” of the energy system and the EU economic recovery. This needs to be supported by the adoption of a methodology for the calculation of the life-cycle greenhouse gas (GHG) emissions from renewable and low carbon hydrogen, as well as transparent and robust sustainability criteria in line with the principles of the circular economy.
This methodology should be the basis for relevant EU funding programs and financial support for all energy carriers, including hydrogen projects, as well as for hydrogen trade with third countries. To support this, a traceable, trackable, tradable, transparent, and trustworthy certification scheme is needed to enhance the credibility and tradability of hydrogen as a global commodity.
The Hydrogen Act is a vision paper contributing to the implementation of the EU’s Hydrogen Strategy. The final goal of the Hydrogen Act is to contribute to the establishment of a proper functioning and liquid market for clean hydrogen as a new commodity in Europe, building up the backbone of a global clean hydrogen market.