Spanish energy tax threatens EU’s green hydrogen plans, industry warns

As Spain claws back profits from renewable energy companies, the resulting investment insecurity imperils Spain's potential as a renewable hydrogen producer. EPA-EFE/Fernando Alvarado

As energy prices soar across Europe, the chairman of electricity giant Iberdrola warned of short-sighted measures in Spain that are threatening the expansion of renewable electricity needed for the production of green hydrogen.

Europe’s path towards net-zero emissions by 2050 will require large amounts of renewable electricity, including for the production of so-called green hydrogen made from water electrolysis.

Policymakers are looking at hydrogen to store energy and as a feedstock to decarbonise carbon-intensive industries like chemicals, steelmaking and heavy-duty transport.

But investments in green hydrogen are now on hold in Spain because of an exceptional tax imposed by the government in response to rising electricity prices, said Jose Galán, chairman of Spanish utility Iberdrola. 

Madrid announced plans on 14 September to claw back €3 billion from electricity companies which are accused of earning windfall profits from the surge in gas prices.

“Some countries imposing new charges on renewables due to the temporary situation of gas prices are seriously concerning investors and putting at risk future investment in renewables,” Galán warned.

Europe is already lagging behind on renewable energy deployment and regulatory certainty is crucial to attract investments, Galán said at the Renewable Hydrogen Summit on 29 September.

Others in the industry agreed. Europe needs a lot more renewable electricity in order to grow the market for green hydrogen, said Walburga Hemetsberger, CEO of SolarPower Europe, a trade association. And that requires more investment and faster permitting procedures for new wind and solar projects, she added.

“Green hydrogen…will need massive volumes of green electricity,” said Sopna Sury, CEO of the hydrogen unit at RWE, the German energy company.

Spain moves again to curb soaring power prices

Spain’s left-wing government approved Tuesday (14 September) a fresh package of measures, including a tax cut, to curb soaring household electricity bills that have hurt businesses and angered voters.

Race is on for hydrogen market leadership

The comments came after the publication in September of a study outlining the potential of solar power in building a hydrogen economy. The study looked at locations across the world and singled out the Southernmost Spanish city of Malaga has having the highest potential in Europe. 

But those investment are now on hold in Spain due to the exceptional tax imposed on power companies. Iberdrola has reportedly paused tenders for goods and services associated with the construction of renewables projects in Spain in order to evaluate their economic viability.

As a result of the ongoing energy crisis, BloombergNEF cut back its solar PV projections for next year by 1.5 GW, according to Vesa Ahoniemi, strategy manager at Finnish utility Fortum.

This is despite widespread recognition that Spain has a key role to play in the deployment of solar PV and green hydrogen.

“Expanding renewables is critical for the decarbonisation of Europe, and Spain is crucial as an important location for solar PV installations,” said Jan Rosenow, Europe director at the Regulatory Assistance Project, a think tank.

Any delay in renewable energy deployment will undermine Europe’s goal of cutting emissions and be a global leader on green hydrogen.

“We need to be fast,” warned Iberdrola’s Galán, saying the United States were aiming for very competitive hydrogen prices of $1/kg by 2030.

European hydrogen has a fighting chance, he added though, saying the EU had some competitive advantages like binding targets and companies ready to invest.

According to the study, renewable hydrogen could become as cheap as €0.7/kg ($0.8) if produced from solar PV in Malaga.

Renewable hydrogen is currently four times more expensive than hydrogen produced from fossil gas. This means Europe’s goal of installing 40 gigawatts of electroslysers by 2030 will only be reachable if the political framework is right, Galán said, calling for additional investments and tax cuts to promote renewable energy.

At the same time, higher gas prices means the cost of producing hydrogen from electrolysis is becoming relatively more competitive. “Higher gas prices have a significant impact on the cost of hydrogen made from gas,” Rosenow told EURACTIV.

[Edited by Frédéric Simon]

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