This article is part of our special report Hydrogen outlook in Central and Eastern Europe.
Best businesses thrive when faced with challenges and the EU Green Deal offers an abundance of them in the foreseeable future. However, the potential to turn a challenge into an opportunity will rely on joint and coordinated efforts of public and private actors. It is our shared objective to make a successful transition to a decarbonised economy and to the responsible future. We all agree that the question is not if but how to do it and success will depend on providing businesses and societies with a clear and walkable path to get there.
Bartek Czyczerski is the Managing Director of Business & Science Poland.
Hydrogen has the potential to become the fuel of the XXI century. Hydrogen is the simplest, lightest, and most abundant element in the universe with many applicable uses. Its main advantage is the possibility of its low- and zero-emission production methods coupled with the ability to transform it into other carriers or types of energy – including electricity or heat. Thus, hydrogen can play an important role in the process of achieving climate neutrality. Its application may range from heavy transport – where electrification is very difficult – through the industrial use to the energy storage.
And here comes the rub: it is crucial to realise that today only less than 0,1% of global production of H2 originates from a zero-carbon process. Therefore, between the current situation and the vision of a 100% renewable hydrogen economy, there is a long and costly way to go.
To give you one example: to put on the road 500 buses fueled with green hydrogen accompanied by the electrolysers of 50 MW of the necessary production capacity and 30 refuelling stations requires the investments of ca. 450 mn EUR over a few years span. This amount does not cover the cost of electricity necessary to produce green hydrogen to fuel them. The current estimates suggest that the yearly cost difference between a traditional and hydrogen fuel required to run those buses will amount to ca. 19-23 mn EUR in favour of a traditional one.
We subscribe to the long-term priority to develop the renewable hydrogen market but for the moment the production of such hydrogen is neither sufficient in terms of quantities nor cost-effective. We must not forget that at the end of the value chain there is an EU consumer who will be confronted with the higher costs of new technologies and without a customer willing to foot the bill there is no market.
Clearly, the investments needs are significant and there is an urgency for the support in this regard. However, any business decision must consider not only the investment cost but also long-term profitability which depends on the sufficient demand.
Therefore, apart from the financing, it is essential to address other tasks: the development of the hydrogen market based on the various low-emission technologies, at least until the renewable hydrogen market matures; the instruments stimulating the demand; finding the way to cover the cost difference between the traditional and zero-carbon technologies; and finding a way to incentivize and support the innovation.
There are several ways to boost the development of the hydrogen economy. The list is open, and some initial ideas include:
- increasing the share for renewable energy from hydrogen for renewable energy sources (RES) under the RED II Directive;
- financial support for innovative projects aimed at obtaining clean hydrogen in existing installations – e.g., a hydrogen purification to the quality that can be used in automotive fuel cells – or in small-scale, local power plants where there is a need to compensate for higher production costs of zero-carbon hydrogen;
- further, decreasing distribution fees for renewable energy for hydrogen production;
- last, but not least – the support mechanisms for products manufactured with the use of “renewable hydrogen”.
We reason from a particular perspective of the Central and Eastern Europe region which has made a successful transition to a market and a greener economy. Since 1990, the EU has managed to reduce its total CO2 emissions by 23%, largely thanks to the reductions in the Central European countries. Yet, despite these efforts, the current regional energy mix is a result of the past and overcoming this heritage will take extra time and effort. It will also affect the way and pace of developing the hydrogen economy. Poland today is the nr 3 producer of hydrogen in the EU. Similarly, to the rest of the EU, it is still predominantly based on fossil fuels. However, we are familiar with this business and can contribute to make the hydrogen the backbone of the sustainable energy transition of the XXI century. It may be a small step for some, but it will be a giant leap for the CEE region towards the climate-neutral economy.