The Brief – Waking up from hydrogen daydreams

Europe’s time spent sleepwalking to the tune of hydrogen lobbyists – draining funds and political capital for far too long – appears to be coming to an end.

This week, I attended a business leadership conference hosted by the German Chamber of Commerce in Berlin. Attendees, all serious businesspeople, were asked which technology is the key net-zero technology. The number one answer? Hydrogen.

Europe’s fascination with hydrogen has become more like an addiction and a costly one, too.

The European Commission estimates that to produce, transport and consume 10 million tonnes of renewable hydrogen domestically, investment worth up to €471 billion will be necessary. 

For the odourless gas to be climate-friendly, it must be produced through electrolysis using renewable electricity. To avoid electrolysers taking up all the green power in the grid and boosting demand for coal power, two-thirds of the €471 billion will have to be invested into additional renewables.

To meet the second half of the EU’s hydrogen targets – 10 million tonnes of imports – will require another estimated €500 billion.

That amounts to a €1 trillion dream to get the hydrogen economy from non-existent to infancy into 2030, and the spending certainly wouldn’t end there.

Hydrogen proponents may argue that not all that money will come from taxpayers and, indeed, private investments may end up shouldering much of it. But copious amounts of public funds are being invested right now.

“All relevant EU funds are being mobilised to support an accelerated scale-up of the hydrogen market in Europe,” the Commission stated in March. 

That means shelling out €1 billion every seven years for the Clean Hydrogen Partnership.

The Innovation Fund, meanwhile, which taxpayers’ money spent on carbon prices from the EU’s emissions trading scheme is fed into, has put out multiple calls for hydrogen-related projects to the tune of €1.7 billion.

Then there are the projects deemed “important” to Europe, the so-called IPCEIs (Important Projects of Common European Interest), where EU countries can be more liberal with their financial support to individual sectors.

Hydrogen IPCEIs carry a €10.6 billion price tag. Another €5 billion comes from COVID-19 recovery funds. The European Investment Bank has also put €1 billion towards hydrogen projects.

Commission boss Ursula von der Leyen’s pet project and main production financing vehicle, the hydrogen bank, comes at a comparatively meagre €3 billion. Can you tell Brussels is running out of money for hydrogen?

Add national initiatives to the more than €20 billion from above, and you have an inkling of the size of Europe’s hydrogen daydreams, not to mention how far from achieving anything even close to the stated ambitions we remain. 

Finally, what will all that hydrogen be used for?

Once, lobbyists painted a rosy picture of an entire economy running on hydrogen. But hydrogen cars proved a non-starter while heating with hydrogen has thankfully been banished from people’s minds.

It looks certain that hydrogen will play a role in steelmaking and as a feedstock in the chemical industry, like fertiliser production.

Politicians find the idea of hydrogen as a form of long-term energy storage tempting. Freight shipping and aviation may look to use some form of hydrogen derivate (also known as e-fuels).

Meanwhile, today’s main consumer of hydrogen, fossil fuel refineries, are on their way out. In a world of electric vehicles, petrochemical uses of hydrogen largely fall away.

Industry demand is projected to be far below the EU’s lofty targets. A 2023 study for the Commission’s energy directorate put the 2050 industry demand for hydrogen at upwards of 42 million tonnes. By 2030, they expect industry demand to be around 3 million tonnes, at most.

Even Hydrogen Europe, the bloc’s staunchest hydrogen advocate, estimates that economy-wide demand for hydrogen – mandated by rules designed to force an early switch to hydrogen – will be 8.5 million tonnes in 2030.

Others, like the e-fuel alliance, a hydrogen-based diesel lobby group, are much more pessimistic in the face of low-ball transport targets.

Demand for hydrogen in transport would amount to around 10 to 12 terawatt-hours – less than half a million tonnes of hydrogen, Tobias Block, head of strategy at the association, said in late August. 

“This is not what the European Union wanted to achieve in the hydrogen strategy,” he stressed.

It is good that Brussels appears to be waking up to the fact that its hydrogen targets outstrip reality now rather than later.

One good example of the wakeup is the curious case of Kenya. 

When Kenyan President William Ruto visited Berlin in March, he spoke colourfully of his country’s ambitions to export hydrogen to Europe. “We will also be a critical partner to Europe in the supply of green hydrogen,” Ruto insisted. 

The plan was almost sound: Leverage Kenya’s abundant potential for renewables, turn that electricity into hydrogen and ship it to Europe at a hefty premium.

In practice, transporting hydrogen is devilishly complicated and not economically viable without a pipeline in place – and Kenya’s distance from Europe makes such a project unlikely.

It has been a refreshing surprise that Kenya’s green hydrogen strategy and roadmap, created with EU funding and announced on Tuesday (5 September), does not chase lofty dreams of shipping hydrogen to another continent. 

Instead, the strategy focuses on what Kenyans can create for themselves, turning their abundant hydrogen into green fertiliser to make the country’s farms some of the world’s climate-friendliest.

Now Europe needs to adopt the hydrogen realism it is exporting at home, too. Increasingly, that appears to be the case.

Energy Commissioner Kadri Simson’s comments that “there is no green future for Europe without an upgraded power grid” in the FT is likely a sign of changing times, while the newly crowned EU Green Deal Chief, Maros Šefčovic, has specifically been tasked with managing the bloc’s much-needed grid expansion.

After years of hydrogen hype, Brussels may just focus on electricity – the true fuel of the future.

The Roundup

The European Commission unveiled on Wednesday its list of online services designated as “gatekeepers”, which will now have six months to adapt to strict antitrust practices or face up to 20% global annual turnover fines.

With almost half of Europeans lacking digital skills, there is an urgent need to boost digital literacy if the European Health Data Space (EHDS), set to be launched in 2025, is to be a success.

Non-profit and civil society groups will have a ‘one-stop shop’ to allow them to operate in EU countries where they are not registered, under a new proposal tabled by the European Commission on Tuesday.

Ukrainian lawmakers voted on Tuesday to restore a requirement that officials declare their assets, a measure sought by the International Monetary Fund, but included a loophole critics say dampens its effect.

Twenty-eight people died, thousands of animals burned, properties and businesses destroyed, and 935,000 acres of land incinerated – this is the provisional toll of the unprecedented wildfires that have ravaged Greece in recent weeks. But it didn’t have to be this way. 

A presidential election in the Maldives on Saturday could be decisive in determining whether China or India win a competition for influence over the tiny Indian Ocean island chain.

Chinese Premier Li Qiang said on Wednesday it is important to avoid a “new Cold War” when dealing with conflicts between countries as world leaders gathered in Indonesia amid sharpening geopolitical rivalries across the Indo-Pacific region.

Look out for…

• Enlargement Commissioner Olivér Várhelyi visits Turkey.
• Commissioner Jutta Urpilainen visits Tallinn, Estonia, and participates in 2023 OGP Global Summit Wednesday-Thursday.
• Commissioner Kadri Simson delivers keynote speech and participates in  EU Grids Forum on Thursday.
• Commission President Ursula von der Leyen meets Sheikh Mohamed bin Zayed Al Nahyan, president of the United Arab Emirates, on Thursday.

Views are the author’s

[Edited by Zoran Radosavljevic/Benjamin Fox]