The European Commission unveiled plans on Wednesday (8 July) to promote hydrogen based entirely on renewable electricity like wind and solar, but said low-carbon hydrogen derived from fossil fuels will also be supported in order to scale up production in the short term.
Hydrogen is seen as a potential silver bullet to decarbonise hard-to-abate industrial sectors like steel and chemicals, which currently rely on fossil fuels and cannot easily switch to electricity. It is also seen as a long-term solution for shipping, aviation and heavy-duty road transport where electrification is not feasible at the moment.
“Hydrogen is a vital missing piece of the puzzle to help us reach this deeper decarbonisation,” said Kadri Simson, the EU’s energy commissioner who presented the strategy on Wednesday (8 July).
By 2050, the EU executive estimates that clean hydrogen could meet 24% of the world’s energy demand, with annual sales in the range of €630 billion. For Europe, that could translate into 1 million jobs in the hydrogen value chain.
But getting there will take time. Today, 96% of hydrogen today comes from fossil fuels, the Commission points out, saying: “The priority is to develop renewable hydrogen, produced using mainly wind and solar energy”.
That will require further cost reductions in technologies such as electrolysers, which aren’t expected to be fully mature until 2030 at the earliest, the Commission said in a statement.
Therefore, in the meantime, “other forms of low-carbon hydrogen are needed to rapidly reduce emissions and support the development of a viable market,” the Commission added, referring to carbon capture and storage (CCS) as well as hydrogen obtained from gas pyrolysis, which generates carbon in solid form instead of CO2.
The good news is that Europe is at the forefront of all these technologies, the Commission said.
“The new hydrogen economy can be a growth engine to help overcome the economic damage caused by COVID-19,” said Frans Timmermans, the Commission executive vice-president in charge of the Green Deal. “In developing and deploying a clean hydrogen value chain, Europe will become a global frontrunner and retain its leadership in clean tech,” he said.
In order to scale up production, the Commission said it will follow “a phased approach”:
- From 2020 to 2024, the Commission’s objective is to support the installation of at least 6 gigawatts of renewable hydrogen electrolysers in the EU, in order to produce up to 1 million tonnes of renewable hydrogen.
- From 2025 to 2030, hydrogen needs to become an intrinsic part of Europe’s integrated energy system, the Commission says, with at least 40 gigawatts of renewable hydrogen electrolysers and the production of up to 10 million tonnes of renewable hydrogen in the EU.
- From 2030 to 2050, the aim is for renewable hydrogen technologies to reach maturity and be deployed at large scale across all hard-to-decarbonise sectors, such as chemicals and steelmaking.
To support Europe’s nascent renewable hydrogen industry, the Commission also set European Clean Hydrogen Alliance that will bring together industry leaders, national and regional ministers as well as civil society to “build up an investment pipeline for scaled-up production” and support demand for clean hydrogen in the EU.
“The Alliance is strategically important for our Green Deal ambitions and the resilience of our industry,” said Thierry Breton, the EU’s internal market commissioner in charge of the alliance.
Chemicals and steelmaking
Most hydrogen in Europe today is generated and consumed by the chemicals industry, which sees it as “a viable option” to reduce CO2 emissions further in the future.
“Hydrogen can become an important low-carbon building block for the chemical industry’s production processes,” said Marco Mensink, director general at CEFIC, the EU chemical industry association.
“As one of the largest producers and consumers of hydrogen in Europe, it is a vital first step to see that these new strategies place the chemical sector at the heart of Europe’s future hydrogen economy,” he said.
Steelmaking is another key industrial sector which is expected to benefit from the widespread availability of clean hydrogen. For those sectors, the Commission intends to promote so-called carbon contracts for difference (‘CCfD’) that would remunerate investors by paying the difference between the CO2 strike price and the actual CO2 price on the EU carbon market.
The difficult part will be to deal with the transition period until 2030 and avoid a lock-in effect into carbon-emitting sources of hydrogen.
“Of course there will be funding for CCS and pyrolysis technology,” said a senior Commission source who briefed the press on Wednesday.
“But we do not see this as a lock-in because the development of renewable hydrogen is a process that will take a while,” the official added, saying those investments have a lifecycle of around 25 years which could therefore be amortised by the time green hydrogen becomes competitive.
“In the transition period, we’re not going for fossil-based hydrogen,” the official insisted, effectively ruling out EU support for so-called “grey” hydrogen produced from steam methane reforming without CCS.
“Therefore, it is low-carbon hydrogen that we are using in the transitional period,” the official added.
This is why the carbon capture and storage will be essential in the transition period, said another senior Commission official. “We need the carbon capture solutions in order to quickly decarbonise as much as possible the existing production while scaling up renewable hydrogen production at the same time,” the source explained.
Russia has shown interest in developing pyrolysis technology, seeing it as a way to decarbonise its natural gas exports to Europe.
‘The right plan at the right time’
Transport and Environment (T&E), a green campaign group, hailed the Commission’s hydrogen strategy, saying it was “the right plan at the right time”.
“Hydrogen is the missing link in Europe’s strategy to decarbonise planes and ships where electrification is not an option,” said William Todts, executive director at T&E. “Now the EU needs to create laws that force airlines and shipping companies to start using zero-emission fuels including hydrogen, ammonia and synthetic kerosene,” he added.
T&E particularly welcomed the focus on zero-emissions trucking in the strategy, saying the Commission rightly identifies hydrogen and electrification as key technologies to achieve clean road freight.
However, Todts expressed doubts as to the Commission’s strategy of promoting low-carbon hydrogen with CCS in the transition period. “Hydrogen is only as clean as the energy used to produce it, and relying on fossil gas just delays the decarbonisation of the economy which the EU has committed to,” Todts said.
According to the European Environmental Bureau (EEB), a green campaign group, the Commission’s hydrogen strategy is simply “a gift to fossil fuel companies”.
“Investing in fossil-based hydrogen, whose production is already available at industrial scale, risks making truly clean and fossil-free hydrogen uncompetitive for the EU market and creating stranded assets. It’s a costly gamble that Europe cannot afford and could easily avoid,” said Barbara Mariani, senior policy officer for climate and energy at the EEB.