European Commission launches hydrogen gas strategy

LONDON (ICIS)–The much-awaited European hydrogen strategy was formally adopted by the European Commission on 8 July.

The strategy focuses on clean hydrogen produced using electrolysers powered by renewable energy and targets 40GW electrolyser capacity by 2030 as well as an estimated 80GW-120GW additional renewable capacity.

The strategy also states that low-carbon hydrogen produced via fossil fuels using carbon capture and storage (CCS) technology will also play a transitional role.

In order to coordinate the strategy, the Commission also launched the European Clean Hydrogen Alliance to bring together public authorities, industry and civil society.

HYDROGEN COSTS

The current cost of clean and low-carbon hydrogen is uncompetitive compared to hydrogen produced from fossil fuels without capturing emissions. The strategy references fossil-fuel based hydrogen can be as little as €1.5/kg, disregarding carbon prices. Whereas low-carbon hydrogen and clean hydrogen can cost between €2/kg and €2.5-5.5/kg respectively. A carbon price of around €55-90 per tonne of CO2 in order to make low-carbon hydrogen competitive. The value as traded during the second quarter was closer to €25 per tonne of CO2.

Electrolyser costs are expected to halve on current costs by 2030, according to the strategy document. They have dropped by 60% in the last ten years.

MARKET INTEGRATION

The policy focus of the coming years will be to ensure proper regulation is set up in order to produce a highly-liquid market that supports supply and demand triggers.

The document acknowledges the need to develop a benchmark for euro denominated transactions by 2021.

INVESTMENT

Between now and 2030, electrolyser investments would need to range between €24bn and €42bn. In order to scale up necessary solar and wind energy of 80GW-120GW a further €220bn-€340bn would be required.

A further €11bn for retrofitting half of existing plants with CCS, as well as €65bn for hydrogen transport, distribution and storage, including refuelling stations.

Up to 2050, investments in production capacities could amount to €180-€470bn in Europe.

HYDROGEN ROADMAP TO 2050

The document outlined a roadmap of hydrogen expansion out to 2050 in three stages:

Phase One: 2020-2024

• Installation of 6GW of renewable hydrogen electrolysers

• Production of up to 1 million tonnes (mt) of clean hydrogen, used for the decarbonisation of current hydrogen production and usage, namely in industry and chemical sectors as well as heavy-duty transport.

• Policy work will also be developed in order to establish a liquid hydrogen market, the formation of a euro-denominated benchmark by 2021

Phase Two: 2025-2030

• Installation of 40GW electrolyser capacity by 2030

• Production of 10mt of clean hydrogen

• Renewable hydrogen used for balancing the renewable-based electricity system by using hydrogen-to-power generation methods, also hydrogen storage begins for seasonal flex

• Further retrofitting of existing fossil-fuel based hydrogen production methods with CCS to continue

• The development of hydrogen clusters that rely on decentralised renewable energy production and local demand

• Transport networks established between countries with large renewable potential to high demand centres

• The build-out of hydrogen refuelling stations

• International trade to develop between neighbouring countries to the EU

• An open and competitive hydrogen market established in order to encourage investment, with unhindered cross-border trade

Phase Three: 2030-2050

• Renewable electricity production to increase as one quarter of renewable power could be used for renewable hydrogen production by 2050

• Hydrogen and hydrogen-derived synthetic fuels developed from carbon neutral CO2 used across wider transportation sectors, such as aviation and shipping, as well as hard-to-decarbonise industrial and commercial buildings

• Creation of biogas from hydrogen paired with CCS to generate negative emissions