Europe’s already highly competitive green hydrogen industry just got another boost thanks to new E.U. funding. The region has been making a name for itself by establishing several major green hydrogen plants and developing the market for the renewable energy source as other regions battle to get green hydrogen projects off the ground. Improved policies for green hydrogen production are expected to support sectoral development even further, although the International Energy Agency (IEA) remains sceptical over ambitious E.U. 2030 targets.
This month, the European Commission (EC) approved $5.2 billion in public funding for hydrogen projects across the region. This investment is expected to attract a further $6.8 billion in private funding. The organisation said that 13 member states will be providing the funds for a project entitled IPCEI Hy2Use, which will support 29 businesses across 35 projects. It will help develop “large-scale electrolysers and transport infrastructure, for the production, storage and transport of renewable and low-carbon hydrogen,” according to the EC.
While the investment includes all types of hydrogen – from grey and brown to green – it will encourage greater renewable (or green) hydrogen production across the region. One executive vice president at the EC, Margrethe Vestager, expects the funding to add 3.5 GW of electrolysis capacity. This would mean “an output of approximately 340,000 tons of renewable and low-carbon hydrogen per year,” Vestager stated.
The new investment would contribute to the EC target of an 80 GW renewable hydrogen electrolyser capacity in Europe by 2030. The European Commission President Ursula von der Leyen also highlighted the EC’s “2030 target to produce ten million tons of renewable hydrogen in the EU, each year,” in her State of the Union address earlier this month. “To achieve this, we must create a market maker for hydrogen, in order to bridge the investment gap and connect future supply and demand,” she added. Several green hydrogen projects are already underway in the region, with some large-scale electrolysers commencing operations between 2024-2026, and more to come in the 2026-2027 period. The IPCEI Hy2Use scheme will end if 2036.
In addition to approving greater funding for hydrogen projects, the E.U. has also begun to introduce more favourable regulations to support production. Earlier this month, the European Parliament (EP) voted an amendment into action for the Renewable Energy Directive II (RED II), getting rid of “additionality” requirements at the E.U. level. It also introduced binding targets for green hydrogen production.
The target for renewable hydrogen to make up 5.7 percent of all fuels by the end of the decade is introduced in RED II. It also outlines targets for industry, stating that industrial fuels should consist of 50 percent renewable fuels of non-biological origin (RFNBOs) by 2030, and 75 percent by 2035. For this to be achieved, Europe will have to deliver between nine and 10 tonnes of green hydrogen.
The EP scrapped a controversial part of RED II – the Delegated Act – that would have required all green hydrogen producers within the E.U. to source their electricity from dedicated renewable energy projects. It would also have meant that projects could only access grid-sourced electricity when offset with a dedicated supply within the hour. Now, producers will be permitted to use electricity from the grid so long as they can verify it as green electricity through a power-purchase agreement (PPA).
The change comes following hard lobbying by Hydrogen Europe for the amendment who suggested that previous rules would have been detrimental to green hydrogen production, threatening private firms to move to other regions with more lenient regulations. The recent introduction of green hydrogen tax credits in the U.S., under Biden’s IRA legislation, is already threatening private development in Europe as America is looking increasingly attractive to producers. Hydrogen Europe stated of the move, “These binding targets on renewable hydrogen, and the creation of a simpler framework, are strong signals from the EU institutions to ensure the scale-up of a hydrogen economy and reduce our dependency on fossil fuels.”
However, even following recent policy changes and the increase in funding, the IEA is concerned that the E.U. may not be able to meet its 2030 green hydrogen targets. The current project for installed green hydrogen capacity for the end of the decade is 39 GW, missing the 80 GW target by around a half. Europe is expected to be close to meeting its Fit for 55 targets but will likely miss the more ambitious aim unless it increases its electrolyser capacity even further.
Europe is already a major green hydrogen hub, with the region set to provide one-third of the total global electrolyser capacity for green hydrogen this year, followed by China – a figure that is set to remain stable until 2030. But to scale up green hydrogen operations in Europe the E.U. would have to dedicate funds to the development of larger-capacity hydrogen plants – aiming for 260 MW facilities by 2025, reduce green hydrogen prices through technological innovation, and repurpose gas pipelines to transport hydrogen.
As the E.U. provides higher levels of funding to green hydrogen projects, together with favourable hydrogen policies, Europe will likely become the biggest green hydrogen hub in the world by the end of the decade. However, to meet more ambitious targets, the E.U. will have to attract greater funding and drive forward several major green hydrogen projects.
By Felicity Bradstock for Oilprice.com
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