Europe faces a “mass exodus” of its green hydrogen industry to the more favourable US market if the European Commission (EC) refuses to back down on “disproportionate” additionality requirements and fails to nail down simple regulatory and financial support regimes quickly, trade association Hydrogen Europe has warned.
In a letter to EC president Ursula von der Leyen, seen by Recharge, Hydrogen Europe chief executive Jorgo Chatzimarkakis railed against the EU’s proposed Delegated Act (DA), currently being discussed as part of an overhaul of the bloc’s flagship Renewable Energy Directive.
“The rules of the Delegated Act are disproportionate and will make European renewable hydrogen insufficient for the industry needs and non-competitive vis-à-vis non-European renewable hydrogen,” he wrote.
The DA would require all renewable hydrogen production to source power from dedicated renewable energy installations, with any grid-sourced green electricity offset by dedicated power supply within the hour — a process Hydrogen Europe calls temporal correlation.
“Giving green light to the Delegated Act in its current form would in essence damage most of the policies and initiatives your team has put forward, and most certainly cause a mass exodus of companies towards the US market,” the Hydrogen Europe CEO warned in the letter.
The EU is keen to ensure that green hydrogen does not cannibalise renewable energy supply, which is desperately needed to decarbonise the growing electricity system and wean the bloc off dependence on Russian gas.
“We are not objecting to the additionality principle, as we are all in favour of ramping up renewables for green hydrogen,” Chatzimarkakis told Recharge. “It’s the temporal correlation in hourly counting which is the problem.”
The proposed rules means that if power supply is cut from an H2 plant’s dedicated renewables installation — for example if the wind stops blowing for a prolonged spell and hampers supply from a wind farm — it will be extremely difficult to source alternative renewable power within the hour. Failure to do so would see H2 produced at the plant being stripped of the “renewable” label.
And as green hydrogen production is cheapest when electrolyser capacity factors are high, the rules could undermine project economics if producers are forced to switch off production due to a lack of power supply.
Other countries such as India are planning to allow “banking”, where green hydrogen developers that produce their own renewable electricity can “bank” their excess supply with a local power distributor for up to 30 days, and buy it back at a fixed price when needed.
Shift to the US
No such requirements are incumbent upon hydrogen producers in the US Inflation Reduction Act, which Chatzimarkakis praised for its “clear and simple” framework on hydrogen, especially the landmark maximum tax credit of $3 per kg, which has the potential to make US-produced green H2 cheaper than grey overnight.
“The rules are simple and the conditions are attractive,” he said in the letter to von der Leyen, noting that this represents a significant challenge for Europe as it strives to build its own hydrogen sector.
By contrast to the US, the EC has been slow to finalise regulation and financial support for renewable hydrogen and lacks strategic co-ordination at EU level, leaving much of the work to member states, the Hydrogen Europe boss complained.
Evidence of the industry turning Stateside is emerging rapidly: Norwegian electrolyser firm Nel is openly courting the US market, and last week Recharge exclusively reported that clients of Danish solid-oxide electrolyser manufacturer Topsoe are looking to shift their focus from Europe to the US.
And the new CEO of green H2 giant Fortescue Future Industries, Mark Hutchinson, has warned that Europe will struggle to meet its targets of producing 20 million tonnes of green hydrogen by 2030 unless it can match the US subsidy package.
Chatzimarkakis, who represents 403 hydrogen businesses and regional trade associations, called on von der Leyen to accelerate and streamline the bloc’s regulatory and financial support packages, and back the proposal for a “European Renewable Hydrogen Switchboard”, to let the industry remain competitive.
The switchboard proposal, first tabled by the European Investment Bank earlier this year, would be modelled on Germany’s H2 Global hydrogen tendering programme, which provides a platform for producers to bid to supply international customers at a fixed price.
The European Commission will be consulting at Cabinet level on the DA this week, ahead of a mid-September European Parliament vote on its inclusion in the Renewable Energy Directive.