The European Commission (EC) and 20 manufacturers have signed a Joint Declaration to ensure that enough electrolysers will be made in Europe to meet the EU’s new “Hydrogen Accelerator” goal of producing ten million tonnes of green hydrogen a year by 2030.
Reaching that volume of H2 would require 90-100GW of electrolysers to be installed in just seven and a half years — up from less than 150MW today, despite there being a little under 1.75GW of annual manufacturing capacity across the continent.
“It is the objective of electrolyser manufacturers in Europe to have in place by 2025 a combined annual electrolyser manufacturing capacity in Europe of 17.5 GW, and to further increase that capacity by 2030 in line with projected demand for renewable and low-carbon hydrogen,” the declaration says.
To support the hundreds of millions of euros that would need to be invested, the EC would help tackle the three main bottlenecks preventing rapid electrolyser growth:
- The lack of adequate regulatory frameworks and subsidies for large-scale green hydrogen production;
- The absence of certainty on future market demand for renewable H2; and
- The challenges of securing the necessary volumes of components and raw materials.
“There is no Hydrogen Accelerator without an acceleration in electrolyser manufacturing. There is no acceleration in electrolyser manufacturing in Europe without adequate regulatory and financial support,” said one of the Joint Declaration signatories, Jon André Løkke, the CEO of Norwegian electrolyser maker Nel.
The document suggests that the EU would like to see a subsidy scheme put in place known as Carbon Contracts for Difference.
“The initial development of a market for renewable hydrogen, the large-scale deployment of clean hydrogen technologies and applications, and the creation of hydrogen value chains would be further incentivised if Carbon Contracts for Difference [CCfD] type schemes were put into place for industrial renewable hydrogen-based decarbonization pathways,” says the declaration, which was signed by Thierry Breton, the European Commissioner for the Internal Market; Hydrogen Europe boss Jorgo Chatzimarkakis; and senior executives from 20 European electrolyser manufacturers (see list below) after a day-long private meeting in Brussels.
It added that several member states are already preparing such subsidy schemes and that the Commission has already granted state aid approval for them.
“The European Commission will seek the speedy adoption by the European Parliament and the Council [ie, member-state leaders] of its legislative proposal for an amendment to the ETS [emission trading scheme] Directive for the Innovation Fund that could serve as a legal basis for a CCfD scheme.
“The Commission will explore the option of a CCfD pilot scheme of renewable hydrogen-based industrial decarbonisation pathways.”
Under a CCfD scheme, end users would be paid a guaranteed amount by governments for avoiding CO2 emissions. This would consist of savings made by not paying a carbon price under the ETS, plus a top-up subsidy to reach the “strike price” agreed in the CCfD.
The amount actually paid by governments would therefore depend on the fluctuating EUA carbon price, and would mean that if it exceeded the strike price, end users would actually pay the difference back to the government.
The UK is due to introduce a slightly different Contracts for Difference scheme for green H2 this year, which would offer a subsidy representing “the difference between a ‘strike price’ reflecting the cost of producing hydrogen and a ‘reference price’ reflecting the market value of hydrogen”.
Essentially, this would enable green hydrogen to be available to the market at the same price as grey hydrogen produced from unabated methane.
However, it is worth pointing out that several analysts, including BloombergNEF and Rystad Energy, believe that green hydrogen would actually be cheaper to produce in Europe today than grey or blue H2 due to sky-high natural-gas prices.
The joint declaration adds that the European Investment Bank — the lending arm of the EU — “stands ready to support hydrogen project promoters”, pointing to the €550m of finance it has already committed to the sector.
“The bank is also evaluating over €1bn worth of hydrogen within its pipeline”.
Finance will also be available from the EU Innovation Fund in the second half of this year, as well as the Commission’s Important Projects of Common European Interest instrument, and under its Climate, Environmental Protection and Energy Aid Guidelines.
Ensuring demand for green hydrogen
Uncertainties surrounding the future size of the green hydrogen market can be addressed by EU or national H2 targets, “especially if of a legally binding nature”, the joint declaration states.
Quotas for hydrogen and derivatives such as ammonia and e-fuels — so-called Renewable Fuels of Non-Biological Origin in EU jargon — have been proposed by the European Commission in its revised Renewable Energy Directive, while the build-up of hydrogen infrastructure has similarly been proposed in the Trans-European Energy Networks and the Alternative Fuels Infrastructure Regulation, the document states.
“The European Commission will ensure that regulation governing the production of renewable hydrogen, including on the availability of renewable electricity to renewable hydrogen production projects, will be justified and proportionate and will support a fast and affordable ramp-up of the market for renewable hydrogen and its production in Europe.”
It adds: “Regulation should support and accelerate the availability of renewable electricity to renewable hydrogen production projects to enable the scale-up of hydrogen projects to gigawatt-scale, whilst ensuring that only hydrogen produced from renewable sources qualifies as renewable hydrogen.”
The Joint Declaration points out that producing ten million tonnes of green hydrogen by 2030 will require about 500TWh of renewable electricity, “adding to already high demand resulting from electrification and the decarbonisation of electricity generation”.
“The simplification and shortening of permitting procedures for renewable energy projects is therefore of paramount importance,” it explains. “Overly complex and lengthy permitting procedures for the manufacturing and installation of electrolysers constitute a challenge as well.
“The European Commission will... shortly adopt a recommendation and a legislative proposal on accelerated permitting for renewable energy projects, including renewable hydrogen.”
To help facilitate the required supply chain and raw materials, the EU’s public-private European Clean Hydrogen Alliance forum “will set up an ‘Electrolyser Partnership’ that will bring together electrolyser manufacturers and suppliers of components and materials within the existing structures of the Alliance”, the declaration says.
The Commission will also build “raw materials partnerships with third countries” and work with manufacturers on “raw materials dependency issues, such as strategic sourcing, processing, recycling and possible substitution”.
The manufacturers also committed to research the reduction of the amount of raw materials needed in electrolysers, in conjunction with the Commission, and to implement recycling schemes.
“It’s time to walk the talk,” said Løkke. “We are looking forward to 18 May, when the Commission is expected to present its RePowerEU plan.”
Advent Technologies (US-based, with offices in Denmark, Germany and Greece)
Cummins (US-based, with operations in Belgium)
De Nora (Italy; an electrode maker that partly owns Thyssenkrupp Nucera)
Green Hydrogen Systems (Denmark)
Haldor Topsoe (Denmark)
John Cockerill (Belgium)
Siemens Energy (Germany)
Thyssenkrupp Nucera (Germany)