Here’s a quick reality check. There may be more than 250GW of green hydrogen projects in the global pipeline, and a seemingly endless stream of announcements to use vast quantities of the zero-carbon gas to decarbonise everything from trucks and heating to steel and aviation, but the simple truth is that renewable H2 barely exists today.

Hydrogen: hype, hope and the hard truths around its role in the energy transition
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According to analyst Aurora Energy Research, just 200MW of electrolysers — the machines that use electricity to split water molecules into hydrogen and oxygen — are currently deployed worldwide, and not all of those are even using renewable energy. The world’s largest operating green hydrogen project today, in Quebec, Canada, is just 20MW.

This is because green hydrogen is currently far more expensive to produce than the grey H2 derived from unabated fossil fuels that accounts for 95-99% of the world’s hydrogen demand today.

Cost estimates vary according to the price of natural gas and renewable energy, with capacity factors of the latter having a big impact (ie, the more hours an electrolyser is in operation, the cheaper the levelised cost of hydrogen). But the International Energy Agency puts the current cost of green hydrogen at $3-8/kg, compared to $0.50-1.70/kg for unabated grey hydrogen.

The consensus view is that governments will need to subsidise green hydrogen in the short to medium term to make it affordable and create a viable and sustainable market for the gas ­— in a similar way to how feed-in tariffs and national tenders have drastically cut the cost of wind and solar power over the past 20 years.

Indeed, at COP26 last week, 32 nations and the EU last week agreed to work together to ensure that “affordable renewable and low-carbon hydrogen is globally available by 2030”, but with no detail as to how they would achieve that.

According to a new document by the International Renewable Energy Agency (Irena), the World Economic Forum (WEF) and consultant Accenture — unveiled at COP26 — it will be far from simple, requiring no less than 38 policies or “enabling measures” for the EU alone, with 39 steps in Japan. These include support mechanisms, a new market design, quotas for industry, carbon border adjustment taxes, carbon intensity definitions, electrolyser manufacturing capacity targets, workforce training and R&D support.

The Enabling Measures Roadmap for Green Hydrogen report, which describes itself as a “toolbox for policy makers”, looks at the enabling measures required in the EU and Japan — with later expansions due to do the same for the US, China, India, Latin America and the Middle East and North Africa.

“The rapid uptake of green hydrogen is essential for sectors like aviation, international shipping and heavy industry, where energy intensity is high, and emissions are hardest to abate,” said Irena in a statement. “The roadmaps show the enabling measures that need to be implemented to boost the green hydrogen economy globally.”

This initial paper sets out ten objectives, each of which has three to five enabling measures (listed as “a” to “e”) — some of which are discussed in detail, with others consisting of just one line of text.

The policy recommendations are very similar for both the EU and Japan, but for the purposes of this article, Recharge will focus on the European proposals, followed by a short analysis of the Japan-specific enabling measures.

Objective 1: To remove cost and regulatory barriers for hydrogen production

Enabling measure 1a: To ensure additionality rules while support increased renewable energy deployment. This is to ensure that green hydrogen production does not “displace more effective uses of renewable electricity” — and does not access any of the “additional payments” set up for such uses, such as feed-in tariffs. However, this does leave the door open for using excess renewable energy (ie, that would otherwise be curtailed due to a lack of power demand) for H2 production, although this would require tracking in a future certification scheme.

1b: Decrease high electricity prices with dedicated support. This includes ensuring electrolysers are exempt from taxes and fees, and low taxes on excess renewable energy.

1c: Ease additionality rules for first movers. This “partial exception” to 1a is not clearly defined, but calls for assessment of “transitional measures”. It puts forward two examples, the first of which is to average out the excess renewable energy over a longer period of time, so rather than just utilising it when it becomes available, the operator can take that energy at times that optimise the operation of electrolysers. The second is to co-locate green hydrogen production with renewables generation in tenders in order to ease potential grid constraints — ie, diverting wind or solar power that would otherwise be curtailed to electrolysers.

1d. Decrease investment costs of electrolysers with dedicated support (eg, grants and loans).

Objective 2: To deploy mechanisms that close the cost gap for hydrogen use in hard-to-abate sectors

2a: To create a one-stop-shop for hydrogen finance. This isan initiative to bring together project developers, private finance, development finance and government support under one roof to accelerate final investment decisions (FIDs).

It includes the creation of a forum that connects financiers with policymakers “to share perspectives on what is stopping FID for hydrogen projects” and governmental grants for project development and document preparation.

2b: To provide fiscal incentives (tax level differentiation and tax relief for green goods). In other words, to lower tax rates or tax relief for consumers and businesses that use products made using green hydrogen, such as fertiliser or steel. This would help overcome the added expense of using a more expensive form of H2.

2c. To implement Carbon Contracts for Difference. These are defined in the document as “contracts that provide certainty on the costs for a hydrogen consumer by paying the difference between the carbon market price and an agreed strike price”.

In other words, end users would be paid a guaranteed amount by the government for avoiding CO2 emissions. This would consist of savings made by not paying a carbon price under the EU’s Emissions Trading System (ETS), plus a top-up subsidy to reach the “strike price” agreed in the CCfD. The key action here is to identify who should benefit from such an arrangement and, in the first instance, the implementation of a pilot scheme.

The CCfD and a pilot programme are already included in the hydrogen strategy unveiled by the European Commission in July 2020, which is still awaiting final sign-off by member states.

2d. Introduce eco-labelling to green products, including hydrogen production routes.

2e. Phase out free EU Emissions Trading System (ETS) allowances for grey hydrogen and use revenues for green H2.

Objective 3: To drive critical mass demand through major hydrogen projects

3a: To identify high-value/efficient applications and define targets by end-use sector in line with net zero. The document does not offer any more information on this “enabling measure”, but this would presumably rule out the use of hydrogen for heating and fuel-cell cars, for which direct use of electricity is generally considered to be a more efficient and a faster route to decarbonisation.

3b. To incentivise the development of hydrogen valleys through promotion of regional and sectoral targets. This term “hydrogen valleys” is as a synonym for industrial clusters — locations where green H2 would both be produced and consumed, in order to reduce the considerable costs and difficulties of transporting hydrogen.

3c. To drive sustainable public procurement. In other words, governments/public authorities buying products made using green hydrogen.

3d. To accelerate the fuel shift in industrial applications through major transformation policy. This calls for the introduction of quotas or mandates requiring certain industries to use increasing amounts of green hydrogen — along with loans, grants or other funding to help absorb the added costs of doing so, as well as a certification scheme that ensures a greenhouse gas emission intensity standard (see below).

Objective 4: To drive efficient allocation of capital within Europe and for imports

4a. To ensure alignment of efforts and strategies across member states through coordination and continuous knowledge exchange.

4b. Set ambitious capacity targets for trade facilities. This includes ports, ships, storage and equipment that can handle unspecified hydrogen carriers (which would presumably include ammonia, methanol and toluene, as well as compressed and liquefied H2). This includes defining milestones that would enable economies of scale to reduce costs; targets for H2 imports and exports; agreeing standardised designs with equipment manufacturers; and participating in global initiatives for the import and export of hydrogen from pilot projects and beyond.

4c. To define market design and operating rules for hydrogen trading (including derivatives).

Objective 5: To reduce fossil-fuel consumption through mandates and obligations

5a. To phase out fossil-fuel-based technologies in hard-to-abate sectors. The document only singles out two examples here: grey hydrogen and the use of coal for steel production, but under “ongoing work and examples” it points to the UK’s planned phase out of gas boilers and bans on new petrol and diesel cars.

This doesn’t, however, count as support for the use of hydrogen in those sectors. Instead, the report calls for “draft sectoral targets for decarbonisation that use a holistic approach (including energy efficiency, electrification and shift to low-carbon fuels like hydrogen)”, as well as the assessment of competing technologies, and national roadmaps to phase out fossil fuels.

5b. To introduce quotas and mandates for hydrogen, green products and “basic materials” such as green fertiliser and green steel. This also includes green H2 quotas for existing large hydrogen consumers (which are not specified, but include ammonia and chemicals producers and oil refiners), and “sectors other than industry, (eg, aviation)”.

The latter would be controversial, as hydrogen is not widely seen as energy intensive enough by volume to be used directly as an aviation fuel, although the gas could be used as a key ingredient in so-called “e-fuel” — synthetic kerosene jet fuel produced by combining green H2 with captured carbon dioxide, even though it might be prohibitively expensive compared to bio-based sustainable aviation fuel. For more on aviation decarbonisation, click here.

5c. To design a Carbon Border Adjustment Mechanism based on lifecycle carbon content to promote green goods. This essentially means the imposition of a carbon tax on imported goods to ensure that European companies do not face higher CO2 charges than non-EU competitors. As Recharge has previously reported, such a scheme might cause anger in exporting countries such as China, and could lead to trade wars.

Objective 6: Ensure early ramp up of ‘no regret’ infrastructure

The document offers no details about the following five enabling measures, which would have to be implemented by Europe’s transmission system operator regulators.

6a. Clarify governance of the hydrogen transmission network.

6b. Set up a flexible regulatory framework based on market developments.

6c. Integrate long-term planning of hydrogen, power and gas infrastructure.

6d. Specify interoperable quality standards and definitions.

6e. Introduce capacity payments to support ramp-up of infrastructure.

Objective 7: Ensure clarity on technical and safety standards for project development.

Again, the report offers no details here, other than to say that the following would have to be agreed by the hydrogen industry itself:

7a. Define technical standards for new parts of the value chain beyond production (transportation, storage, conversion).

7b. Define technical standards for hydrogen derivatives (eg, ammonia, synthetic fuels).

7c. Develop safety standards for new hydrogen carriers.This is presumably a reference to liquid organic hydrogen carriers (LOHCs) such as toluene, and up-and-coming solid-state hydrogen carriers like sodium borohydride.

Objective 8: Ensure clarity on carbon intensity standards through a guarantee of origin scheme.

8a. To set clear carbon intensity, definitions, thresholds, boundaries for hydrogen production. Ensuring that a particular batch of H2 is “green” is vital if the hydrogen sector is to have any integrity as a route to decarbonisation, and to do this will require a certification scheme along the lines of the “guarantees of origin” used in the power sector for renewable energy.

This will include defining a “minimum criteria for the definition of sustainable hydrogen”, the report states, which opens a backdoor for blue H2 derived from fossil fuels with CCS, as well as hydrogen made using grid electricity rather than dedicated renewables.

The Green Hydrogen Organisation last week said it would lead the global development of renewable H2 standards.

8b. Ensure member states, EU and exporters — both inside and outside the EU — use the same methodology and scope for carbon intensity. This will inevitably require co-operation and engagement with international standardisation bodies and organisations, as well as exporting and importing countries.

The document points to ongoing efforts on this front through the International Partnership for Hydrogen and Fuel Cells in the Economy (IPHE), an intergovernmental partnership between 21 member countries and the European Commission. The IPHE last month released a 75-page “methodology working paper” on defining greenhouse gas emissions from the production of hydrogen via electrolysis, steam methane reforming with carbon capture and sequestration (CCS), industrial by-products and coal gasification with CCS.

8c. To define carbon intensity standards for hydrogen derivatives (ammonia) and liquid hydrogen.

8d. To introduce environmental externalities (water, land, etc) in the certification process. While the report offers no detail on this, it is generally considered important that green hydrogen production does not use water that would otherwise be needed by local populations, and that the use of land for large-scale H2 production does not negatively impact local people or infringe on their rights.

Objective nine: To “hyperscale” electrolyser development and remove barriers to growth.

9a. Set electrolyser manufacturing capacity targets.

9b. Set targets for electrolyser components to support supply chains (eg, membranes, electrodes, etc).

9c. Drive automation of electrolyser production and increase raw material efficiency (eg, recycling). Traditionally, electrolysers have been produced by hand, making them very expensive. By automating their production in large factories, this will bring down costs rapidly — as manufacturers such as ITM Power and Nel are already in the process of doing.

The report also calls for the establishment of “explicit targets for critical raw materials use in electrolysers with attention to platinum group metals [in this context, platinum, iridium and ruthenium] in polymer electrolyte membrane [PEM] electrolysers”. These expensive, rare metals are used as catalysts, although PEM manufacturers frequently state that the amounts required are very small, so they are not a significant impediment to bringing down electrolyser costs.

9d. To identify critical skills and develop strategy [sic] to ensure availability of qualified workforce.

Objective 10: To focus innovation and R&D to enable technology scale-up

10a. To focus R&D to improve technology performance of electrolysers, including durability, cost and efficiency.

10b. To scale and share pilot projects to build experience with commercial-size facilities.

10c. To identify possible long-term supply-chain bottlenecks by value-chain component.

The report also sets timeline targets for each of the 38 policy measures, which range from the end of this year to 2030.


The Irena and WEF paper also goes into similar detail about the 39 “enabling measures” Japan would need to scale the green hydrogen market, which are very similar to those in Europe.

The only noticeable differences are related to the fact that Japan will almost certainly be an importer, rather than producer of green hydrogen, due to its limited availability of land for renewable energy (plus as a steep continental shelf that reduces its ability to build cheap bottom-fixed offshore wind), and an inability to directly import clean electricity, due to its geographic isolation and deep surrounding waters.

The document therefore calls upon Japan to sign memoranda of understanding with other countries to supply green hydrogen, create a national plan to use hydrogen for seasonal storage (ie, storing solar power in the summer in the form of hydrogen for use in winter), and a greater focus on hydrogen use for heavy-duty transport such as trucks and buses, including the planning of refuelling stations and ports.

As part of this, the report says Japan should put more R&D focus into the shipping of hydrogen, leveraging best practice from the liquefied natural gas (LNG) market, while reducing the costs of converting ammonia or LOHCs back into pure hydrogen, as well as new performance targets for energy-intensive hydrogen liquefaction (which requires cooling to a temperature of -259.2°C).

“Green hydrogen needs to be transitioned from its current niche role to a global energy carrier with widespread usage across sectors and this will require an integrated policy approach,” said Irena director-general Francesco La Camera. “Our Enabling Measures Roadmaps will help countries lead the way for a global hydrogen market and meet global net zero objectives.”