The EU will prioritise green hydrogen over blue, with the latter to be used only on a “temporary” basis until renewable H₂ achieves scale, according to the European Commission’s new hydrogen strategy, which has just been unveiled.

“The priority for the EU is to develop renewable hydrogen, produced using mainly wind and solar energy,” says the strategy document. “In the short and medium term, however, other forms of low-carbon hydrogen are needed, primarily to rapidly reduce emissions from existing hydrogen production and support the parallel and future uptake of renewable hydrogen.”

The commission wants to see at least 6GW of renewable hydrogen electrolysers installed in the EU by the end of 2024, producing up to 1 million tonnes of green H₂. Currently, just under 10 million tonnes of grey hydrogen – made from unabated fossil fuels – is produced today across the continent, mainly for use in oil refining, ammonia fertiliser production and chemicals.

Installed electrolyser capacity will increase to at least 40GW by 2030, producing up to ten million tonnes of green H₂.

“In this phase, renewable hydrogen is expected to gradually become cost-competitive with other forms of hydrogen production, but dedicated demand side policies will be needed for industrial demand to gradually include new applications, including steel-making, trucks, rail and some maritime transport applications, and other transport modes,” says the strategy document.

“Renewable hydrogen will start playing a role in balancing a renewables-based electricity system by transforming electricity into hydrogen when renewable electricity is abundant and cheap and by providing flexibility. Hydrogen will also be used for daily or seasonal storage, as a backup and provide buffering functions.

“Additionally, the further retrofitting of existing fossil-based hydrogen production with carbon capture should continue to reduce greenhouse gas and other air pollutant emissions in view of the increased 2030 climate ambition.”

Renewable hydrogen technologies should reach full industrialisation between 2030 and 2050, said the EC: “From 2030 to 2050, renewable hydrogen technologies should reach maturity and be deployed at large scale across all hard-to-decarbonise sectors.”

Costs and funding

The required investments in electrolysers between now to nid-century would amount to €24bn-€42bn ($27-47bn), with €220bn-340bn “required to scale up and directly connect 80-120GW of solar and wind energy production capacity to the electrolysers to provide the necessary electricity.”

It adds that retrofitting half of the existing grey hydrogen facilities in the EU with carbon capture and storage would cost an estimated €11bn and a further €65bn of investment will be needed for H₂ transport, distribution and storage, and hydrogen refuelling stations by 2030.

In total, the EC says that cumulative investments in renewable hydrogen in Europe could reach €180bn-470bn by 2050, compared to only €3bn-18bn for “low-carbon fossil-based hydrogen”, thought it was not immediately apparent how this hydrogen build-out will be funded and how much would come from public and private sectors.

The strategy document states that a forthcoming revision of the EU Emissions Trading System would look into how the production of green and blue hydrogen can be incentivised through carbon pricing and states “support schemes are likely to be required for some time” in order to scale up green and blue H₂ until they become cost-competitive with grey.

And it adds that“a possible policy instrument would be to create tendering systems for carbon contracts for difference (CCfD)”. Under this scheme, 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.

It suggests developing a pilot CCfD scheme — “preferably at EU level” — to support the production of low-carbon steel and basic chemicals.

The EU document envisages “direct and transparent market-based support schemes for renewable hydrogen, allocated through competitive tenders ... within a transparent, efficient and competitive hydrogen and electricity market that provides price signals that reward electrolysers for the services they provide to the energy system [such as] flexibility services, augmenting renewable production levels, reducing burden from renewable incentives”.

It adds: “Investments into renewable and low-carbon hydrogen production installations and technologies, such as electrolysers, can apply for EU funding.”

There are many pots of EU money available to hydrogen companies, including the €750bn EU post-Covid economic recovery instrument, Next Generation; the €650bn InvestEU pot, one of the bloc's main funding mechanisms; the European Regional Development Fund, the Cohesion Fund and the Just Transition Mechanism.

A green and blue H2 commercial build-out roadmap is expected to be put forward by the new European Clean Hydrogen Alliance (ECHA) — a government/industry group set to be officially launched on 9 July. The strategy document explains that the ECHA will play a “crucial role” in implementing the strategy and supporting investments “cto scale up production and demand for renewable and low-carbon hydrogen”.

Boosting demand

The Commission has yet to decide on how to boost clean hydrogen demand – critical, of course, to organic market growth – and says it will consider several options for EU-level incentives, including “the possibility of minimum shares or quotas of renewable hydrogen or its derivatives in specific end-use sectors”, such as in the chemical sector, transport or blending hydrogen into the natural-gas grid.

The strategy document says that clean hydrogen could be immediately replace grey H₂ in refineries and ammonia production, while early adoption could come from transport sectors such as city buses, taxis and trains on railways where electrification is not possible.

Hydrogen use “should be further encouraged” in heavy-duty road vehicles such as coaches and trucks, while in the longer term, synthetic fuels derived from renewable hydrogen could be used to power ships and aircraft, it adds.

Using hydrogen to produce heat in residential and commercial buildings — something that the natural gas industry is very keen on — does not appear high on the list of EU priorities, with little glossing in the strategy. In a section of the document about hydrogen industrial clusters, known as “hydrogen valleys”, where clean H₂ would be produced and used locally, it says that a “dedicated hydrogen infrastructure can use hydrogen not only for industrial and transport applications, and electricity balancing, but also for the provision of heat for residential and commercial buildings”.

Increased electrification

At the same time, the European Commission launched its energy system integration strategy, promising greater direct electrification in end-use sectors.

"As the power sector has the highest share of renewables, we should increasingly use electricity where possible: for example for heat pumps in buildings, electric vehicles in transport or electric furnaces in certain industries. A network of one million electric vehicle charging points will be among the visible results, along with the expansion of solar and wind power," it said.

"For those sectors where electrification is difficult, the strategy promotes clean fuels, including renewable hydrogen and sustainable biofuels and biogas.

"The Commission will propose a new classification and certification system for renewable and low-carbon fuels."

The EU Hydrogen Strategy will be discussed at Recharge's free-to-attend digital roundtable, "Blue vs Green – the Future of Hydrogen", which takes place tomorrow (Thursday) at 1200CET. Register here

Transition

EU prioritises green hydrogen over blue in its long-awaited H2 strategy