Europe’s hydrogen ambitions

written by Chris Malins

introduction

Hydrogen has garnered much attention in recent years due in part to its relative novelty, but also due to the number of industries and sectors it can disrupt, and indeed must disrupt if we are to meet our COP-21 Paris agreements. The environmental necessity has clearly been understood by the EU who described hydrogen as “essential to support the EU’s commitment to reach carbon neutrality by 2050”[1]. io consulting (io) recognises that renewable electricity simply cannot deliver the deep decarbonisation we need, and clean fuels such as hydrogen and ammonia will have a major role to play.

In July 2020 the European Commission officially published its hydrogen strategy for Europe: an ambitious and broad plan to leverage the carbon-free credentials of hydrogen to decarbonise multiple sectors of the economy. The staged approach focusses, correctly, on both the decarbonisation of industries using hydrogen, and the decarbonisation of the hydrogen itself. The scale of the strategy, if realised, will have implications beyond Europe’s borders; and promises opportunities to those organisations best able to help Europe navigate this key part of the energy transition.

strategy aims

The Commission aims to boost demand for and production of “clean hydrogen”, and to do so through cooperation between the private sector and EU Member States. In doing so it seeks to create at least a limited international market in hydrogen through pipeline networks and trade with neighbouring countries in Africa in the South and Ukraine in the East. This strategy, if executed well, can act as an accelerant to the hydrogen, particularly green hydrogen, sector’s scaling up and reductions in unit costs.

Industrial applications and mobility stand out as two key markets for hydrogen; both of which are also highlighted by the FCH’s 2℃ roadmap shown in Figure 1, below. The strategy recognises the immediate applications for hydrogen in producing ammonia and methanol, and to at least partially replace the use of coal in steelmaking. Like hydrogen, ammonia’s utility comes from its wide range of potential applications including as a combustion fuel in turbines, as a chemical feedstock and as a transport fuel for shipping. For transport, the commission has focussed upon the areas where hydrogen is best suited: heavy road vehicles and captive predictable fleets such as buses and rail networks. io sees potential in combining off-take agreements from both these large sectors, reducing unit production costs for both.

figure 1: potential hydrogen usage to achieve European emissions reductions in line with 2degC target[2]

Gas networks play a dual role with transmission networks highlighted as a potential low-cost energy carrier, while gas distribution networks are framed more as off-takers in themselves. The impacts on industrial users of natural gas in such pipelines are not addressed significantly, but the impacts on materials, and changes to the Wobbe Index[3], gas density, and flow properties will all present major challenges as the proportion of hydrogen increases. Resolving such challenges is something io has been working on closely with McDermott, drawing upon expertise from both companies.

Beyond the global benefits from decarbonisation, the European Commission is also particularly focussed on the benefits to EU industries. The EU describes itself as “well positioned to benefit from a global development of clean hydrogen”. Such investments will include the headline-grabbing FCEVs, but two of the largest finance destinations will be the storage and transportation infrastructure and new on-site hydrogen production for industry[4]. io sees both as key sectors and is proud to continue to work on large-scale green hydrogen production projects which have industrial off-takers.

timeline

Starting from a base of nearly zero green hydrogen production, the EU has mapped out a path of hydrogen growth over three phases as shown below in Figure 2.

Electrolysers installed (GW) 6 GW 40 GW “Renewable hydrogen will be deployed at a large scale across all hard-to-decarbonise sectors”
Renewable Hydrogen Produced up to 1 MT up to 10 MT

figure 2: EU hydrogen strategy timeline [5]

The ambition of this scale can only be appreciated in the context of the slow but accelerating growth in electrolyser capacity to date. The average annual additions of electrolysers in Europe implied in the first phase in Figure 2 will need to exceed the total cumulative electrolyser installations to date globally (Figure 3) to meet the European Commission’s targets. Indeed, the entire electrolyser capacity of Europe in 2020 is forecast to reach just 0.035GW[6]. The next few years will thus be crucial not just in terms of scaling up electrolyser production, but also selecting the optimal concepts for decarbonising industry and completing early-phase engineering.Figure 2: EU Hydrogen Strategy timeline [5]

figure 3: global electrolysis capacity annual additions (IEA)

The uncertainties beyond 2030 means the lack of target figures for the time being is immaterial to establishing the vision and framework for hydrogen growth this decade.

national interests

The European Commission’s Strategy does not allocate any additional funding to achieve its well-organised goals. From a project perspective then it is largely reliant upon the support of its Member States fulfilling their role in subsidising and accelerating investment by the private sector. The announcement of the European Clean Hydrogen Alliance, announced by the Commission, aims to take a top-down approach to project planning and coordination, and will likely play a key role in cross-border strategy execution.

EU members are already rising to the challenge of advancing green hydrogen, however even the most ambitious targets will need to be revised to meet the Commission’s goals. France has just outlined its plans to spend €7B by 2030[7] on supporting green hydrogen supply chains as part of “France Relance”, including R&D and electrolyser production, but has not identified an installation target in terms of GW of production capacity. Germany, still the current leader in this regard, has published its own hydrogen strategy promising €7B in funding within Germany, and a further €2B in neighbouring countries with the potential to supply hydrogen[8]. Germany’s plans for 5GW of green hydrogen production by 2030 will be a profound increase, however, at just an eighth of the total goal for Europe, Germany’s plan meets just half its 25% share on a 2019 GDP basis [9]. In contrast, the 2GW by 2030[10] outlined by Portugal in their draft plan, while far lower in absolute terms, if achieved, will play an outsize role in achieving the 40GW European target.

challenges

Achieving the goals outlined by the European Commission presents significant political, economic, and technical challenges. The greatest of these are centred around:

  1. Establishing a European or even international market in hydrogen as a commodity; particularly with certified differentiation between “colours” or carbon intensities.
  2. Scaling up green hydrogen production to the levels required in the short-term in the face of lower cost grey and blue hydrogen alternatives (see also forecasts and scaling discussed in io’s article titled What Colour is Your Hydrogen.
  3. Reusing existing gas network infrastructure by blending in hydrogen to keep costs down. This incorporates both of the above challenges, but presents new risks, challenges and opportunities for major industrial gas consumers. With a hydrogen concentration of just 10% classed as “High” (HyLAW)[11] there is much work to be done to remove the existing technical, legal and administrative barriers to large-scale majority-hydrogen networks.

conclusions

The European Commission’s strategy is well considered and addresses many of the challenges associated with boosting the supply and demand of green hydrogen over the coming decade. With no new significant funding allocated to achieve the intended goals, the European Commission is of course reliant upon its Member States to deliver on the key actions and goals listed. By highlighting the next key actions, the European Commission has delivered a roadmap for the EU and others to follow, and this is a necessarily steep uphill road indeed. To climb it will take cooperation between European States and the entire hydrogen value chains from production through to distribution, storage, and usage.

[1] (European Commission 2020)

[2] (Fuel Cells and Hydrogen 2 Joint Undertaking 2019)

[3] (IFPEN and Sintef 2019)

[4] (Hydrogen Council 2017)

[5](European Commission, 2020)

[6] (van Wijk and Chatzimarkakis 2020)

[7](Gourvernement du France, 2020)

[8] (German Federal Ministry for Economic Affairs and Energy, 2020)

[9](The World Bank, 2020)

[10](Republica Portuguesa – Ambiente e Ação Climática 2020)

[11] (IFPEN and Sintef 2019) (IEA 2020)