• Energy Transition & Climate Change

ERT Expert Paper – Enablers for investing in hydrogen in Europe

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This Expert Paper highlights facts & figures on hydrogen in Europe and defines enablers for the uptake of a hydrogen economy.

ERT member companies are also sharing their case studies in which they explain the role of hydrogen in their company’s strategy and the ongoing projects.

Key messages:

1. Renewable and low-carbon hydrogen can help decarbonise sectors where direct electrification is hard to achieve. The EU’s strategic objective to install at least 6 GW of electrolysers in the EU by 2024, producing up to 1 Mt of renewable hydrogen and 40 GW by 2030 producing up to 10 Mt, is welcomed. Achieving this goal requires a cumulative investment of between €320 and 458 billion by 2030. These figures do not include any additional investment required for upgrading downstream installations. As stated in the EU Hydrogen Strategy, other forms of low-carbon hydrogen are needed in the short and medium-term, mainly to cut emissions from existing hydrogen production quickly and support the parallel and future uptake of renewable hydrogen. We need clear definitions for both renewable and low-carbon hydrogen (e.g. within the EU Gas & Hydrogen Decarbonisation package).

2. Stimulate demand for renewable hydrogen with balanced policies that mix incentives and mandates. Measures to increase renewable hydrogen use in industry – as proposed by the ‘Fit for 55’ package – are steps in the right direction, if the availability of renewable energy sources (RES), abatement cost gaps and flexibility to apply the most efficient CO2 reduction options are considered. The upcoming Gas & Hydrogen Decarbonisation package should contain the right enablers for low-carbon hydrogen, compatible with the EU’s carbon neutrality goal and the ‘do no significant harm’ principle.

3. If there are insufficient renewable hydrogen supplies, all forms of low-carbon hydrogen production must be incentivised for a short to medium-term transitional period. As long as they are compatible with the ‘do no significant harm’ principle, all forms of hydrogen production should be backed ahead of any strong uptake of renewable hydrogen to achieve decarbonisation pathways and reach climate neutrality in the EU.

4. Predictable carbon prices support the business case for hydrogen. Volatile carbon prices can cause risk-averse investors to forego investments in clean solutions. Carbon contracts for difference (CCfDs) should be promoted.

5. We need access to renewable energy at a competitive price. EU Member States should update their national energy and climate plans to cover any additional demand for RES stemming from the uptake of hydrogen. They should remove any construction and licensing barriers to renewable energy buildout, and cut taxes and levies on electricity to enable direct and indirect electrification. Companies need access to the right tools to prove that they use renewable energy to produce hydrogen. The guarantees of origin (GOs) scheme is a good start and must be further harmonised in combination with Power Purchasing Agreements (PPAs) while ensuring credible traceability. Take a pragmatic approach on criteria to prove ‘additionality’, geographical and time correlation, while respecting the energy system’s overall efficiency.

6. We need time-limited incentives for industrial-scale integrated hydrogen pilot projects; local, decentralised hydrogen production; and associated infrastructure, including CO2 transportation and storage. The cost of low carbon and renewable hydrogen is currently well above the fossil-based hydrogen benchmark cost. Financial and government support for CAPEX and OPEX will be critical to bring these technologies to scale, reduce costs ERT Enablers for investing in hydrogen in Europe and enable commercial deployment, as well as competitive technologies for export. Correlate any financial support with the CO2 emissions reduction potential of a project.

7. We need to foster the development of European partnerships and cooperation between the public and private sector (PPP) and join forces to define an appropriate regulatory framework, including standards.

8. We need public support for R&D and innovation in hydrogen technologies, combined with talent and skills to make European companies global technology leaders in hydrogen.

9. We need infrastructure and an enabling regulatory framework in Europe to transport and trade both electricity and hydrogen, building up capacity in a pragmatic and progressive way, depending on the expected evolution of demand.

10. We need a well-functioning cross-border hydrogen market with a harmonised system of guarantees of origin and foster partnerships with non-EU countries in the mid-to long term, to guarantee stable access to sufficient renewable and low carbon hydrogen.

11. We should look at sector-specific triggers to make the business case for hydrogen as each sector’s needs and potential is different. Several ERT Member companies are taking the lead and are integrating hydrogen applications in their business.