Talks were filled with dreams of a hydrogen powered society: the hype was real. The fact that we warned the community about the resources hydrogen would cannibalise from other sectors portrayed us as the ‘anti-hydrogen’ lobby.
Three years down the line, we stand in a very different place. Now that rules are defined and hydrogen is to be produced and consumed; political and industrial players are realising that it’s not abundant. On the contrary, it requires a massive amount of renewable electricity to be produced.
It’s also not cheap: a run towards subsidies is happening across the globe and matching the cost of production and the price the users can pay is becoming increasingly difficult. Finally, importing hydrogen into Europe from renewable rich regions is proving hard, both technically and financially.
This leaves us with two certainties: decarbonised hydrogen is and will be scarce for the foreseeable future, and sectors such as the steel or fertiliser industries will need a lot of it to decarbonise. Policy should thus carefully steer this resource to no-regret sectors, instead of promising it to sectors with much more efficient decarbonisation pathways.
Here is a policy recipe with four-ingredients to make it happen:
• Target support schemes, such as subsidies and tax reliefs, to no-regret sectors
• Plan infrastructure strategically to connect points of supply with industrial clusters
• Adopt binding targets to create demand in those sectors that absolutely need hydrogen for decarbonisation
• Ban blending with natural gas
Too many cooks?
Is the European Union’s current policy framework following this recipe? Mostly not.
The hydrogen bank is the main support scheme put in place by the EU, but instead of targeting the use to priority sectors, it directs the limited available funding to those who are the most willing to pay, irrespective of the use.
Infrastructural planning is also failing at this. The ten-year network development plan (TYNDP) foresees hydrogen demand in light-duty vehicles and space heating and uses the hydrogen backbone as a blueprint for future infrastructure – despite the fact that this was developed with very strong vested interests by the gas sector.
Similarly, the alternative fuel infrastructure regulation (AFIR) mandates the deployment of hydrogen refuelling stations for road transport, despite the sector’s clear trajectory towards electrification.
Rays of hope
The Renewable Energy Directive (RED III) adopted a binding target in industry to decarbonise 42.5% of the current use by 2030, and 60% by 2035.
It also targets refineries decarbonisation by mandating that 1% of all fuels supplied in Europe will need to be based on renewable hydrogen by 2030.
Similarly, the adoption of Fuel EU and Refuel EU pushes the progressive uptake of hydrogen-based fuels in the shipping and aviation sectors.
This goes a long way to creating a market for hydrogen in priority sectors. However, by concentrating on current industrial consumption, the steel sector remains outside the boundaries of this mandate.
Finally, blending rules are in negotiation within the gas market package, seemingly bringing the accepted blend level at interconnection points from the commission’s original proposal of 5% down to a maximum of 2%. This is a step in the right direction, which needs to remain solid throughout the remainder of the negotiations.
Overall, the target setting in the EU is an example that other regions of the world should follow in terms of creating demand for hydrogen in the right sectors, while backing it up with the renewable generation deployment to meet the demand from the electrolysers.
However, the supportive landscape that could ensure targets are met is largely missing, leaving the EU strategy towards hydrogen use ambiguous and thus less effective.
Marta Lovisolo is senior policy adviser on renewable energy systems at Bellona Europa and board member of the Renewables Grid Initiative
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