by Frederic Simon*
The Commission has made hydrogen “a central element” of plans to decarbonise industry, announcing it will launch a “Clean Hydrogen Alliance” after the summer break in a bid to build a full supply chain in Europe.
Germany, which takes over the EU’s rotating presidency in July, has taken the lead on the issue, outlining a €7 billion plan earlier this month to promote “green” hydrogen at gigawatt scale.
“Hydrogen is one of the enablers in the context of the Green Deal for decarbonising sectors like chemical industry, steel industry and transport,” the Commission document states, listing the industrial sectors where future demand for hydrogen is expected to be highest.
Now, the EU executive intends to spell out what is meant by “clean hydrogen” and put together a “strategic outlook” for the development of “a hydrogen economy in Europe,” according to the title of the draft strategy.
Priority to green H2
The European Commission declined to comment on the leaked document, saying it was still subject to change. And the version obtained by EURACTIV appears to be at a relatively early stage, with numerous bullet points and incomplete sentences.
Still, the document is outspoken about the key objectives of the strategy, which aren’t expected to change radically in the final version, expected on 8 July.
From the outset, it says the EU’s “clear priority” is to develop green hydrogen “as soon as possible” in order to advance the bloc’s long-term decarbonisation agenda.
And while the EU executive seems ready to accept that “blue” hydrogen – obtained from natural gas with carbon capture and storage – “will play a role in the transition” to a fully renewables-based hydrogen economy, it is categorical in rejecting the “grey” sort produced from fossil gas.
The hydrogen strategy will be presented on 8 July, alongside a related initiative to integrate the various components of the energy system where hydrogen is also expected to play a key role, a Commission spokesperson told EURACTIV.
Bringing down costs
The key question, the document adds, is “when green hydrogen will become price competitive” in comparison to the fossil fuel sort, which currently dominates global supply.
EU policy initiatives “would aim at enabling green hydrogen to arrive at close to competitive price levels already in a couple of years,” it says, adding: “This will be possible as soon as integrated green hydrogen factories at gigawatt scale go into production”.
The aim, according to the draft document, is to significantly scale up production of green hydrogen in order to bring down the price to a range of €1-2 per kilo.
Simultaneously, measures to boost demand would be adopted in targeted sectors such as aviation, shipping, trains and heavy-duty transport, as well as industry: fertiliser, steel, chemicals, and cement.
However, critics say the Commission’s draft strategy fails to address the fundamental economics of green hydrogen because it doesn’t take into account the falling price of electricity.
“There is one aspect wholly absent from the communication: the recognition that more renewables into the electricity system depresses prices,” said Mike Parr from PWR Consultants, a market research and consulting firm.
In all major European electricity markets – including Germany, France and Spain – the rise of cheap wind and solar power has pushed down wholesale electricity prices to the point where they are now below the levelised cost of electricity (LCOE) for renewables, Parr explained.
“And thus we move back into subsidy land,” Parr told EURACTIV. “This is not good if the aim is a massive build-out of renewables that, for the most part, does not need a subsidy.”
Others were more upbeat, saying the draft strategy “is on the right track” by prioritising renewables and building on the German and Dutch hydrogen strategies.
The Commission document “is asking all of the right questions,” said Andreas Graf from AgoraEnergiewende, a German think-tank specialised in research on the energy transition.
“It gives me hope that establishing clean hydrogen industrial leadership will become a genuinely European project in service of the Green Deal,” he told EURACTIV.
But there is “still a long way to go” before concrete legislative proposals are put on the table in June next year, he cautioned.
*first published in: www.euractiv.com