• Natural Gas News

    EC Unveils Hydrogen Strategy: Update


The European Commission has acknowledged that some fossil fuel-based hydrogen will be needed in the short-to-medium term to deliver emissions cuts.

by: Joseph Murphy

Posted in:

Natural Gas & LNG News, Europe, Top Stories, Premium, Hydrogen, Carbon, Renewables, Political, Environment, Regulation, Infrastructure, News By Country, EU

EC Unveils Hydrogen Strategy: Update

(Adds quote from upstream industry)

The European Commission (EC) published its long-awaited hydrogen strategy on July 8, prioritising the development of renewable energy-derived hydrogen while accepting that some fossil fuel-based hydrogen will be needed to deliver emissions cuts in the short- to medium-term.

Hydrogen accounts for only a fraction of the EU's and the world's energy mix, and almost all current supplies are produced from fossil fuels, using techniques such as gas reforming and coal gasification. Very little comes from so-called green hydrogen, produced through the electrolysis of water, powered by renewable energy sources.

"Renewable electricity is expected to decarbonise a large share of the EU energy consumption by 2050, but not all of it," the EC said. "Hydrogen has a strong potential to bridge some of this gap, as a vector for renewable energy storage, alongside batteries, and transport, ensuring back up for seasonal variations and connecting production locations to more distant demand centres."

In a strategy for becoming climate neutral published in November 2018, the EU projected that hydrogen's share of Europe's energy mix could reach 13-14% by 2050, compared with under 2% at present.

"Hydrogen can replace fossil fuels in some carbon intensive industrial processes, such as in the steel or chemical sectors, lowering greenhouse gas emissions and further strengthening global competitiveness for those industries," the EC said. "It can offer solutions for hard to abate parts of the transport system, in addition to what can be achieved through electrification and other renewable and low-carbon fuels."

Europe is well-positioned to gain from a hydrogen revolution, as it is highly competitive in clean hydrogen technologies manufacturing. The EC estimates that investments in renewable hydrogen in Europe could accumulate to €180-470bn ($203-531bn) by 2050, with a further €3-18bn being ploughed into low-carbon fossil fuel-based hydrogen. 

Reaching critical mass

But, the EC notes, "driving hydrogen development past the tipping point needs critical mass in investment, an enabling regulatory framework, new lead markets, sustained research and innovation into breakthrough technologies and for bringing new solutions to the market, a large-scale infrastructure network that only the EU and the single market can offer, and cooperation with our third country partners."

The EC accepts that neither renewable or low-carbon hydrogen, such as fossil-based hydrogen with carbon capture, are currently cost-competitive versus fossil fuel-based hydrogen without carbon capture. Renewable and low-carbon hydrogen cost €2.5-5.5/kg  and €2/kg respectively for the EU, whereas unabated fossil fuel-based hydrogen costs only €1.5/kg, according to the International Energy Agency (IEA).

As such, while the EU's priority is renewable hydrogen, other forms of low-carbon hydrogen will have a role to play in the short- to medium-term, especially in cutting emissions from existing hydrogen production, and supporting the future growth in renewable hydrogen use as its cost falls.

Nevertheless, between 2020 and 2024, the EU's goal is to install at least 6 GW of renewable hydrogen electrolysers producing 1mn mt/yr of the fuel. The bloc intends to create regulation that supports the development of a liquid and well-functioning hydrogen market, incentivising both supply and demand.

The target for the second phase running until 2030 is to expand this capacity to 40 GW of electrolysers producing 10mn mt/yr of hydrogen. Over the course of this phase, the hope is that renewable hydrogen will gradually become cost-competitive against other types of hydrogen production, but demand-side incentives will still be needed.

Through both phases, existing fossil fuel-based hydrogen production will be abated by retrofitting carbon capture and storage technologies. During the third phase up to 2050, renewable hydrogen technologies should reach maturity and be deployed at a large enough scale to reach all hard-to-decarbonise sectors, where alternatives are either unfeasible or too expensive.

German gas association Zukunft Erdgas praised the strategy for acknowledging fossil fuel-based hydrogen's role in the nearer term. 

"It sends a clear signal for the production and use of green hydrogen, but the production of CO2 -neutral hydrogen from natural gas is emphasised for the competitive and technology-open development of a hydrogen economy," the association commented. "Europe has recognised that electrification alone will not be enough to achieve climate neutrality. Hydrogen will become the second pillar of the future energy strategy and an integral part of the European energy mix."

London-based law firm Ashurst also welcomed the strategy for recognising that specific quotas and other incentives would be needed to attract investment in the early stages of hydrogen's deployment.

The EU also formally launched the European Clean Hydrogen Alliance on July 8, a collaboration between public authorities, industry and civil society that will strive to create an investment agenda and a pipeline of concrete projects for hydrogen.

A step-change for gas: Eurogas

The strategies adopted today are a step change for the gas sector, said industry group Eurogas. The EC confirms that the EU will need gaseous molecules to break silos in the energy system and achieve climate neutrality in the most cost-effective way. Commissioner Kadri Simson also confirmed that the gas infrastructure can be easily re-purposed to carry hydrogen, it said.

Future-proof solutions – producing hydrogen from natural gas and fostering the uptake of hydrogen from renewable electricity – will provide Europe a leading position in developing clean technologies, not just deploying them, and create quality jobs for Europeans. Bringing together industry, public authorities and civil society under the European Clean Hydrogen Alliance platform is the right step to kick-start the hydrogen economy for a climate-neutral Europe.

IOGP calls for pragmatism

The International Oil & Gas Producers Group said the European Council and parliament should take “a more inclusive approach to all clean hydrogen production sources, and to recognise the long-term, cross-sectoral role of gas as well as that of carbon capture and storage and its significant scale-up potential.”

To succeed, the future basket of implementing measures will need to be more realistic and ensure that the full range of clean energy solutions are equally able to play their part" said Europe’s head of the IOGP, François-Regis Mouton. He said the EU needs a pragmatic approach to reaching its climate objectives.

"On paper, it is easy to pick winners to produce large volumes of clean and cheap hydrogen. What is difficult is to get industrial actors to take on the market, technology and policy risks associated with real investments in a globally competitive landscape. The strategies rely massively on new, hypothetical competitive renewable hydrogen imports while forgetting Europe's own resources, and its existing strategic energy partnerships which can ensure competitive supply of clean hydrogen from natural gas with CCS or pyrolysis," he said.

IOGP said that it would work with the ECommission to bring down remaining barriers to CCS. “We need to act now to give CCS its full place in the transition as a versatile, large scale and long-term component of the EU energy system,” he said, proposing a European CCUS forum where industry, civil society and policy-makers can work together on scaling up these key technologies and retain industry and jobs in Europe.