EU releases a Hydrogen Strategy for Integrated Energy
The European Commission has released their plans for the integrated energy system of the future with clean hydrogen. This new approach to Powering a Climate-neutral Economy sets out an integrated energy system using hydrogen to support the decarbonisation of industry, transport, power generation and buildings across Europe. The international dimension is an integral part of the EU approach.
Clean hydrogen offers new opportunities for re-designing Europe’s energy partnerships with both neighbouring countries and regions, together with its international, regional and bilateral partners, advancing supply diversification and helping design stable and secure supply chains. The EU Hydrogen Strategy (link updated 12-Dec-2022) addresses how to transform this potential into reality, through investments, regulation, market creation and research and innovation.
Hydrogen can power sectors that are not suitable for electrification and provide storage to balance variable renewable energy flows, but this can only be achieved with coordinated action between the public and private sector, at EU level. The priority is to develop renewable hydrogen, produced using mainly wind and solar energy. However, in the short and medium term other forms of low-carbon hydrogen are needed to rapidly reduce emissions and support the development of a viable market. This gradual transition will require a phased approach:
From 2020 to 2024, the EU will support the installation of at least 6 gigawatts of renewable hydrogen electrolysers in the EU, and the production of up to one million tonnes of renewable hydrogen.
From 2025 to 2030, hydrogen needs to become an intrinsic part of an integrated energy system, with at least 40 gigawatts of renewable hydrogen electrolysers and the production of up to ten million tonnes of renewable hydrogen in the EU.
From 2030 to 2050, renewable hydrogen technologies should reach maturity and be deployed at large scale across all hard-to-decarbonise sectors.
To help deliver on this Strategy, the Commission has also launched the European Clean Hydrogen Alliance with industry leaders, civil society, national and regional ministers and the European Investment Bank. This Alliance will build up an investment pipeline for scaled-up production and will support demand for clean hydrogen in the EU.
Currently neither renewable hydrogen nor low-carbon hydrogen, notably fossil-based hydrogen with carbon capture, are cost-competitive against fossil-based hydrogen. Estimated costs today for fossil-based hydrogen are around €1.5/kg for the EU, highly dependent on natural gas prices, and disregarding the cost of CO2. Estimated costs today for fossil-based hydrogen with carbon capture and storage are around €2/kg, and renewable hydrogen €2.5-5.5/kg.
Carbon prices in the range of €55-90 per tonne of CO2 would be needed to make fossil-based hydrogen with carbon capture competitive with fossil-based hydrogen today. In the forthcoming revision of the ETS, the Commission may consider how the production of renewable and low-carbon hydrogen could be further incentivised, while taking due account of the risk for sectors exposed to carbon leakage.
Costs for renewable hydrogen are going down quickly. Electrolyser costs have already been reduced by 60% in the last ten years, and are expected to halve in 2030 compared to today with economies of scale. In regions where renewable electricity is cheap, electrolysers are expected to be able to compete with fossil-based hydrogen in 2030. These elements will be key drivers of the progressive development of hydrogen across the economy.
A condition for a widespread and cost-effective use of hydrogen as an energy carrier across Europe will the availability of energy infrastructure for connecting supply and demand. Hydrogen may be transported via pipelines, but also via non-network based transport options. The infrastructure needs for hydrogen will ultimately depend on the pattern of hydrogen production and demand, together with transportation costs, and will be linked to the different phases of the development of hydrogen production, increasing significantly after 2024.
To target support at the cleanest available technologies, the Commission will work to introduce common standards, terminology and certification, based on life-cycle carbon emissions, anchored in existing climate and energy legislation, and in line with the EU taxonomy for sustainable investments. The Commission will propose policy and regulatory measures to create investor certainty, facilitate the uptake of hydrogen, promote the necessary infrastructure and logistical networks, adapt infrastructure planning tools, and support investments, in particular through the Next Generation EU recovery plan.
Executive Vice-President for the Green Deal, Frans Timmermans, said: “The strategies adopted today will bolster the European Green Deal and the green recovery, and put us firmly on the path of decarbonising our economy by 2050. The new hydrogen economy can be a growth engine to help overcome the economic damage caused by COVID-19. In developing and deploying a clean hydrogen value chain, Europe will become a global frontrunner and retain its leadership in clean tech.”
To become climate-neutral by 2050, Europe needs to transform its energy system, which accounts for 75% of the EU's greenhouse gas emissions. The EU strategies for energy system integration and hydrogen, adopted today, will pave the way towards a more efficient and interconnected energy sector, driven by the twin goals of a cleaner planet and a stronger economy.
These two strategies for Energy System Integration and Hydrogen present a new clean energy investment agenda, in line with the Commission's Next Generation EU recovery package and the European Green Deal. The planned investments have the potential to stimulate the economic recovery from the coronavirus crisis. They create European jobs and boost our leadership and competitiveness in strategic industries, which are crucial to Europe's resilience.