The European Union is on its way to implement policy measures meant to accelerate renewable hydrogen production and use. This is in line with the EU’s Fit for 55 policy package and REPowerEU plan. The Delegated Acts of Renewable Fuels of Non-Biological Origin (RFNBO) were adopted last month, providing regulatory clarity by defining under which conditions hydrogen and hydrogen-based fuels can be classified as RFNBO. According to the World Economic Forum (WEF), the Acts will also establish the methodology for calculating associated greenhouse gas emissions savings.
In 2022, the WEF, in collaboration with Accenture and the International Renewable Energy Agency, published the Enabling Measures Roadmap for Green Hydrogen Europe, the goal of which was to identify key enablers to achieve a scaled and traded renewable hydrogen market. Both the WEF and Accenture have since released an updated version of the roadmap and renamed it ‘Enabling Measures Roadmap for Renewable Hydrogen’.
1. Hydrogen in the EU broader energy system
EU hydrogen policies are part of a system wide policy effort directed at decarbonizing. Some policies include Fitfor55, REPowerEU and the Green Deal Industrial Plan for a Net Zero Age. Hydrogen use is envisioned as a means for decarbonizing sectors such as industrial emissions and heavy-duty transport through both blending (short-term) and fuel-substitution (mid/longer-term).
Resource demands associated with producing hydrogen through electrolysis is considered through the Critical Raw Material Act (CRMA), along with other resource-intensive technologies such as batteries. The CRMA puts forward a comprehensive set of actions to ensure the EU’s access to a secure, diversified, affordable and sustainable supply of critical raw materials.
According to the WEF, current hydrogen demand in Europe amounts to 8.7 Million tonnes (Mt) yearly. As this is predominantly satisfied by grey hydrogen production (99.9%), greening existing hydrogen value chains serves as an indispensable stepping stone towards the EU’s renewable hydrogen targets. The EU has put forward the target of 10 Mt of renewable hydrogen production and 10 Mt of renewable hydrogen import by 2030, totaling 20 Mt of renewable hydrogen use in 2030.
In the current hydrogen market, the bulk of the demand (50%) flows towards refineries (4.4 Mt yearly) for hydrotreating and hydrocracking, followed by the ammonia producing industry (29%) needed in the fertilizer industry (2.5 Mt yearly). The production of methanol and other base chemicals are responsible for 13% of demand (1 Mt yearly).
According to the WEF, there is an opportunity to combine supply and demand through an industrial clusters approach, which enables shared risk and economies of scale including aggregation of offtake. Greening existing hydrogen value chains only brings us so far, leaving the challenge of realizing novel applications for renewable hydrogen.
2. Investment challenges
Announced clean hydrogen production volumes in Europe already total 13 Mt per annum by 2030, as reported by the WEF. The EU is providing an increasingly attractive framework for hydrogen value chain development. One example is the European Hydrogen Bank which has the ability to cover and fund the cost gap of renewable hydrogen through a competitive bidding mechanism, contributing to the business case for a selection of pioneering projects.
Some member states, such as Germany and the Netherlands, have also created both CAPEX and OPEX subsidy schemes next to the EU’s policy framework. They are in the process of implementing hydrogen end-use obligations instead of targets.
