FID announced for largest green hydrogen plant in Spain

BP and Iberdrola have reached a final investment decision (FID) on what they claim will be Spain’s largest green hydrogen project, to be located at BP’s Castellón refinery. The decision paves the way for the start of construction of the plant, which is expected to be operational in 2H2026.  

The 25 MW electrolyser will be powered by 200 GWh/y of renewable solar photovoltaic and wind-generated electricity through a power purchase agreement (PPA) signed with Iberdrola. The electrolyser will include five 5 MW modules incorporating containerised proton exchange membrane (PEM) technology, to be supplied by Plug Power.  

The green hydrogen produced is to support the transition of BP’s Castellón refinery into an integrated energy hub. Around 2,800 t/y of green hydrogen could substitute part of the grey hydrogen (produced from natural gas) currently used by the refinery, avoiding the emission of 23,000 t/y of CO₂, reports the partnership.

It is anticipated that in subsequent phases of the project, the green hydrogen produced could also be used to replace the use of natural gas in key hard-to-abate industries in Valencia, such as the ceramics sector, the chemicals sector and in heavy transport.

This is the first hydrogen project to be jointly undertaken by the two companies (through a 50:50 joint venture company Castellón Green Hydrogen). The Technology Institute of Energy (ITE) will also participate in the project, which has been awarded €15mn of European Union funding.

In other low-carbon hydrogen plans, BP is also currently developing a 100 MW green hydrogen project in Germany, located next to its Lingen refinery, which has received EU funding. Meanwhile, BP Aberdeen Hydrogen Energy, a joint venture with Aberdeen City Council, has taken the final investment decision (FID) for the Aberdeen Hydrogen Hub, a scalable green hydrogen production, storage and distribution facility (with production capacity of up to 300t/y) to be powered by renewable energy.

Spain sets sights on dominating regional hydrogen market

Spain has significant wind and solar generation capacity, with renewables accounting for over 50% of the nation’s total electricity mix. According to the Energy Institute’s latest Statistical Review of World Energy, the country generated 142 TWh of renewable energy in 2023, with wind accounting for 64.2 TWh and solar 46.8 TWh.  

Now, Spain is now looking to produce hydrogen through projects such as that at Castellón. According to the latest analysis from Rystad Energy, the country could achieve some 5 GW of installed electrolyser capacity by 2030. However, it notes that for Spain to meet its target of 11 GW – the highest in the EU – the country will need additional support from its subsidy programmes. Germany follows closely in second place, with a target of 10 GW by 2030, but is only currently projected to reach 4.5 GW, says the market analyst.

Spain’s ‘optimal conditions for renewable energy, coupled with supportive policies’, have positioned it as ‘one of the most cost-effective regions for green hydrogen production’, says Rystad. It also adds that while the global hydrogen market has ‘not met investors’ early and enthusiastic expectations,… the outlook is more promising’. A notable exception is Spain’s own 20 MW Puertollano green hydrogen plant.  

Its projections suggest Spain could significantly boost green hydrogen production by 2030, with most projects considered low-risk and on track for timely commissioning thanks to strong government support. This funding is already driving progress, as seen in the FID for the first 25-MW phase of the Castellón refinery hydrogen plant, which could expand to 2 GW of electrolysis capacity by 2035, notes Rystad.

The European Hydrogen Bank’s (EHB) pilot auction earlier this year also highlighted interest in the Spanish hydrogen sector, attracting 46 bids from Spain out of 132 bids from European nations in total.  

Interest in the sector is also being supported by the Spanish government’s €794mn state aid package under the EU’s IPCEI Hy2Use programme, aimed at helping develop hydrogen-related infrastructure, including large-scale electrolysers and transportation networks for the production, storage and distribution of low-carbon hydrogen.  

Rystad Energy also notes that Spain’s hydrogen sector is set to benefit from a €2.3bn subsidy programme recently announced by the government, of which €1.2bn will be dedicated to developing renewable hydrogen hubs and €750mn to strengthening the nation’s green technology supply chain. With this, Spain joins other European countries such as Germany, France and the Netherlands in recently launching billion-dollar funding programmes and auctions, it says.

At a national level, Spain’s Ministry of Ecological Transition is also reported to be preparing a €1.2bn funding initiative for large-scale green hydrogen projects and powerful electrolyser installations. Scheduled to launch in the final quarter of 2024, the programme aims to develop extensive green hydrogen ‘valleys’ or clusters, boosting large-scale production and use of electrolytic hydrogen and its derivatives.

‘Spain is positioning itself as a key player in Europe’s hydrogen market but has yet to outline plans for generating domestic demand. Unlike Germany, which has set ambitious targets and ranks second in production capacity, Spain could focus on becoming a net exporter, particularly to Germany, which faces challenges due to less favourable renewable energy conditions,’ comments Minh Khoi Le, Head of Hydrogen Research, Rystad Energy. ‘Seizing this opportunity could not only benefit Spain but also position it as a game-changer in the regional hydrogen landscape.’

Supporting development of Spain’s SAF sector

In related news, Spanish IOC Cepsa and airlines Iberia, Iberia Express, Vueling, and BIOCIRC (Spanish Association of Biocircularity) have presented a report outlining 16 economic, regulatory and public-private collaboration measures aimed at boosting the production and consumption of sustainable aviation fuel (SAF), including e-SAF produced from green hydrogen, in Spain. Their goal is to position the country ‘as a European hub’ and place it at ‘the forefront of sustainable tourism and the energy transition’.

The report suggests that some €22bn will be needed to build facilities and generate 270,000 direct, indirect and induced* jobs by 2050. It forecasts that some €13bn could be contributed to Spain’s GDP from the construction of the plants alone, with an additional €42.9bn from their operation until 2050 (along with the corresponding investment and jobs for this phase).

The report also highlights the need to establish a supportive regulatory framework that will allow companies to ‘invest with confidence in this emerging industry’.  

*’Induced’ jobs refer to employment created by the additional personal spending by both direct and indirect workers.