EC unveils hydrogen strategy for a climate neutral Europe

The European Commission (EC) has published an EU hydrogen strategy that aims to raise up to €180bn in total investments to boost the technology and infrastructure needed to produce, store and transport renewable hydrogen. It is understood that a significant level of funds will come from the EU’s post-coronavirus recovery plan, which is currently being finalised. Priority will be given to hard-to-decarbonise sectors such as the steel and cement industry and shipping and aviation.

The strategy foresees a gradual trajectory, with three phases of development of the clean hydrogen economy, at different speeds across different industry sectors.

In the first phase (2020–2024) the objective is to decarbonise existing hydrogen production for current uses such as the chemical sector, and promote it for new applications. This phase relies on the installation of at least 6 GW of renewable hydrogen electrolysers in the EU by 2024 and aims at producing up to 1mn tonnes of renewable hydrogen. Compared to the current situation, where approximately 1 GW of electrolysers are installed in the EU today.

In the second phase (2024–2030) the aim is for hydrogen to become an intrinsic part of an integrated energy system with a strategic objective to install at least 40 GW of renewable hydrogen electrolysers by 2030 and production of up to 10mn tonnes of renewable hydrogen in the EU. Hydrogen use will gradually be expanded to new sectors, including steel-making, trucks, rail and some maritime transport applications. It will still mainly be produced close to the user or close to the renewable energy sources, in local ecosystems.

In a third phase, from 2030 onwards and towards 2050, renewable hydrogen technologies should reach maturity and be deployed at large scale to reach all hard-to-decarbonise sectors where other alternatives might not be feasible or have higher costs.

Investment in hydrogen will be a growth engine that will be critical in the context of recovery from the COVID-19 crisis, says the EC. Its recovery plan highlights the need to unlock investment in key clean technologies and value chains, to foster sustainable growth and jobs. The EC stresses that clean hydrogen is one of the essential areas to address in the context of the energy transition, with various possible avenues to support it. 

Moreover, Europe is highly competitive in clean hydrogen technologies manufacturing and is well positioned to benefit from global development of clean hydrogen as an energy carrier. Cumulative investments in renewable hydrogen in Europe could be up to €180–470bn by 2050, claims the EC, and in the range of €3–18bn for low carbon fossil-based hydrogen. Combined with EU's leadership in renewables technologies, the emergence of a hydrogen value chain serving a multitude of industrial sectors and other end uses could employ up to 1mn people, directly and indirectly, it says. Analysts estimate that clean hydrogen could meet 24% of world energy demand by 2050, with annual sales in the range of €630bn.

Today, neither renewable hydrogen nor fossil-based hydrogen with carbon capture are cost-competitive against fossil-based hydrogen, notes the EC. Current estimated costs for fossil-based hydrogen are around €1.5/kg for the EU, dependent on natural gas prices, and disregarding the cost of CO₂. Estimated costs for fossil-based hydrogen with carbon capture and storage (CCS) are around €2/kg, and renewable hydrogen €2.5–5.5/kg.

However, the EC strategy notes that costs for renewable hydrogen are going down quickly. Electrolyser costs have been reduced by 60% in the last 10 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 (from steam reforming) in 2030. These elements will be key drivers of the progressive development of hydrogen across the EU economy, states the EC.