EU Hydrogen Strategy under the EU Green Deal

The EU’s hydrogen strategy lays out the European Commission’s vision vis-à-vis hydrogen and its role as an energy carrier in a European integrated energy system. The Strategy considers hydrogen as ‘essential to support the EU’s commitment to reach carbon neutrality by 2050 and for the global effort to implement the Paris Agreement while working towards zero pollution.’ It also places it as ‘a key priority to achieve the European Green Deal and Europe’s clean energy transition.’

Concretely, a broad and central role is envisaged for hydrogen within the energy mix, as it could act as a carbon-neutral energy carrier, enabling back up energy storage capacity for seasonal variations; the substitution of fossil fuels in carbon-intensive industrial processes; the decarbonisation of the hard-to-abate parts of the transport system; and the repurposing of existing natural gas pipelines, avoiding stranded assets.

The Hydrogen Strategy lays out its definitions of the various types of hydrogen:

• ‘Electricity-based hydrogen’ refers to “hydrogen produced through the electrolysis of water (in an electrolyser, powered by electricity), regardless of the electricity source. The full life-cycle greenhouse gas emissions of the production of electricity-based hydrogen depends on how the electricity is produced.”
• ‘Renewable hydrogen’ is “hydrogen produced through the electrolysis of water (in an electrolyser, powered by electricity), and with the electricity stemming from renewable sources. The full life-cycle greenhouse gas emissions of the production of renewable hydrogen are close to zero. Renewable hydrogen may also be produced through the reforming of biogas (instead of natural gas) or biochemical conversion of biomass, if in compliance with sustainability requirements.”
• ‘Fossil-based hydrogen’ refers to “hydrogen produced through a variety of processes using fossil fuels as feedstock, mainly the reforming of natural gas or the gasification of coal. This represents the bulk of hydrogen produced today. The life-cycle greenhouse gas emissions of the production of fossil-based hydrogen are high.”
• ‘Fossil-based hydrogen with carbon capture’ is “a subpart of fossil-based hydrogen, but where greenhouse gases emitted as part of the hydrogen production process are captured. The greenhouse gas emissions of the production of fossil-based hydrogen with carbon capture or pyrolysis are lower than for fossil-fuel based hydrogen, but the variable effectiveness of greenhouse gas capture (maximum 90%) needs to be taken into account.”
• ‘Low-carbon hydrogen’ encompasses “fossil-based hydrogen with carbon capture and electricity-based hydrogen, with significantly reduced full life-cycle greenhouse gas emissions compared to existing hydrogen production.”
• ‘Hydrogen-derived synthetic fuels’ refer to “a variety of gaseous and liquid fuels on the basis of hydrogen and carbon. For synthetic fuels to be considered renewable, the hydrogen part of the syngas should be renewable. Synthetic fuels include for instance synthetic kerosene in aviation, synthetic diesel for cars, and various molecules used in the production of chemicals and fertilisers. Synthetic fuels can be associated with very different levels of greenhouse gas emissions depending on the feedstock and process used. In terms of air pollution, burning synthetic fuels produces similar levels of air pollutant emissions than fossil fuels.”
• The strategy also points out that “clean” hydrogen refers to “renewable” hydrogen.

The Strategy sets a priority for the EU to develop renewable hydrogen based on a 3-phase roadmap, quantified production targets and with ‘a full value chain approach’:

Phase 1 (2020-2024): 

• It aims for at least 6 GW of renewable hydrogen electrolysers by 2024 in the EU (i.e. production of 1 million tonnes of renewable hydrogen).
• Manufacturing of electrolysers (of up to 100 MW) would need to be scaled up.
• Consumption would be mostly on-site in a first instance and would serve industrial processes, such as steel and chemicals, and hydrogen refuelling stations for buses.
• In the short and medium term, the need for low-carbon hydrogen is also acknowledged, which will require the deployment of CCUS infrastructure.
• Blending option with natural gas could be considered for distribution at a later stage.

Phase 2 (2025-2030): 

• The target is 40 GW of renewable hydrogen electrolysers by 2030 (i.e. production of 10 million tonnes of renewable hydrogen).
• Hydrogen would decarbonise steelmaking, trucks, rail and some maritime transport applications and other transport modes. It would also serve for balancing: daily and seasonal storage, backup and buffering.
• The backbone of a European infrastructure will need to be designed to transport and distribute hydrogen, including a network for H2 refuelling stations and for heating in residential and commercial buildings (notably in H2 valleys).
• International trade in hydrogen would expand, especially with Eastern and Southern neighbouring partner countries.
• The EU would aim at completing an open and competitive EU hydrogen market, with unhindered cross-border trade and efficient allocation of hydrogen supply among sectors.
• Overall, 2x40 GW by 2030 is the guiding vision

Phase 3 (2030-2050): 

• 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.
• A potential ¼ of the EU’s renewable electricity production will be used for hydrogen production, which in turn would account for up to more than 23% in the 2050 energy mix.
• Hydrogen and hydrogen-derived synthetic fuels would further penetrate all hard-to-abate sectors such as maritime transport, aviation, and the heating system for buildings.

To reach these goals, the Strategy details on the investment needs in the hydrogen sector at large, from required renewables production to hydrogen distribution. It estimates that, by 2030, scaled-up manufacturing of electrolysers would demand €24-42 billion of investments. The renewable energy generation required to reach renewable hydrogen production targets would amount to 80-120 GW, which represent €220 to 340-billion worth investments. The development of CCS technology for half of existing plants would cost €11 billion. Finally, the deployment cost of a hydrogen distribution network (including refuelling stations) would add up to €65 billion. The total amounts to at least €320 billion.

By 2050, cumulative investment needs in renewable hydrogen production would be up to €180-470 billion and between €3-18 billion for low-carbon fossil-based hydrogen. Besides, analysts estimate that clean hydrogen could meet 24% of energy world demand by 2050, with annual sales in the range of €630 billion.

Policy focus will lie in the establishment of the regulatory framework (including the review of State aid rules). This includes a range of key measures:

• Introducing a common low-carbon threshold/standard for the promotion of hydrogen production installations based on their full life-cycle greenhouse gas performance (possibly defined relative to the existing ETS benchmark).
• Introducing a comprehensive terminology and European-wide criteria for the certification of renewable and low-carbon hydrogen.
• Making hydrogen infrastructure an important part of TYNDP planning, draw synergies between TEN-E, TEN-T and AFID, and ensure infrastructure access is non-discriminatory.
• Considering hydrogen blending within natural gas networks.
• Moving towards a liquid market with commodity-based H2 trading, with visible price signals and establishment of clear rules on third party access, electrolyser connection to the grid and permitting.
• Considering the possibility to introduce minimum shares or quotas of renewable hydrogen or its derivatives in specific end-use sectors.

In addition to the establishment of a regulatory framework, funding will also be made available. Firstly, the European Clean Hydrogen Alliance (ECH2A) has built a clear pipeline of viable investment projects, providing a broad forum to coordinate investment by all stakeholders and engage civil society, and facilitate cooperation in a range of large investment projects, including IPCEI projects. It will be supported by the Strategic Investment Facility under InvestEU and the ETS Innovation Fund. Then, the EU’s recovery plan, Next Generation EU, which provide for funding opportunities, especially via InvestEU, the Recovery and Resilience Facility, the increase in Cohesion funding via REACT-EU, and the Just Transition Mechanism. It will also develop a pilot scheme for a Carbon Contracts for Difference (CCfD) programme. Finally, it will bolster direct and transparent, market-based support schemes.

Finally, on the international dimension, the European Commission wants to strengthen EU leadership in international fora and develop the hydrogen mission within the mandate of Mission Innovation (MI2). It will set out closer cooperation with Southern and Eastern neighbouring countries (including Ukraine) and with the African Union. On top of that, it will strive to establish the euro as the benchmark currency for hydrogen trade.

The implementation of the strategy into law is taking place under the legislative proposals in the Fit for 55 package and the Hydrogen and Decarbonized Gas Market package. The aim of the packages is to ensure that the targets of the strategy are attainable and the development of an internal market for hydrogen can take place by 2030.

In light of the war in Ukraine and the EU strategic goal to decrease the imports of Russian fossil fuels, the European Commission published the REPowerEU plan in May 2022, which complements the implementation of the EU hydrogen strategy to further increase the European ambitions for renewable hydrogen. In the Staff Working Document accompanying the plan, the Commission outlines a ‘hydrogen accelerator’ concept to scale up the deployment of renewable hydrogen with the ambition to produce 10 million tonnes and import 10 million tonnes of renewable hydrogen in the EU by 2030.

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What’s in it for hydrogen?

The EU’s Hydrogen Strategy gives a central role to hydrogen in its planned integrated energy system. Not only seen as a cornerstone of the energy mix (potentially a 25% share in 2050) which would help decarbonise hard-to-abate industries or transport means, the European Commission considers hydrogen a ‘key technology’ to link sectors with each other, thereby enabling the energy system integration it set forth.

The Strategy’s main priority is to fix targets for hydrogen deployment based on a 3-phase roadmap and to detail policy and support measures. It intends to define a first terminology in the perspective of elaborating a certification system of hydrogen types based on full-life emissions. On top of that, the possible introduction of renewable hydrogen quotas for some end-use sectors would overall be beneficial to the whole hydrogen industry and would boost business development opportunities of the hydrogen value chain players.

Regarding production, the Strategy gives clear targets: 6 GW of electrolysers capacity for a production of 1 million tonnes of renewable hydrogen by 2024 and 40 GW of electrolysers capacity for a production of 10 million tonnes of renewable hydrogen by 2030. The Clean Hydrogen Alliance has identified and supported flagship production projects. Scaled up manufacturing of larger electrolysers (up to 100 MW) will also be fostered, including via the European Green Deal call. Although the priority is renewable hydrogen production, low-carbon hydrogen (for instance with CCS technology) is considered useful in a transitional phase, therefore at least until 2024.

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Links to the original document and additional information:
Hydrogen Strategy – European Commission Communication COM(2020) 301 final