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EU to fund hydrogen as part of decarbonisation strategy

European Commission proposes using EU funds to kickstart private investment in hydrogen technologies that target hard-to-abate sectors

The European Commission yesterday proposed the EU invest in hydrogen technologies as part of its €750bn Next Generation EU stimulus package to recover from the Covid-19 crisis.

The package would build on existing work by the Commission to reduce the EU’s greenhouse gas emissions to net zero by 2050. A specific strategy on hydrogen is due to be published later this year.  

Achieving the 2050 goal will require a greater use of hydrogen technologies, EU energy commissioner Kadri Simson told the EU’s industry committee during an evidence session on 19 May. “Hydrogen has a strong potential to emerge as a key new energy carrier, a solution to decarbonise particularly difficult sectors,” she said.

“Hydrogen has a strong potential to emerge as a key new energy carrier, a solution to decarbonise particularly difficult sectors” Simson, EU energy commissioner

The Next Generation EU plan includes fostering private sector development of hydrogen technologies with direct support. It includes a Strategic Investment Facility that has the aim of generating investment of up to €150bn, based on direct EU contributions totalling €15bn. Funds will be focused on strategic sectors “notably linked to the green and digital transition”, of which research and development in hydrogen technologies is an important component.

The plan also includes support for national government investment, €310bn in grants and €250bn in loans, that align with EU priorities including the transition—so some of this money may also find its way into developing hydrogen technologies.

The Commission’s package needs to be approved by the EU Council and the European Parliament before it becomes law.

Policy support

The Next Generation EU financial package will be channelled through the EU’s existing policy programmes, including the European Green Deal. The Commission sees hydrogen as important in decarbonising three sectors in particular: heating buildings, industrial processes and transport.

Producing hydrogen from electrolysis, known as green hydrogen, is one of the technologies targeted in the policy. This nascent technology emits far less CO2 than the more widespread process of reforming natural gas, known as blue hydrogen.

Green hydrogen is one of the leading solutions for storing the power generated by renewables when it exceeds demand, to help solve power-grid intermittency issues.

Blue hydrogen projects will also be able to access the strategic finance announced by the commission’s plan, but they must have carbon capture and storage (CCS) technologies attached to be considered low carbon.

This means being part of a CCS cluster with access to existing carbon storage infrastructure. The coordination required to develop these clusters requires both planning and financial support at state level, according to research by industry association Hydrogen Europe.

c.50 – Public policies in place to support hydrogen industry globally

But, once developed, these clusters can act as hubs for the development of hydrogen applications in both the industry and transport segments.

The variety of sectors involved and the incremental approach that has been taken towards the technology means policy support needs to be highly targeted, according to Grzegorz Pawelec, research, innovation and funding manager at Hydrogen Europe. 

“The hydrogen sector fills a lot of different niches and needs in the energy system, and therefore a coordinated EU-level strategy with a suite of policy tools adapted to fit these various different requirements will be fundamental,” he says.

Hydrogen Europe’s most ambitious policy scenario envisages €430bn of investment and €145bn of subsidies up to 2030, with 17.9mn t/yr of demand created by the end of the period.

Hydrogen applications

In the industrial sector, among the most important of these applications is the use of hydrogen as a low-carbon alternative to natural gas in direct-firing processes such as steel manufacture.

Although some firms, such as Germany’s Thyssenkrupp, are testing the technology, it needs to be subsidised to be cost-competitive with steel generated using traditional processes, according to research by NGO the Stockholm Environment Institute (SEI).

In the transport sector, the CCS clusters can act as hubs for the development of ‘road corridors’ of refuelling infrastructure for hydrogen-powered heavy vehicles, such as trucks and lorries.

The EU does not yet have a plan for using hydrogen for heating buildings, partly because it is one of the more complicated areas of policy development. It is being evaluated as an option for the strategy due to be published later this year.   

Hydrogen boilers can be used in combination with electrically powered heat pumps for low-carbon domestic heating in a ’hybrid heat pump’ solution, according to UK independent NGO the Committee on Climate Change (CCC).

These heat pumps can be retrofitted to existing boiler-based heating systems, but such a rollout is likely to require an incentive scheme to guarantee uptake as well as investment in the gas grid to repurpose it to carry hydrogen.

Infrastructure requirements

Gas grids can carry up to 20pc hydrogen without significant repurposing, but anything above that level—which would be necessary to fully decarbonise the sector—would require significant investment. Indeed, it would be one of the largest policy decisions any state would need to make in the move to a hydrogen-based heating system.

Binding targets for renewable content in the gas grid would be a significant help in incentivising this move, according to Hydrogen Europe.

Globally, the hydrogen industry has received relatively little policy support until now. Only 50 support policies are in place and the majority of these focus on transport, according to an International Energy Agency (IEA) report on the fuel last year.

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