- The EU will come short of reaching its short-term targets based on the rate at which renewables are expanding
- It is likely that down the road there will be another push to switch to all-green hydrogen.
While there are several conversations in the EU about green hydrogen, it is now being established that blue and pink hydrogen will be the likely major players in the next few years. This comes at the back of a realisation that the EU will come short of reaching its short-term targets based on the rate at which renewables are expanding.
The Head of Renewable Energy, Cleantech and Sustainability Research at UK Investment bank Peel Hunt LLP, Mr Nick Walker, shared his opinion of the current status of the European hydrogen market, especially in regards to electrolyser production and green certification.
“It is likely that down the road there will be another push to switch to all-green hydrogen. For the next 5-10 years, however, both blue and green hydrogen is likely to be in play (like in the UK),” Walker said.
He revealed that his conclusion was based on the conflicting signals emanating from the EU as regards the green “label” of hydrogen. In specific terms, the REPowerEU of the European Commission dictates that only fossil-free hydrogen will be allocated subsidies. However, om reality, for a short period of time, some nuclear energy and fossil gas operations with carbon sequestration (blue hydrogen) will also be considered environmentally sustainable. This will become so with the start of the new year as in mid-July 2022 the EU adopted an amendment to its taxonomy to include such activities.
“So, on the face of it, it would appear to have the EU saying it will only hand out subsidies for electrolyser projects/companies producing green hydrogen, but the taxonomy — underpinning rules for investors — says it is okay to include nuclear and gas as ‘green’ for investment purposes in this sector,” he said, also suggesting that “the national interests of some of the larger EU member states have come into play.”
When asked about the effects of this move on the sector and electrolyser production, Walker shared the following comments:
“I believe the EU has discovered that they cannot build enough new renewables in the timescale it has set itself to meet its own targets […] and there is a push to go quicker, faster, bigger. So, in the short term, they want to also use nuclear power to power electrolysers and the use of blue hydrogen sourced from natural gas […]. The EU has also promised to speed up permitting times for renewables and electrolyser projects, where possible. Use of nuclear power could be a positive for electrolyser production,” he added.
“With the US IRA [Inflation Reduction Act of 2022] tax credit in place, I think the EU has woken up to the fact that they need to push as hard and as quickly as possible and not to put too many bureaucratic processes/obstacles in place. Hence, we are now seeing the watering down of the original ‘additionality’ rules,” Walker said further.
The industry is currently waiting for the EC to publish the delayed additionality rules, which will set the requirements for hydrogen to get renewable certification. This was reportedly supposed to happen on December 15 following the leaking of the draft document.