The economic emergency caused by the Covid-19 pandemic, combined with the climate crisis, has given new impetus to Europe’s need to provide greener fuel to ensure it hits net zero targets. Experts say hydrogen could play a key role in Europe’s energy mix — if it is produced sustainably.

Simone Mori is head of Europe at Enel Group. He believes Europe should avoid deploying and supporting solutions which are not sustainable in the long term and that could end up in stranded assets. “Against this background, hydrogen needs to be renewable,” he says. “This means producing it using electrolysis fed by 100% renewable energy sources power. Unlike blue hydrogen [produced with natural gas] that emits greenhouse gases for the share of CO₂ it cannot capture, and for the methane leaks from the upstream natural gas value chain, renewable hydrogen is, in fact, the only truly sustainable production pathway with zero greenhouse gas emissions.”

The EU’s hydrogen strategy aims to create a clean hydrogen industry in Europe, with targets of having a production capacity of one million tonnes of renewable hydrogen by 2024 and an installed electrolyser capacity of 40GW by 2030. 

“The EU’s ambition is already being translated into action in member states where, one by one, they are announcing national hydrogen strategies, such as those recently unveiled in Germany and France,” says Jorgo Chatzimarkakis, secretary general of Hydrogen Europe.

Opportunities

Activities in the sector have been increasing in response to the push for decarbonisation and the creation of legally binding quotas in the aviation and steel industries. Insiders say opportunities are growing in areas such as energy storage, as well as hard-to-abate sectors such as heavy industry and heavy-duty transportation.

Recent major announcements include the French government’s plans to invest €7.2bn ($8.47bn) in the hydrogen industry and Siemens’s confirmation that it is to build one of the world’s largest green hydrogen plants in southern Germany. 

Stakeholder collaboration has also moved up a notch with the announcement of plans to develop a strategic export–import value chain to ensure the production and transportation of green hydrogen from Portugal to the Netherlands. And German wind association WAB has signed a three-year deal with its Scottish partner, DeepWind, to cooperate more closely on the development of a market for green hydrogen from wind energy. 

“As the share of renewables in the energy mix grows, we are reaching the limit of what the electricity grid can handle with traditional measures (pumped hydro storage, demand-side response and other grid-balancing tools),” says Mr Chatzimarkakis. 

“Up to a point, this can be managed by increased use of batteries. But when it comes to seasonal energy storage, batteries become eye-wateringly expensive. This is one area where hydrogen has an important role to play in terms of its ability to store energy and alleviate congestion in the electricity grid. Storing energy in the form of hydrogen is the only viable solution to seasonal storage we have available.”

Enel’s Mr Mori believes that, initially, it will be necessary to scale up the manufacturing of the electrolyser and the deployment of the first projects, to rapidly bring down the cost of such technologies. “In the second phase, once hydrogen becomes cost-competitive, we can expect to see it play a larger role in the EU energy mix and really contributing to the decarbonisation process as a complementary solution to other measures, such as electrification and energy efficiency,” he adds. 

Challenges

Several challenges remain, however, including achieving cost parity with fossil fuels, adapting the regulatory framework and closing regulatory gaps. 

“Regulators need to create a separate market for renewable electricity-based gases and fuels,” says Jan Freymann, head of communications and public affairs at green hydrogen start-up Sunfire. “For example, they could set quotas in the transportation sector. Or they could design funding programmes targeted at supporting the first industrial-sized projects. Combined capex and opex funding is needed to enable the first projects.”

A plea to regulators

Insiders point to the role of regulators in driving the development of green hydrogen, calling for the use of clearer terminology so that consumers can make informed choices. They also want a clear legislative framework to support a market-based approach for hydrogen production. 

“Policy support should focus on accelerating and supporting the business models which are the most valuable for Europe and that allow real forms of sector integration. That is, those based on renewable hydrogen, domestically-produced with electrolysers co-located with grid-connected renewable energy sources or directly connected to electricity networks, and destined to off-takers in hard-to-abate sectors,” says Mr Mori.

Mr Freymann believes that if the European hydrogen sector is to flourish, industry and policy-makers must work together and focus on scaling up production, integrating value chains and cutting costs. “For politicians and regulators, the focus should be on ramping up renewable electricity supply, providing incentives for renewable fuels and gases, providing public finance to build production facilities, and delivering on certification and tradability," he adds.

Taking to the skies

Hydrogen technology looks promising for the aviation industry, where it can be used in fuel cells powering one or more electric motors, burned directly in an aircraft turbine, or used as a key ingredient in the production of synthetic fuels. First movers include Airbus, which has recently unveiled designs for hydrogen-fuelled passenger planes, and start-up ZeroAvia, which has achieved the world’s first hydrogen fuel cell-powered flight of a commercial-grade aircraft.

Daniel Riefer, associate partner, McKinsey & Company, says it is hard to predict how many aircraft will be using hydrogen for direct propulsion by 2050. “In our analyses, we assume the market entry of a short-range aircraft [around 165 passengers with a range 2000km] and a proof-of-concept for a medium-range aircraft by 2035. This could enable up to 40% of the global fleet to be powered by hydrogen by 2050. 

“But before the first commercial hydrogen aircraft can take off, significant research and development work is needed on liquid hydrogen tanks, fuel cell systems, hydrogen turbines and on-board distribution systems.”

He adds that the use of hydrogen will affect the cost per passenger. “This will depend on aircraft type but it will remain above that of the fossil jet fuel alternative. Our calculations show costs per tonne of CO₂ equivalent to less than €100 for short-range aircraft. This translates into a cost increase of about 5% for commuter aircraft and 25% for short-range. However, regulations will likely drive up the cost of greenhouse gas emissions and helping hydrogen in aviation to become more economically viable.”

This article first appeared in the October/November print edition of fDi Intelligence.