A few months back, Europe decided to strengthen its investments in renewable and low carbon hydrogen development. This was a solution to fostering a green economic recovery and growth, which also aligns with the goal to become carbon neutral by 2050.
As a result, many European countries, as well as the European Union, announced ambitious hydrogen strategies in 2020, focusing on diverse downstream uses and low carbon production technologies. The first SIA Partners European Observatory for renewable and low carbon hydrogen compares the positioning of 12 European countries which are engaged in hydrogen deployment. With this Observatory, Sia Partners aims to contribute to a better understanding of hydrogen perspectives, challenges, and opportunities in Europe.
European production capacities of renewable and low-carbon hydrogen currently represent 0.1 Mt/year; less than 1% of total production capacity. However, considering the production projects announced for 2030, production capacities should increase to 7.8 Mt/year thanks to large-scale electrolysis projects but also the development of carbon capture for steam methane reforming processes (SMR + CCUS). When first comparing the data, strong differences in hydrogen quantities and technologies will appear between the 12 countries studied in the observatory. Nevertheless, producing renewable hydrogen creates multiple challenges:
- Cost competition: considering the current electrolysis technologies, taxes on energy, and electricity prices, it’s impossible for low carbon hydrogen produced from grid-connected electrolysis to compete with hydrogen produced by SMR, and SMR+CCUS.
- Given the 2020 carbon content of the European electricity production, hydrogen produced from grid-connected electrolysis cannot be considered low carbon in the majority of the countries studied. To avoid associating CO2 emissions with increasing hydrogen production, the current electrolysis projects will have to be associated with the deployment of an additional 20GW of renewable production capacities by 2030.
- Transport and storage infrastructure will have to scale up to link regions of production and consumption.
The entire hydrogen sector, as well as national governments, have to mobilize in order to overcome these economic, environmental and infrastructure challenges. They must tap into innovation and investments. Looking at downstream markets, end-uses for low-carbon and renewable hydrogen will become more diverse over time, even if greening the industrial sector remains a priority in many countries. Given this diversification of uses, countries will respond by considering local economic issues (strong industrial presence), energy needs (renewable energy intermittency management) and political priorities (clean mobility, greening of residential heating…).
In order to support the development of a hydrogen economy, governments will rely, not only on public subsidies and investments, but also on the establishment of guarantees of origin and more adequate regulatory frameworks. Based on our comparative analysis of these different topics, Germany, France and the Netherlands stand out from other European countries as particularly ambitious and promising. These 3 countries have ambitious targets in terms of renewable hydrogen production, transport and downstream uses (mobility and industry). They also benefit from significant public investments. They are followed by the United Kingdom, whose ambitions are slightly behind in terms of hydrogen transport infrastructures and hydrogen mobility targets.