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What Does The EU’s Hydrogen Strategy Mean For Fossil Fuels?

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The EU has released plans combining energy system integration with widespread green hydrogen deployment to drive a systemic shift away from fossil fuels, as a means meeting its energy and climate goals.

Achieving its goal of climate neutrality by 2050 means the EU must decarbonize its energy sector, responsible for 75% of GHG emissions. While today hydrogen constitutes less than 1% of EU energy consumption, the EU has made a historic commitment to a new energy system model in order to achieve its climate goals.

The only way climate neutrality can be achieved is through the green transition, because while electricity might be getting greener, electrification is necessary to transform the type of energy consumed across industry. Hydrogen is a key energy vector as like electricity, it is an energy carrier with no GHG emissions associated with its use. It also has several energy and non-energy uses, from storing renewable energy to fueling heavy transport, as well as a provider of energy and feedstock in energy-intensive industries, such as in the steel or chemical sectors.

The EU Strategy for Energy System Integration is expected to provide the model for this systemic shift. It has become increasingly clear that the current model (where energy consumption in transport, industry, gas and buildings is happening in ‘silos’, each of which has separate value chains, rules, infrastructure, planning and operations)  cannot deliver climate neutrality by 2050 in a cost efficient way.

The new strategy combines a plan for electrification with a more circular energy system but, most importantly, it recognizes that there are sectors where electrification can be a problem. Here the EU plans to promote clean fuels, including renewable hydrogen and sustainable biofuels and biogas.

In the integrated energy system envisioned, hydrogen can support the decarbonization of industry, transport, power generation and buildings across Europe. Indeed the CEO of Michelin, Florent Menegaux  said, ““Hydrogen is a perfect solution for long-haul, heavy-duty and commercial vehicles. The extensive development of clean hydrogen corridors and ecosystems will be a huge step towards sustainable mobility, with significant environmental and economic benefits.” Volkmar Denner, Chairman of Robert Bosch added,Hydrogen is a strong enabler for sectoral integration. It should not be limited to specific sectors and be made available for mobility, industry and heat applications. For example, clean hydrogen will enable us to realize residential heating and cooling without fossil fuels in order to meet the targets of the Paris Agreement.”

While it’s widely accepted that hydrogen can power sectors that are not suitable for electrification and provide storage to balance variable renewable energy flows, the costs remain high. Significant support and investment are required to fully commercialize green hydrogen but this can only be achieved with coordinated action between the public and private sector, at an EU level.  The EU Hydrogen Strategy addresses how to transform this potential into reality, through investments, regulation, market creation and research and innovation.

The costs of innovative solutions to the energy challenges must be integrated into the way in which the energy system is operated. New links between sectors must be created and technological progress exploited. The plan is to develop renewable hydrogen, produced using mainly wind and solar energy. In recognition of the short to medium challenges of energy transition however, the EU has said that other forms of low-carbon hydrogen are needed to rapidly reduce emissions and support the development of a viable market.

While this short term acceptance of blue and even brown hydrogen is within the strategy, the writing may be on the wall for natural gas as well as oil and coal, with clear priority given to renewable hydrogen and a clear and concise timeline for deployment. While critics have suggested that allowing fossil fuel derived hydrogen will cause a challenge for climate targets, if electrolyzers follow the same cost curve as onshore wind and solar PV, the energy market could be set for another transformation.

There are three phases to the plan. In less than 4 years, the EU will support the installation of at least 6GW of renewable hydrogen electrolyzers (up from around 1GW today), and the production of up to one million tonnes of renewable hydrogen. Between 2025 and 2030, this is expected to grow to 40GW of renewable hydrogen electrolyzers and the production of up to ten million tonnes of renewable hydrogen.

In order to deliver its vision, the EU also launched the European Clean Hydrogen Alliance with industry leaders, civil society, national and regional ministers and the European Investment Bank. The Alliance will build up an investment pipeline for scaled-up production and will support demand for clean hydrogen in the EU.

At the launch of the Strategy, Executive Vice-President for the Green Deal, Frans Timmerman said, “The strategies adopted today will bolster the European Green Deal and the green recovery, and put us firmly on the path of decarbonizing our economy by 2050. The new hydrogen economy can be a growth engine to help overcome the economic damage caused by Covid-19. In developing and deploying a clean hydrogen value chain, Europe will become a global front runner and retain its leadership in clean tech.” 

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