European Commission delays in granting state aid approval for EU clean hydrogen projects threaten to derail the bloc’s attempt to meet its 2030 targets on expanding production of the fuel, according to Hy24, the world’s largest pure-play hydrogen infrastructure fund.

Dozens of projects put forward by member states to receive state aid under a derogation of the EU’s Important Projects of Common European Interest (IPCEI) scheme have stalled because they are waiting for clearance by the Commission to receive the funds, says Pierre-Etienne Franc, CEO of Hy24.

“It is absolutely critical now for the IPCEI derogation to be enacted,” he tells Hydrogen Economist. “All the projects have stalled. The longer we wait, the steeper the curve is to reach the 2030 ambition.”

The EU has recently doubled its previous clean hydrogen targets, setting a 2030 goal to produce 10mn t/yr within the EU and to import a further 10mn t/yr. The target is set under RepowerEU, a new energy strategy designed to end the bloc’s dependence on Russian fossil fuels in response to the war in Ukraine.

“All the projects have stalled. The longer we wait, the steeper the curve is to reach to 2030 ambition” Franc, Hy24

The Commission say it is assessing state aid for hydrogen projects as a priority.

“Our IPCEI on hydrogen shall be approved by the summer. This will kickstart large industry-driven investments, which are worth well over €50bn ($52.8bn),” says Commission president Ursula von der Leyen.

Germany selected 62 large-scale hydrogen projects in May last year to receive more than €8bn in federal and state funding under the IPCEI scheme. At the time, the German government said it hoped to gain approval from the Commission by the end of 2021.

Franc says the IPCEI situation reflects delays between the EU’s headline ambitions and the policy execution support tools on the ground.

“The situation we have now is that policymakers are somewhat ahead of industry​ in the ambition,” Franc says. “They are implementing plans which the industry, as it stands today, is not capable of delivering. Policymakers could address this by accelerating the execution support tools and the downstream demand boosters to secure offtake growth.”

Nevertheless, the EU’s new 2030 targets for hydrogen are impressive up to a point, Franc says. “The target is very large for the industry, but it is still a very small as part of the larger energy system—20 mn t is barely going to replace 10pc of the natural gas consumption of Europe.”

“However, it shows the way, and it is impressive that European policymakers, with the support of many of the industry players, have captured and designed this plan. It is very bold and it is welcome,” he adds.

New asset class

Hy24, a joint venture between French asset manager Ardian and hydrogen investment firm FiveT Hydrogen, launched its fund in October last year. The fund is on track to close this summer with a target of €1.8bn to invest across the sector’s value chain, with a strong focus on mobility applications, says Franc, who cofounded FiveT after a 26-year career with industrial gases firm Air Liquide.

Clean hydrogen has arrived as an asset class in its own right, with the number of financial players entering the sector rising despite the economic and policy challenges faced by the sector, he says.

Hy24 launched with a group of strategic industrial anchor investors—including TotalEnergies, Air Liquide, hydrogen component manufacturer Plug Power, concessions and construction company Vinci, energy and industrial gases supplier Chart Industries and services firm Baker Hughes—as companies turn to clean hydrogen to decarbonise their operations and those of their customers.

Financial players have since joined the fund, reflecting the groundswell of interest in hydrogen from that sector.

€1.8bn – Hy24 target value

Credit Agricole Assurances, France’s largest insurance group, recently made a “significant” investment in Hy24. Earlier this year, state-owned Japan Bank for International Cooperation also said it had agreed to invest up to €100mn in the fund.

“Almost 50pc of the fund today is with financial investors,” Franc says. “The bet that we made that hydrogen will become a financial asset class is so far succeeding—at least for the setup of the fund. This is recognised also by the fact that we raised more than €1.5bn in just over six months.”

Franc points to investment in the sector by other large financial players and funds, including Singapore sovereign fund GIC, which took a stake in hydrogen project developer Intercontinental Energy earlier this year.

Danish fund Copenhagen Infrastructure Partners and Australia’s Macquarie are also engaged in significant projects.

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Author: Stuart Penson