Investment fund Hy24 is championing hydrogen’s potential in the EU mobility sector, but it warns a lack of urgency among member states in rolling out refuelling networks risks undermining the decarbonisation of heavy-duty transport.

Hy24, which claims to be the world’s largest fund dedicated to hydrogen infrastructure, plans to invest 50pc of its €2bn ($2.2bn) capital into mobility.

“We are unique in this respect—there are other funds that could support production, but we are the only one with this focus on the mobility sector,” says Nicolas Brahy, general counsel and head of public affairs and ESG at Hy24, a joint venture between French asset manager Ardian and investment firm FiveT Hydrogen.

“It is no longer a problem of one or two stations here and there but a question of system-wide change” Brahy, Hy24

Hydrogen will be necessary to fully decarbonise heavy-duty transport, Brahy says, but mobility presents additional challenges for investors compared with other end-uses.

“There is more need for coordination than industrial users,” says Brahy. “In industry, there are two or three parties involved—the producer, the offtaker, maybe the technology providers, and renewable power generators. For mobility, it is much more complex, you have many more additional parties involved—fleet operators, vehicle manufacturers refuelling stations—and you have to make sure that the same subsidies are in place in every member state.”

He adds that this level of coordination, while difficult to achieve, is necessary to enable cross-border hydrogen networks and trade as it has a “multiplying effect” on demand.

Brahy highlights that the agreement reached on the EU’s Alternative Fuels Infrastructure Regulation (Afir)—while watered down from its original proposal—is still a positive step towards hydrogen mobility. “Hydrogen is recognised as a necessity in all member states. Even in member states that are sceptical about hydrogen in the short term, there is now a guarantee that there will be refuelling stations in all 27 member states.”

“There is also a minimum size and pressure that developers can comply with,” he adds, noting that, previously, companies have been wary to invest in refuelling stations that could risk falling out of compliance once regulation is adopted. “Now, there is clarification of 1t/d, 700bar—everyone knows that you need to develop to these specifications, and it provides certainty to move forward on the manufacturing side and deployment.”

However, the final deal still results in too few refuelling stations to supply an expected increase in hydrogen-powered vehicles on the road. “For a sense of the magnitude of difference, Europe currently has around 110,000 gasoline and diesel stations,” Brahy notes. “The original proposal would have resulted in 800–1,000 hydrogen refuelling stations. Parliament pushed for 1,500, and the member states in their general approach pushed that down to 235. With an estimated 660 stations, the compromise is a quarter of the results from the original proposal.”

“We need many more vehicles than can be refuelled by this number of stations to decarbonise,” says Brahy. He adds that “there is a lack of a sense of emergency from member states” when it comes to hydrogen mobility, arguing that many appear to prioritise decarbonising light-duty vehicles via electrification first before tackling heavy-duty trucks.

“To achieve the proposed CO₂ standards for heavy-duty and sell a substantial market share of hydrogen trucks, you have to phase them in progressively. There needs to be a number of stations in place to begin with and confidence that more stations are coming in year by year,” Brahy says.

However, given hydrogen refuelling stations take two years to develop—“more for countries that do not have any to begin with”—decisions will need to be made as soon as possible to provide fleet operators and manufacturers with enough certainty to invest in hydrogen options. “We need to change gears, as it is no longer a problem of one or two stations here and there but a question of system-wide change.”

Brahy adds that this will require hydrogen mobility to be “embedded in subsidy schemes”. He suggests that this could take the form of capacity payments—“a lease for the station, spread over several years”—which could increase the bankability of refuelling infrastructure and ensure consistent quality over time. He notes that similar capacity payments have already been approved in Germany for electric vehicle fast-charging stations.

Policy suite

The EU is wrapping up a wider suite of policies towards hydrogen as it approaches European Parliament elections and European Commission appointments in 2024. While the industry has had mixed reactions to Afir and the Renewable Energy Directive (Red)'s delegated acts, which set a strict definition of renewable hydrogen, the way in which member states implement these measures could swing the balance for European hydrogen, Brahy says.

Red’s delegated acts “will not allow cheap hydrogen from the start” as a result of additionality and temporal correlation requirements, he says. “But it is a choice we can live with. We should rather concentrate on the next steps. While it is good to have the new directive, we need to make sure member states transpose the Red at a national level.”

“We always say that the US Inflation Reduction Act [IRA] is very generous [for hydrogen subsidies]. It is true in the sense that it will be an immediate payment mechanism—and it is generous in amount of subsidy,” Brahy says. “But in fact, national transpositions playing with intermediary targets (between now and 2030) and with the size of the penalties could rapidly give value to green hydrogen that is equivalent or higher than the US IRA.”

“The US also does not have any federal obligations on the demand side… which are at least as important as subsidies, especially when they are technology-specific,” he adds.

Brahy notes that Europe’s Net Zero Industry Act—aimed at supporting a domestic supply chain for transition technologies by speeding up permitting—could also present a potential step ahead of the US. However, the proposal may not go far enough, as it covers only manufacturing sites and not actual production projects, he adds.

“Permitting is a key issue. We only have seven years to 2030, which is extremely short when you consider that a solar PV plant takes 2–3 years and a windfarm 6–8 years to go through permitting—and adding an electrolyser only complicates that,” he says. “At some point, we will need to drastically change permitting procedures or risk not being able to comply with 2030 targets.”

Grid connection is another element that has already inflated project timelines for renewables and is likely to have an effect on renewable hydrogen. Brahy highlights that the delegated acts may incentivise developers toward projects directly connected to renewables with no grid backup—potentially eliminating this time-intensive process altogether.

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Author: Polly Martin