Hydrogen policymakers will be feeling the heat as they head off for their summer breaks after a challenging first half of the year.

The ever more complex regulations they have wrapped around the clean hydrogen industry are under increasing scrutiny, while the support for the wider net-zero project is under strain as the public’s understanding of its vast expense grows.

Throw in the uncertainty over the possible policy environment for hydrogen following the US elections later this year, and the near-term outlook for project developers as they return from vacations looks cloudy.

Policymakers must surely hit the reset button soon if they are to retain investor interest in clean hydrogen projects. The number of genuinely bankable projects and FIDs remains alarmingly low for an industry that has been tasked with meeting significant supply and demand targets by the end of the decade.

“The Commission did not undertake robust analyses before setting the EU’s renewable hydrogen production and import targets” European Court of Auditors

Grumbling about the complexity of regulation and the process for accessing subsidies both in Europe and in the US has been getting louder for months. “Perfection is the enemy of the good,” said one speaker of EU policymakers’ forensic approach to the hydrogen sector during the World Hydrogen Summit 2024 in Rotterdam in May. Questions over the implementation of the 45V tax credit in the US were also raised at the event.

On the political level, the tone shifted in June when European parliamentary elections appeared to confirm a weakening of support for net zero, potentially denting the case for the hugely expensive creation of a new hydrogen economy, as well as the deployment of technologies such as CCS.

“In 2019, a green wave took Brussels—this is clearly not happening this time. The space for ambitious climate action has become much smaller,” Philipp Jaeger, policy fellow at thinktank the Jacques Delors Centre, told Hydrogen Economist as the dust settled on the election results.

Overly ambitious

In July, the European Court of Auditors delivered a less-than-favourable assessment of the EU’s efforts to foster a hydrogen economy. It called for a “reality check” on the situation, given that four years have passed since the EU set out its hydrogen strategy, although it acknowledged the European Commission had been “partially successful” in creating the conditions for an emerging hydrogen market and value chain.

More damning was the ECA’s verdict that the EU would miss its “overly ambitious” 2030 hydrogen targets. It has said it aims to grow hydrogen demand to 20mt/yr by 2030, meeting this demand with 10mt/yr of domestic production and 10mt/yr of imports.

“The Commission did not undertake robust analyses before setting the EU’s renewable hydrogen production and import targets,” the ECA said. This chimed with what many in the industry had been privately saying for months, if not longer, given the sluggish progress in developing production capacity and infrastructure.

Commission president Ursula von der Leyen, who has just secured another five years in office, can point to the successful completion of the European Hydrogen Bank’s first pilot auction, and the growing number of projects gaining access to public funds via the Important Projects of Common European Interest programme as evidence the EU’s strategy has gained momentum since the start of the year. The signing of the first green ammonia import deal under Germany’s H2Global pilot auction also marked an important breakthrough.

Fortescue retreats

The hydrogen sector needs to see far more projects progressing to FID if 2030 targets are to remain within reach. On this front, the news has been mixed in recent weeks. Australia’s Fortescue, one of the green hydrogen concept’s most vociferous supporters, sent a minor shockwave through the industry in July when it said it had “deprioritised” three of its key projects. It also admitted it was unlikely to reach its target to produce 15mt/yr of the energy vector by 2030.

Shell and BP advance

On the plus side, oil majors Shell and BP—both of which have the luxury of guaranteed offtakers for green hydrogen in the form of their own refineries—buoyed sentiment with FID decisions.

Shell confirmed its readiness to invest at scale in renewable hydrogen by taking FID on the 100MW REFHYNE II electrolyser project at its Rheinland refining complex near Cologne in Germany. BP took FID on the deployment of an initial 25MW of electrolyser capacity at its Castellon refining complex in the Valencia region of Spain, where it is working with Spanish energy firm Iberdrola. It also said it expects to take FID on a 100MW green hydrogen project adjacent to its Lingen refinery in the Lower Saxony region of Germany by the end of the year.

Policymakers will be hoping others will follow the oil majors’ lead in the second half of the year.

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Author: Stuart Penson