Modelling of the potential role of hydrogen in meeting the EU’s proposed 2040 emission reduction targets points to production and imports levels that are significantly below the EU’s current targets, according to speakers at a recent event organised by industry lobby group Hydrogen Europe.

In February, the European Commission released a 2040 greenhouse gas (GHG) emissions reduction recommendation along with an impact assessment, which it was mandated to draft following the global stocktake at COP28 in Dubai.

The commission modelled different scenarios, with the most ambitious targeting a 90% greenhouse gas (GHG) emission reduction by 2040. Under this scenario, clean hydrogen would account for 10% of final energy demand by 2050, and hydrogen production would stand at just 3mt/yr by 2030, rising to 21–35mt/yr by 2040, the modelling shows.

The EU’s RePowerEU strategy calls for EU-based clean hydrogen production in 2030 of 10mt/yr, with 10mt/yr of imports.

The new modelling shows hydrogen and e-fuels imports playing a more limited role, with energy import dependence within the bloc falling from 61% in 2019 to 15% in 2050.

This represents a drastic change from previous targets of importing 10mt/yr, said Daniel Fraile, chief policy and market officer at Hydrogen Europe.

E-fuels and DAC

As much as 40% of all the hydrogen is also expected to be used for e-fuels production, with overall hydrogen consumption rising to 19.3–33.3mt/yr by 2040 and 61.5mt/yr by 2050, Fraile said.

High e-fuel requirements also raise questions over supply and availability of CO₂, as the proposals imply a high reliance on direct air capture technology, which is set to become competitive at carbon price levels of €250/t of CO₂ ($268/t of CO₂).

3mt/yr – Implied EU production in 2030

“This seems quite optimistic… The model expects most CO₂ to be available from direct air capture, which is quite debatable” Fraile said.

Industrial demand also appears lower than in previous forecasts, standing at 17mt/yr by 2050, the modelling shows.

Hydrogen demand for transport grows rapidly post-2030, reaching a 45% share by 2050.

“This is quite significant and seems not in line with narratives that e-fuels and hydrogen will have a limited role in transport,” Fraile said.

Grids and batteries

The success of Europe’s hydrogen strategy hinges on power grid development, adequate battery storage and sufficient renewable power supply, which should be secured through PPAs, said Olivia Infantes Morales, regulatory affairs director, hydrogen and clean power at Spanish energy firm Cepsa.

Cepsa is developing 2GW of hydrogen and e-fuels production capacity in the ports of Huelva and Algeciras in Spain, as part of its Andalusian Green Hydrogen Valley, due to come onstream in the second half of the 2020s.

The project aims to produce some of the most cost-competitive hydrogen on the market, she said, adding the company is negotiating deals to secure cheap wind and solar power as well as biomethane.

Regulators must ensure that Europe’s hydrogen industry remains competitive against other geographies such as China and the US, she added.

Hydrogen development in Europe will be driven by gas, renewables and CO₂ prices as well as the cost of capital, said Jan Cornillie, head of technical advisory firm 3E Advisory Services.

A low natural gas price scenario through 2030 amid Europe’s rush to develop new import capacity, insufficiently high carbon prices and a lack of consistently cheap renewable power place green hydrogen unfavourably against other fuels, he said, adding that developers also have to contend with high costs of capital.

“If green hydrogen has to be a success, you need higher carbon prices, higher targets…We could increase and make binding some of these targets, including for the industrial sector, but that has competitiveness effects,” he added.

A reality check is needed…We cannot get there with the current set of prices,” he stressed.

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Author: Beatrice Bedeschi