Hydrogen makes another appearance
The European Commission has unveiled a comprehensive hydrogen strategy, aiming to pave the way for a carbon-neutral Europe by 2050. The strategy, titled 'A hydrogen strategy for a climate-neutral Europe', seeks to develop low carbon technologies to substitute carbon-intensive fuels, particularly in the industry and transportation sectors.
Currently, the EU still has an extensive reliance on fossil fuels, and stakeholders may resist change. However, major natural gas suppliers, such as Equinor and Gazprom, have begun to take action in the hydrogen market. The Commission seeks to facilitate the expansion of hydrogen irrespective of its source, with the expectation that renewable-based variants will gradually replace fossil fuel-based forms.
Hydrogen, which is currently linked to the fossil fuel industry and mostly produced from methane, is expected to play a significant role in the EU's energy sector in the near future. The Commission may emphasize the importance of renewable-based hydrogen, but it also acknowledges that fossil fuel-based hydrogen can have a role in the transition period.
The strategy includes ambitious plans to install 6 GW of renewable hydrogen electrolysers by 2024 and 40 GW by 2030. This would represent a substantial increase from the 2% share of hydrogen in the EU's energy mix in 2018, with the aim of raising it to 13-14% by 2050. The total cost of these plans through 2030 is estimated to be €320-458 billion.
The Lisbon Treaty divides energy-related competences between the European Commission and its Member States. However, the Commission has set out to lead policy on hydrogen, potentially leading to tension among EU members. Several European countries have already established their own hydrogen strategies to maintain sovereignty over their energy affairs, even as the European Commission has taken a leading role in hydrogen policy coordination.
The strategy does not address the risk of geopolitical deterioration, particularly in relation to Russia and natural gas trade. Nor does it mention the potential for rising supranationalisation of energy markets as a result of its policies. The acceptance and effectiveness of the strategy's guarantees of origin system for certifying the fuel's source are yet to be seen.
The Hydrogen Strategy does not ignore the challenges of transitioning away from fossil fuels. CCS remains in its infancy and fossil fuels have hit record low prices, indicating the obstacles faced in the transition. Shifts in energy mix compositions have been slow, and the Commission estimates that EU Emission Trading System (EU ETS) quota prices would need to rise to €55-€90 for emitters to install Carbon Capture and Storage (CCS).
Despite these challenges, the strategy represents a bold step towards a carbon-neutral Europe. Notably, Germany has made significant advances with projects such as inaugurating Europe's most powerful hydrogen refuelling station, reflecting a national commitment alongside EU-wide hydrogen development efforts. Other EU member states are actively engaged in dialogues to meet 2040 climate goals, implying national strategies complementing EU leadership.
However, Germany has been critiqued for lacking a specific biomethane strategy compared to other European countries, indicating variance in national hydrogen and bioenergy approaches. The strategy's success will depend on the collaboration and commitment of all EU members, as well as the continued decline in electrolyser costs and the increase in their relative sizes to make renewables-based hydrogen prices more competitive.
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