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How to reach long term decarbonisation in the V4 region?

The transition to a climate-neutral society includes several challenges. Reaching an economy with net-zero greenhouse gas emissions (GHG) by 2050 is a high priority for the European Commission and Member States are preparing their 2050 Decarbonisation Plans to lay out the sectoral targets and the measures, which might ensure the successful completion of the full decarbonisation.

Even though the goal is the same, the path chosen by Member States can differ significantly as every Member State has its own specificities and priorities. The online webinar organised by the Regional Centre for Energy Policy Research (REKK) in the framework of the V4 Energy Think Tank Platform focused on some key aspects of the realisation of the 2050 decarbonisation in the Visegrád region.

“We are facing a double challenge here,” said László Szabó, Director of REKK. “Not only we have to go on the path of full decarbonisation but also have to do it in a way to gain higher competitiveness.”

Climate neutrality plans

Running up to the 2050 decarbonisation goals, Member States are required to develop national long-term strategies on how they plan to achieve the greenhouse gas emissions reductions needed to meet their commitments.

“2050 plans should present trajectories towards the full decarbonisation of the economy, however not all countries have so far presented their long-term plans,” said Matúš Mišík, Associate Research Fellow, Slovak Foreign Policy Association. In the V4 region the Czech Republic and Slovakia have submitted their strategies, Hungary has a draft plan, while the Polish long-term decarbonisation plan is still in preparation.

Hungary already stated its intention to become carbon neutral by 2050, which will require yearly investments equal to about 2,5 per cent of the GDP. Besides the long term strategy, the Parliament also adopted the climate law, which set the goal to 2030 as well, implying a decrease in GHG emissions by 40 per cent compared to 1990 levels. Slovakia and the Czech Republic submitted already existing documents to the Commission, however, they do not present modelling for a 100 per cent decarbonisation, thus these plans need to be updated.

“Reaching the last 5-10 per cent of decarbonisation is a very tricky issue,” said Ágnes Törőcsik, Senior Research Associate at REKK. At this phase, Power-to-gas (P2G) and green hydrogen can come into the picture.

The role of green hydrogen in the decarbonisation strategy

The role of green hydrogen and P2G is quite diverse in decarbonisation, it can be used for energy storage, the decarbonisation of the gas and transport sector and the decarbonisation of fossil-based hydrogen production. However, in the V4 region, there is still a long way to come as the status quo of hydrogen is grey.

Poland is the fifth-largest hydrogen producer in the world producing about 14 per cent of Europe’s hydrogen demand, all coming from fossil fuels. The largest Polish chemical company, Azoty and oil and gas company Lotos are supplying the majority of this hydrogen. In the Czech Republic, there are currently ten industrial plants producing grey hydrogen. In Slovakia, the situation is very similar there are two big hydrogen producers and the Slovnaft oil refinery plans to increase its hydrogen production capacities with another production plant producing grey hydrogen. In Hungary, the most important producers are the MOL Danube oil refinery and a chemical raw material manufacturer BorsodChem, both producing grey hydrogen, but there is a smaller P2G pilot project already in operation.

The share of hydrogen in the EU energy mix is very small, under 2 per cent currently, but the EU wants to see at least 6 gigawatts (GW) of renewable electrolyser capacity that can produce up to 1 million tonnes of renewable hydrogen realised by 2024 and 40 GW, producing 10 million tonnes, by 2030. The V4 countries also presented their ambitions, with Poland aiming to reach 2 GW, Hungary 0,6 GW and the Czech Republic 0,4-1,7 GW of hydrogen electrolysis capacity, by 2030. In comparison, the German plan aims for 5 GW by 2025.

Ágenes Törőcsik notes that the 40 GW capacity increase by 2030 will equal the energy value of 12-15 billion cubic metres (bcm) of natural gas and that time the EU total energy demand from gas will reach 400 bcm so the ratio will be still very limited.

The role of P2G and green hydrogen in the decarbonisation strategy is also different from country to country. In the Czech Republic, the main function of hydrogen is in the decarbonisation of the transport sector, with the goal of 100 buses running on hydrogen by 2030. Poland plans to decarbonise hydrogen production by shifting from grey to RES-based production. This involves the establishment of a North-South hydrogen highway, that will transport energy produced from offshore wind in the North to the industrial area in the South. Slovakia has similar ambitions to the Czech Republic, planning to use green hydrogen in the transport sector. In Hungary, there are more potential objectives related to the future of hydrogen. Besides the decarbonisation of the transport sector, Hungary also sees the potential of blending hydrogen in the gas infrastructure and runs a pilot project to test the potential of hydrogen storage.

Although hydrogen is currently on everyone’s lips, when talking about decarbonisation, there are still many open questions from the regulatory side. As a starting point, according to ACER’s recently published regulatory White Paper, the Gas Directive is not valid for hydrogen.

“It’s also not clear how could be a market-based hydrogen market established when the projects will be realised based on supports and subsidies,” pointed out Ágnes Törőcsik adding that guarantees of origin are also a tricky question as it is not clear yet who will issue certificates for green hydrogen and what will happen in case of hydrogen produced from the grid or mixed sources.

To sum up, hydrogen is not competitive yet, but it might be the missing puzzle in long-term decarbonisation. In the V4 region, this could be reached through a step-by-step approach, first decarbonising fossil-based hydrogen production, then producing green hydrogen from renewables using the local environment and finally with the decarbonisation of hard-to-abate sectors such as heating.

Coal phase out: the most important step

Another sensitive issue of decarbonisation in the V4 region is the coal phase-out, which is one of the most important steps to reach net-zero by 2050.

In Poland – the most coal-dependent country in the region – currently, 80 per cent of the electricity is coming from coal. According to the draft 2040 energy policy, this will decrease to 28 per cent by 2040 in case of a moderate CO2 price scenario and 11 per cent in a high CO2 price scenario. There are ongoing talks between the government, coal companies and trade unions that aired 2049 as the date of the closure of the last coal mine.

In the Czech Republic, the Coal Commission recommended a coal-exit date of 2038, conditional on a timely replacement of coal-fired power plants and heating plants by other sources. However, the final decision has been postponed because of disagreement within the government.

In contrast, Slovakia and Hungary have already announced their official exit date. Slovakia will close its last coal mine in 2023. Hungary recently revised its original target year from 2030 to 2025, by this time the transformation of the Mátra Power Plant, the country’s biggest CO2 emitter, should be completed.

Of course, leaving coal behind will not be an easy job as the transition to a lower-carbon economy must happen without leaving former coal workers behind. But it’s feasible. A new JRC report on clean energy technologies in coal regions finds that the deployment of clean energy technologies in more than half of the EU coal regions could offset job losses induced by the transition by creating up to 460,000 jobs in total by 2050.

“If we look at the technical potential in the V4 coal region we can find some interesting potential especially in terms of PV projects installed on former coal mines,” said Adéla Denková, Research Fellow of the AMO Research Center and Chairwoman of AMO Supervisory Board in the Czech Republic. The energy efficiency potential is also very important on the regional level, the refurbishment of houses for instance is usually implemented by local companies creating jobs for the local economy.

The countries can also count on EU support to achieve their decarbonisation goals, the Just Transition Mechanism and its core instrument the Just Transition Fund (JTF) with a budget of more than 17 billion euros, was established to ensure the fairness of Europe’s transition by supporting the most affected regions and alleviating social and economic fallouts. One of the biggest beneficiaries of the JTF is Poland that is set to receive 3,5 billion euros, 20 per cent of the total budget. Member States, now have to develop Territorial Just Transition Plans in cooperation with regional authorities presenting the economic, social and environmental challenges that the regions in transition face and proposing the action needed in the next ten years.

Leaving coal behind and scaling up hydrogen capacities are of course just part of the decarbonisation puzzle. Shifting to a net-zero economy will be a complex job in which all parts of society and economic sectors will play a role, from the power sector to industry, mobility, buildings, agriculture and forestry.

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