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Is hydrogen really the Holy Grail of the power industry?

The European Union aims to be carbon neutral by 2050. The European Commission has set out a comprehensive regulatory framework for the continent’s clean energy transition and while significant progress has been made, it remains challenging to tell which path will enable us to go fully carbon-free by the middle of the century.

One of the promising pathways is hydrogen, that has been described by many as the Holy Grail of the power industry due to its versatility. Although it has been around for decades, climate goals gave a new momentum for hydrogen that holds serious potential for the decarbonisation of the energy sector, transportation and industry.

The cost of clean hydrogen

Green hydrogen, produced by electrolysis and powered by renewable energy sources, is perceived by recent reports and studies as a cornerstone of any strategy leading to a GHG (greenhouse gas) neutral EU by 2050, as it would provide flexibility and storage capacity for power markets and would also enable sector coupling. However, today only 4 per cent of the total global hydrogen production is based on electrolysis according to the International Renewable Energy Agency (IRENA), while the rest is produced from fossil fuels with a substantial carbon footprint.

The challenge is to combine decarbonisation with competitiveness and to overcome cost barriers deriving from the high cost of investments and need for scale economies.

“The argument around green hydrogen, that can be produced on a much smaller and decentralised scale than the fossil fuel-based grey hydrogen, is that over time it will have a more attractive economic case if we factor in the expected cost decline of electrolyser systems and renewables and internalise the cost of carbon,” said Christopher Jackson, CEO of Protium Green Solutions, a UK focused hydrogen and fuel cell project developer, during a panel discussion organised by the Johns Hopkins School of Advanced International Studies (SAIS).

Still, setting off the hydrogen flywheel requires the implementation of clear strategies and the establishment of a regulatory environment that will create clarity amongst investors.

Hydrogen initiatives in CEE

As hydrogen is gaining increasing prominence in the future global energy mix many European countries have included it in their energy transition plans and published hydrogen strategies with ambitious targets (for example, the Netherlands plan to have 3-4 gigawatts (GW) of electrolysers installed capacity by 2030, while Germany is planning for 3-5 GW).

Meanwhile, countries in Central and Eastern Europe also show the first signs of opening towards hydrogen technologies, although significant commitments haven’t been made yet.

“Central and Eastern Europe is lagging behind Western Europe but analysing good practices and implementing R&D and pilot projects could shorten the distance and lay the foundation of an established hydrogen economy,” Peter Kocsis, Consultant at PwC Hungary tells CEENERGYNEWS.

Poland recently announced that a dedicated hydrogen strategy is under preparation to exploit the potential synergies between green hydrogen and the offshore wind farms that are to be built in the Baltic Sea within the next five years. Officials indicated that Poland expects to secure funds from the EU budget to implement targeted policies to scale up its hydrogen economy.

According to Zoltán Mayer, Secretary of the Hungarian Hydrogen and Fuel Cell Association, the interest around hydrogen has increased in Hungary as well. The recent foundation of the National Hydrogen Technology Platform, established at the end of April, points towards a positive direction as well as the first round of energy innovation tenders, some of which support the implementation of hydrogen-based technologies explicitly.

Ján Weiterschütz, Member of the Executive Committee of the Slovak Hydrogen Association underlined that hydrogen development is rather marginal today in Slovakia and expressed his hopes that the adoption of a national hydrogen strategy would be possible with the new government as it would be essential to create adequate policies, action plan and measures.

However, there are some reassuring initiatives on a regional level, such as the Hydrogen Strategy for Košice Region, which explores the implications of greater public and private investment in hydrogen, particularly its spillover effects on regional innovation, education, entrepreneurship and employment.

The Czech Republic is most probably the leader in hydrogen technologies in the region. They already established three hydrogen regions and the Czech government approved measures for the establishment of the necessary hydrogen infrastructure by supporting the deployment of hydrogen refuelling stations through the granting scheme of the Ministry of Transport.

Companies take careful steps

While governments started to raise their ambitions, big energy companies also recognised that there’s an underlying potential in hydrogen and some of them already extended their business portfolio to include hydrogen technologies.

For instance, Croatian oil and gas firm INA took the first steps towards developing hydrogen fuelling infrastructure in the country last year. INA also works on a programme for the development of infrastructure for hydrogen production, distribution and supply, based on the capacities of the Rijeka refinery. In the following years, it will become apparent which companies are leading this effort across sectors and which ones are falling behind.

“The power and gas network operators are not really motivated to join research efforts, because of sector decoupling,” Mr Kocsis says. “For this reason, the European Commission shall involve all members of the energy sector to help the distribution of produced hydrogen.”

Ján Weiterschütz also agrees that the engagement of energy companies will depend on state and EU incentives.

“Today they are hesitant to invest in the integration of hydrogen into their business model and will act only if they face higher carbon price and binding climate goals of EU,” Mr Weiterschütz tells CEENERGYNEWS.

The Clean Hydrogen Alliance

Hydrogen is high on the agenda of the European Commission which is also visible in the policy lines and incentive schemes announced recently. In March, the Commission announced the launch of the Clean Hydrogen Alliance “building on the existing work to identify technology needs, investment opportunities, regulatory barriers and enablers”.

As a key element of the New Industrial Strategy, the Commission unveiled the instrument of the so-called Important Projects of Common European Interest (IPCEI), that would allow member states to subsidise large-scale innovation projects across borders which could otherwise not be funded because of market failure. Hydrogen is one of the industries expected to benefit from the status.

The upcoming Clean Hydrogen Alliance, as well as the new regulatory instruments (including the Renewable Energies Directive-II and the ongoing update of Clean Vehicles Directive), should be the catalysts of the acceleration of the European hydrogen economy, but in order to benefit from these policies targeted hydrogen strategies are required from the part of the national governments, Zoltán Mayer tells CEENERGYNEWS.

“EU hydrogen initiatives will be the main driver for the hydrogen application in the CEE region and government have to understand that the hydrogen value chain is the right tool for the green economy transition and an opportunity for sustainable growth,” underlines Mr Weiterschütz.

Energy security

Hydrogen has another significant implication in Central and Eastern Europe: energy security. As most countries in the region rely heavily on natural gas imported from outside the European Union, green hydrogen may decrease this dependency and allow to store energy produced from renewables source (RES).

“One of the long-term potentials of producing green hydrogen by using just the base feedstock of electricity and water is that it enables specific states to increase their geopolitical stability for critical services,” said Patrick Molloy, Senior Associate of the Rocky Mountain Institute, during the panel discussion of the Johns Hopkins SAIS.

Furthermore, electrolysers with renewable energy sources can stabilise the electricity grid and act as a buffer to increase system resilience. It could significantly increase national energy security and decrease the balancing costs.

Reality check

The real value of investing in hydrogen technologies today would come in the form of lasting long-term benefits. But despite all the potentials inherent in the development of this new technology, today there are still some very real barriers to its large scale adoption.

“The biggest questions of hydrogen revolve around how do we scale up and build the technical expertise, capabilities and how do we develop these projects in time to meet the climate commitments and finally how do we redesign policy so that it is an enabler of a just transition that doesn’t penalise the first movers,” as explained by Christopher Jackson.

“Carbon prices that we have on the market are too low to get companies to switch and somebody needs to make the business case work which requires support fro the regulator and investment in the infrastructure,” concluded Markus Wilthaner, Associate Partner at McKinsey & Company in the panel discussion. “The future of hydrogen is not black or white and if we look at any serious decarbonisation scenario we need the strength of multiple technologies complementing each other.”

Increased attention, as well as favourable policy measure towards these technologies, both on national and EU level, could accelerate the clean energy transitions and bring us closer to decarbonisation objectives in the years ahead.

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