The hydrogen conversation was boosted in Romania as part of the pandemic recovery planning which created the circumstances for transformational changes in the EU energy and industry sectors. Growing signals from public and private stakeholders, as well as politicians, indicate an awakening to the opportunities likely to arise in the following period in a striking departure from the conservative approach to the energy sector of the past years.
Nevertheless, there seems to be a level of confusion among domestic actors about the role that hydrogen is to play in decarbonisation based on its technically feasible and most cost-efficient applications. In Romania, hydrogen is portrayed as a silver bullet towards a decarbonised future in sectors looking to find a place in a landscape shaped by the European Green Deal. However, hydrogen’s real impact will depend on the country’s economic strategy and the costs of technology.
The Romanian authorities announced the intention to release a national hydrogen strategy in 2022. This will be an opportunity to make informed and comprehensive decisions regarding the future of hydrogen, as opposed to the current patchwork of uncoordinated and poorly designed initiatives. The strategy should be developed based on the active involvement of public and private stakeholders with targets and potential funding sources.
In Romania, the most promising hydrogen uses are in industry (steel, ammonia, fertilisers, refineries, and high-value chemicals), transport (long-haul aviation, maritime shipping, HDVs and some railway segments) and potentially, long-term, or seasonal energy storage beyond 2030. Other uses, such as gas blending or green hydrogen use in CCGTs are rather a waste of economic value, given the comparatively high costs of producing hydrogen. Finding economically viable opportunities for sector integration based on best practices in R&D cooperation and commercial projects will be imperative to the development of a Romanian hydrogen industry. From the outset, there ought to be a solid business case for the hydrogen value chains that are set to expand once funding opportunities become available and technology costs decrease.
As shown in Energy Policy Group’s study Clean Hydrogen in Romania: Elements of a Strategy, based on considerations regarding carbon intensity and availability, clean hydrogen is the most promising for delivering the goals of decarbonisation in the long term. Factoring in the cost aspect, clean hydrogen is on a clear path to significant cost reductions that render it competitive with fossil-based hydrogen by 2030 which should ensure that the Romanian national hydrogen strategy focuses on it.
By 2030, producing clean hydrogen will no longer be a CAPEX intensive business. The price of renewable energy becomes the main cost component, especially at medium to high electrolyser load factor. Coupled with the decreasing cost of renewable energy, higher carbon price and elimination of free allocation of CO2 allowances, this will allow clean hydrogen to break even with fossil alternatives between 2028 and 2032 based on local renewable potential.
The modelling scenarios analysed in the aforementioned study, based on the Fit for 55 package proposals regarding the use of clean hydrogen in industry and transport, show that between 1,470 megawatts (MW) and 2,350 MW of electrolyser capacity will need to be installed in Romania by 2030. This amounts to 3.7 per cent and 6 per cent, respectively of the EU electrolyser capacity by 2030 targeted in the Commission’s Hydrogen Strategy. When factoring in the additionality principle, this will require between 3 and 4.5 gigawatts (GW) of new renewables to be installed beside the capacities included in the current National Energy and Climate Plan.
Based on a Levelized Cost of Energy (LCOE) of 50 euros/megawatt-hours (MWh), a reasonable if not conservative assumption for Romania in 2030, given the RES potential and expected cost reductions, the resulting Levelized Cost of Hydrogen (LCOH) for alkaline electrolysis is between 2.21 euros/kgH2 and 2.3 euros/kgH2 while for PEM electrolysis it ranges from 2.34 euros to 2.73 euros/kgH2, depending on load factor. The LCOH can go down to as much as 1.38 euros/kgH2 for alkaline electrolysis and 1.59 euros/kgH2 for PEM electrolysis in 2030 for an LCOE of 25 euros/MWh. The only way of ensuring a stable and predictable source of low-cost electricity for the electrolysis units is long-term Power Purchase Agreements (PPAs) with multiple RES producers or wholesale purchasing of electricity that comes with Guarantees of Origin (GOs).
Key strategic choices will have to be made in the upcoming hydrogen strategy regarding production pathways, location of sites, end-uses and transport infrastructure. There is a clear case in terms of cost, carbon intensity, and availability for the Romanian authorities to be made for clean hydrogen, and to prioritise large-scale investments in renewable and electrolyser capacities. This would be fully compliant with the European pathway enshrined in the EU Hydrogen Strategy and Fit for 55 package provision and will help Romania capitalise on the major opportunities of developing new value chains as part of the energy transition.
The Romanian national hydrogen strategy must identify the drivers in the sector and set priorities for production and identify pathways for use, costs, and deployment targets for 2030 and 2050. It also ought to:
- include a timeline for market development, a clear regulatory framework and financial measures to support the development of the hydrogen sector and the associated value chains;
- prioritise clean hydrogen from renewable electricity, since there is a clear cost-efficient pathway up to 2030;
- target the most promising uses for hydrogen: industry and transport (maritime shipping, heavy-duty vehicles, long-haul aviation and some railway segments). Direct combustion of hydrogen should be avoided, given the low energy efficiency of the process;
- involve public and private stakeholders to outline a strategic roadmap with targets and potential funding sources. Explore economically viable opportunities for sector integration based on best practices for international cooperation in R&D and commercial projects;
- outline measures to develop the hydrogen value chain in Romania, particularly for electrolyser manufacturing. The education and R&D sectors should also be prioritised. Based on the initial development for the domestic market, Romania can aim to become an exporter of equipment and know-how to neighbouring markets. The national hydrogen strategy should be followed by a national industrial decarbonisation strategy and roadmap;
- the Dobrogea region must become a clean hydrogen valley. There is high potential for local clean hydrogen projects with several industrial off-takers as anchor load and potentially transport off-takers, replacing grey hydrogen supply, or more carbon intensive industrial processes. In the long-term Dobrogea can grow into a larger-scale, international and export-focused hydrogen valley, with the Port of Constanța as its centrepiece.