EC hikes renewable hydrogen demand targets in REPowerEU package

The European Commission has increased its renewable hydrogen demand-side targets as part of the REPowerEU package to reduce dependency on Russian fossil fuel imports, setting the stage for the rollout of a hydrogen economy across the continent by 2030.

The EC has called for an increase in the renewable share for hydrogen used in industry to 75% by 2030, up from its previous ambition of achieving a 50% share announced in the Fit for 55 climate package in July 2021.

"Renewable hydrogen will be key to replace natural gas, coal and oil in hard-to-decarbonize industries and transport," the EC said in a statement May 18.

It also revised its target higher for the share of renewable fuels of non-biological origin – essentially renewable hydrogen-based fuels – in the transport sector to 5% by 2030, up from 2.6% in the Fit for 55 package.

Around 7.8 million mt/year of hydrogen could be needed to meet the industry target, with over 11 million mt/year of hydrogen going to the transport sector, according to S&P Global data.

Europe currently produces around 7 million mt/year of hydrogen, used largely in refining and fertilizer production. The vast majority of the hydrogen is derived from fossil fuels via steam methane reforming, representing natural gas consumption of some 29.7 Bcm/year. Around 11.9 Bcm of this gas would come from Russian gas, based on a 40% share of Russian imports in the European gas mix.

Calculated grid-powered hydrogen production costs in Europe have risen sharply since late 2021, driven by soaring gas and power prices. S&P Global assessed the cost of producing renewable hydrogen via alkaline electrolysis in Europe at Eur10.81/kg ($11.33/kg) May 18 (Netherlands, including capex), based on month-ahead power prices, up from Eur4.18/kg a year ago.

However, many renewable hydrogen project developers in Europe are targeting production costs of below $1.50/kg before 2030, underpinned by long-term renewable power purchase agreements, or dedicated renewable generation.

"An increased target for renewable hydrogen in industry by 2030 is achievable and the right way to tackle hard-to-abate industrial emissions," industry group Hydrogen Europe said in a statement May 18.

It welcomed the increased target for transport, but called on the EU to go further and introduce additional sub-targets for the marine and aviation sectors, plus specific support for the road transport infrastructure rollout.

Hydrogen production targets

The EC reiterated its target of 10 million mt/year of domestic renewable hydrogen production by 2030, with another 10 million mt/year of imports.

S&P Global said in an analyst report on the EU's Fit for 55 package that 10 million mt/year of green hydrogen production would require 477 TWh of renewable power generation, almost the entire EU solar and wind generation in 2021, with solar and wind additions set to rapidly increase.

The EC also plans the joint procurement of hydrogen imports, and outlined partnerships for importing hydrogen from the Mediterranean region, Ukraine and the Middle East.

A framework for imports could draw on Germany's H2Global hydrogen import initiative, which plans to receive a first cargo of renewable ammonia – a hydrogen carrier – by 2024.

Carbon contracts for differences would be established to support the uptake of green hydrogen, it said.

The EC also said it aimed to complete its assessment of the first Important Projects of Common European Interest (IPCEIs) by the summer. Gaining IPCEI status paves the way for state funding for projects.

Delegated acts

However, the industry awaits two critical draft pieces of legislation from the EC outlining renewable hydrogen definitions and rules on accounting for renewable power use.

These would provide definitions of renewable hydrogen, paving the way for a market to develop, and rules on the "additionality" of the renewable generation used to power electrolyzers.

Such definitions are seen as essential to unlocking private investment in hydrogen projects, enabling developers to take final investment decisions.

"The industry needs simple and applicable rules to produce renewable hydrogen," Hydrogen Europe CEO Jorgo Chatzimarkakis said in a statement May 18. "Therefore, the publication of the two Delegated Acts defining renewable hydrogen remains instrumental for the industry to accelerate."

Hydrogen Europe said in a position paper published earlier in May that the EU must provide a clear and pragmatic approach to accounting the renewable electricity for hydrogen production when connected to the power grid.

The industry has been concerned that proposed strict temporal correlation rules linking the construction of new renewables with green hydrogen production capacity could hamper the rollout of electrolyzers in Europe.

The trade association proposed that the "temporal correlation should be kept to a monthly resolution to foster the optimization of electrolyzers," which would increase grid utilization and reduce administrative costs, reducing hydrogen production costs.