RED revisions risk derailing renewable hydrogen drive in Europe: industry associations

The renewable hydrogen industry in Europe is warning the EU that its proposed revisions to the Renewable Energy Directive risk undermining the nascent market for the energy carrier.

The draft revision to the RED requires that renewable power generation capacity used to produce green hydrogen must be new capacity in addition to that already in operation on the grid.

Green hydrogen producers agreed that massive additional renewable power is needed, but cautioned that stringent rules around colocation of wind or solar generation with electrolyzers, and a requirement to start up new renewable generation within a short time of an electrolyzer coming online, could hinder the early development of renewable hydrogen.

If the proposed rules stay as they are, this would hamper the build-out of green hydrogen, RWE Generation CEO Roger Miesen said at the Reuters Hydrogen Economy Europe 2021 conference Dec. 2.

"It would be an absolute failure, and would block the build-out of green hydrogen," he said.

The CEO of industry group Hydrogen Europe, Jorgo Chatzimarkakis, said the delegated act, that will rule on the classification of renewable hydrogen projects, as it stood discriminated against hydrogen, as it did not contain similar rules for electric vehicle charging and other energy transition applications.

For example, there was no requirement for electric vehicle chargers to certify the green nature of the power they were using, he said.

The delegated act risks destroying the support given for hydrogen projects in the EU's "Fit for 55" decarbonization package, Chatzimarkakis said.

"This thing here is a straitjacket for hydrogen," he said. "If you do it, do it for everybody. But don't discriminate against one technology."

Renewable Hydrogen Coalition Impact Director Francois Paquet said the EU should adopt a simple support mechanism design, such as the tax incentive being introduced by the US, or use of power purchase agreements.

The Biden Administration's Build Back Better Act seeks to award hydrogen production tax credits according to carbon intensity of production. The credit would offer $3/kg of hydrogen produced with 95% fewer emissions that that produced by steam methane reforming, and between 60 cents/kg and $1.02/kg for hydrogen produced with 40%-95% lower emissions.

IPCEI rules

The EU's Important Projects of Common European Interest was also a good instrument to support the development of hydrogen projects across the continent, but its implementation was very slow, Miesen said.

There were numerous projects that could commit funding today, he noted, but said they lacked the support of a funding decision under the IPCEI program, putting at risk the EU's target of deploying 6 GW of renewable hydrogen production capacity by 2024.

Chatzimarkakis agreed that the 6-GW 2024 target was unlikely to be met, but said the EU was likely to overshoot by far its target of 40 GW of installed electrolyzer capacity by 2030.

And Chatzimarkakis said the EU had hinted it would be relaxing the rules around state aid for large-scale green energy projects, making it easier for such projects to secure funding and get approval.

S&P Global Platts assessed the cost of producing renewable hydrogen via alkaline electrolysis in Europe at Eur13.67/kg ($15.48/kg) Dec. 1 (Netherlands, including capex), based on month-ahead power prices. PEM electrolysis production was assessed at Eur16.26/kg, while blue hydrogen production by steam methane reforming (including carbon, CCS and capex) was Eur6.28/kg.