The European Commission wants the EU to install at least 6 GW of electrolyzer capacity able to produce up to 1 million mt of renewable hydrogen by 2024, it said in an EU hydrogen strategy published on July 8.
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The EC sees renewable hydrogen as making a key contribution to the EU's efforts to become climate neutral by 2050, which means decarbonizing its energy sector and phasing out unabated fossil fuels.
Europe has less than 1 GW/year of electrolyzer capacity installed, and around another 1.5-2.3 GW of planned projects.
That implies the EU would need to at least triple its planned capacity over the next four years to reach the 6 GW goal.
The strategy includes a longer-term goal to have at least 40 GW of electrolyzers installed in the EU by 2030, producing up to 10 million mt of renewable hydrogen.
That could need up to Eur42 billion ($47 billion) of investment in electrolyzers by 2030, the EC said.
It wants EU industry to build bigger electrolyzers -- up to 100 MW -- by 2024, and install them next to existing demand centers in larger refineries, steel plants and chemical complexes, ideally powered by local renewable electricity.
For context, one of the largest industrial electrolyzer projects in the EU today is the 10 MW Refhyne project at Shell's Rheinland refinery in Germany.
UK hydrogen company ITM has installed and started testing five 2 MW PEM electrolyzers on the site, but the planned 2020 start may be delayed by coronavirus restrictions, it said in June.
More solar, wind, CCS
The EU may need to invest up to Eur340 billion to 2030 adding and connecting up to 120 GW of solar and wind capacity to the electrolyzers to produce the renewable hydrogen, the EC said.
It also sees around Eur11 billion needed to 2030 to retrofit half the EU's existing, fossil-fueled hydrogen production plants with carbon capture and storage technology.
A further Eur65 billion could be needed for hydrogen transport, distribution and storage, and hydrogen refueling stations for vehicles.
The EC said that adapting end-use sectors to use hydrogen would also need investments. It estimated it costs up to Eur200 million to convert a typical EU steel plant at the end of its life to hydrogen.
Rolling out an extra 400 small-scale hydrogen refueling stations, up from 100 today, for road transport could cost up to Eur1 billion.
Cost-competitive by 2030
From 2025-30, the EC sees renewable hydrogen becoming cost-competitive with other forms of hydrogen production, as demand expands to include steel and transport sectors.
Renewable hydrogen would start to play a role in balancing a renewables-based electricity system, by turning surplus power into hydrogen and providing flexibility.
In this phase the EU will start to need infrastructure to transport hydrogen, potentially across borders, and also to store it, the EC said.
The EU's existing natural gas grid could be partly repurposed for this.
The EC also sees potential international trade, particularly with neighbors in Eastern Europe and the southern Mediterranean.
Scaling up demand
The EC recommends replacing the nearly 10 million mt of existing high-carbon hydrogen the EU uses in refineries, ammonia and methanol production with lower carbon versions as the first step in building industrial demand.
The next step would be to partly replace fossil fuels used in steel production with hydrogen.
In transport, the EC sees hydrogen being adopted first in city buses or train lines, where refueling stations can be supplied by regional or local electrolyzers.
Hydrogen could also be gradually rolled out to other heavy-duty road vehicles, train lines that are difficult to electrify, shipping and aviation.
The EC said it would consider options to support renewable hydrogen demand, for example by setting quotas for certain end-use sectors, or minimum shares in the energy mix.
Support linked to carbon footprint
The EC said it would propose a common EU low-carbon threshold/standard for promoting hydrogen production plants based on their full life-cycle greenhouse gas emissions.
That threshold should be used to decide where to focus public funding and support to help kick-start lower-carbon hydrogen production.
The EC would also propose "a comprehensive terminology and European-wide criteria" for certifying renewable hydrogen, to enable targeted production support.
Possible support measures include carbon contracts for difference, where hydrogen project developers would be paid the difference between the EU carbon price and the actual cost of cutting emissions.
A senior EC source said low-carbon hydrogen based on natural gas with carbon capture and storage, or pyrolysis, would also be eligible for public funding during an unspecified transition phase.
This would be needed to cut emissions from existing high-carbon hydrogen use while renewable hydrogen capacity was ramped up, the source said.
New legislation in 2021
The strategy is not legally binding, but enables EU policy-makers to debate the suggestions.
The results of that debate will feed into the EC's proposals to update EU energy and climate legislation planned in June 2021.