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EU 2030 green hydrogen target feasible with creativity, aligned subsidies: FT Summit

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EU 2030 green hydrogen target feasible with creativity, aligned subsidies: FT Summit

Highlights

EU can set world trajectory for energy security

Renewable energy production cost much cheaper outside EU

Energy transition set to be 'hugely inflationary'

  • Author
  • Diana Kinch
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  • Manish Parashar
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The EU's ambitious target of having 20 million mt/year of available green hydrogen by 2030 may be achieved if companies accelerate production projects, become more creative and subsidies to the sector are better aligned, speakers said at the Financial Times Hydrogen Summit in London June 16.

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"The 2030 target is just possible but we need companies to move really, really fast ... we need dozens of big projects," said Marco Alvera, CEO of Tree Energy Solutions and former CEO of Italy-based energy company Snam. "The sun is there, the steel is available, the engineering talent is available: we need to put the dots on the i's and get these projects into execution mode."

Some of the big renewable and electrolyzer projects now being planned will help Europe set the trajectory for the world to address energy supply security, price inflation and climate concerns, which have become really serious as a result of the Russia-Ukraine crisis, Alvera said.

The European Commission's REPowerEU program seeks to double the EU's 2030 domestic renewable hydrogen production target to 10 million mt/year, requiring in the region 80 GW of electrolysis, with an additional 10 million mt/year in imports. REPowerEU is designed to make the EU independent from Russian fossil fuels well before 2030, in response to Russia's Feb. 24 invasion of Ukraine.

The UK has followed suit, doubling its low-carbon hydrogen production target to 10 GW by 2030, with half of this from electrolysis.

"We have to set the target high for people to move," said Julien Rolland, head of power and renewables at global trader Trafigura. "We need a lot of entrepreneurial dynamic in this market."

Maximo Miccinilli, senior vice president and head of energy and climate at communications agency FleishmanHillard, said he expected the introduction of policies such as the Carbon Border Adjustment Mechanism to help encourage the emergence of green hydrogen production in what is now not only an environmental, but also a "diplomatic and very political mission."

"It's a huge cocktail of policies and funding and we've got to be creative," Miccinilli said.

Subsidies to the sector are also seen as crucial. Jeroen Kies, head of project finance, Benelux and Nordics, at Sumitomo Mitsui Banking Corp., said alignment of EU subsidies and national subsidies is important on selected projects, as otherwise "over subsidization" of certain projects or areas could present a problem.

"Demand needs to be price-driven," he added.

Project location crucial

Location of projects is also key, Kies said, noting that the cost of renewable energy production is much lower outside the EU.

Alvera said it makes sense to produce more renewable energy in regions and countries that have "sun and wind at the same time," such as West Africa and Chile, which would also be good locations for green hydrogen electrolyzers.

"The sweet spot is a combination of solar and wind and there are five or six sweet spots in the world," he said.

In the same way, it makes sense to produce blue hydrogen where gas is really cheap -- for instance Qatar, Iran, Russia and the US, Alvera said.

The Russia-Ukraine war was seen by a few speakers as having complicated the drive toward energy transition, with some economies moving back to coal-based energy generation to ensure energy availability amid soaring prices.

The energy transition is now set to be hugely inflationary as it may cost as much as $150 trillion to achieve net-zero by 2050, Alvera told delegates. Close to $1.8 trillion is being spent annually on energy efficiency, both in the fossil fuels and renewables area, but this needs to be stepped up to reach $4 trillion or 5 trillion in the next 20 years if net-zero targets are to be met, he added.