Europe likely to miss its 2030 renewable hydrogen targets, ACER says

Hydrogen projects face risks from uncertainties of future hydrogen demand and high costs, and the EU is likely to miss the 2030 strategic goal of 20 Mt renewable hydrogen consumption, according to the hydrogen monitoring report from the European Union Agency for the Cooperation of Energy Regulators (ACER).

The current consumption at the European level is 7.2 Mt (99.7% of it is produced from fossil fuels), ACER said, adding that EU renewable energy and decarbonization targets can increase demand for renewable and low-carbon hydrogen by 2030, but so far uptake has been slow.

As disclosed, there is also limited electrolyzer capacity. Reportedly, the total installed capacity of electrolyzers in Europe in 2023 was 216 MW, and a further 70 GW planned for 2030 was announced but few are advanced. As per ACER, the overall planned capacity is less than the 100+ GW needed to reach EU’s 10 Mt renewable hydrogen production target by 2030.

High costs prevent renewable hydrogen uptake as well, ACER noted, reporting that the cost of renewable hydrogen is currently three to four times higher than hydrogen produced from natural gas, discouraging its early offtake.

As for the infrastructure, the report highlighted that it is planned but it faces uncertainties in being realized: “42,000 km of hydrogen pipelines, numerous storage projects and terminals are planned for the next decade, but only 1% has reached final investment decision, as future hydrogen demand uncertainties pose significant challenges to project promoters. Integrated planning by network operators is needed to ensure grid development at sufficient pace and to optimally locate electrolysers.”

In accordance with this, ACER recommended to:

• transpose the EU (2024) hydrogen and decarbonized gas laws into national legislation and implement them,
• speed up electrolyzer deployment and decarbonization of the electricity sector to increase renewable hydrogen’s cost competitiveness,
• improve forecasting and accelerate integrated planning to identify realistic hydrogen infrastructure needs, avoiding overinvestments and reducing costs related to under-recovery risks,
• when future demand is highly uncertain, consider incremental infrastructure development based on market needs,
• consider the repurposing of gas networks for hydrogen to minimize costs, while not overlooking the potential impacts on the broader gas sector,
• address demand risk in financing hydrogen networks, and
• provide market certainty over the role of non-renewable, low-carbon hydrogen.

In other news, Spain, Lithuania and Austria announced participation in the ‘Auctions-as-a-Service’ scheme as part of the second European Hydrogen Bank auction, which will be launched on December 3, 2024. In addition to the €1.2 billion in EU funding from the Innovation Fund, the three countries will deploy over €700 million in national funds to support renewable hydrogen production projects located in their countries. The total funding mobilized by the auction will therefore be around €2 billion.

Maroš Šefčovič, Executive Vice-President for European Green Deal, Interinstitutional Relations and Foresight, commented: “Renewable hydrogen will be crucial for the decarbonisation of our economy, especially in hard to abate industry sectors. European companies need our support to keep up their competitive edge. I am pleased to see that Spain, Lithuania and Austria have decided to contribute to our European efforts to create a hydrogen market with new financial contributions. I can only invite others to follow this good example.”

As part of the pilot hydrogen auction, the European Commission selected 85 net-zero projects to receive €4.8 billion in grants from the Innovation Fund. Among the winners are projects of different scales, covering a wide range of sectors from the following categories: energy-intensive industries, renewable energy, energy storage, industrial carbon management, net-zero mobility (including maritime and aviation) and buildings.