On April 8th, the European Union’s sixth list of projects of common or mutual interest (PCI/PMI) was signed into law. For the first time ever, it included 65 hydrogen projects such as pipelines, electrolysers, liquid hydrogen terminals, and pieces of storage infrastructure, which are supposed to be now eligible for faster permits and extra grants.
This move appears to be a continuation of efforts outlined in the REPowerEU plan, created by the European Commission in response to Russia's 2022 invasion of Ukraine. The plan aims to decrease the EU’s reliance on Russian hydrocarbons through greater energy efficiency, diversification of energy supplies, and, most importantly, the build-up of Europe’s portfolio of low-carbon energy sources.
In this context, hydrogen (H2) – an element that does not emit carbon when burnt and that can be produced without carbon emissions via water electrolysis if powered by renewables – is viewed as an integral and core element of Europe’s decarbonisation strategy.
Therefore, according to the REPowerEU plan, the EU has targeted both domestic production and imports of renewable hydrogen, with the goals of 10 million tonnes of each by 2030. That is why the sixth list of PCI/PMI projects is aimed to facilitate this process.
Although all these efforts seem logical, they are unlikely to be sufficient and timely enough to let the European Union meet its hydrogen objectives by the end of the decade. This is because the European ambitions for green hydrogen are unrealistic at each core element of the hydrogen value chain.
Specifically, on the supply side, the annual production of 10 million tonnes of green hydrogen will require around 100 GW of electrolysers, almost 200 GW of renewable power specifically dedicated to these purposes, and at least USD 300 billion in investment.
Although it may still seem doable in terms of renewable power capacity, given that the EU installed 18.3 GW of wind power and 56 GW of solar power last year, following the 'additionality' principle, all the electricity used for green hydrogen production should come from renewables whose power is not used directly.
Even if we assume that Europe further accelerates the installation of wind farms and solar panels and the money required to make it happen is not a problem, these numbers look particularly extreme with respect to electrolysers, as the total installed electrolyser capacity in the world in 2020 was only 0.3 GW and many expect that Europe's installed capacity for green hydrogen by 2030 will barely reach 1 GW.
From the perspective of storage and transportation, significant challenges also appear, as the EU is not meeting its declared ambitions. In particular, while the shipping sector still seems to be debating the best way to transport hydrogen over long transoceanic distances, the port infrastructure of Europe is not yet ready for large-scale imports of hydrogen and its derivatives.
In addition, even if Europe now produces and imports the declared volumes of green H2, it will not be able to store it before final use, as the only operational large-scale underground hydrogen storage facility on the continent started operations last year. Similarly, despite impressive plans to develop a pan-European network of hydrogen pipelines spanning over 11,600 km by 2030, the EU seems so far to be falling short of that goal, as the total length of hydrogen pipelines in the entire world has only reached slightly over 5,200 km.
Most importantly, however, the EU has not yet been able to create a stable demand for green hydrogen. The so-called ‘hard-to-abate’ sectors such as steel, fertilisers, or oil refining, which have been expected to become the first large-scale off-takers of clean hydrogen because they cannot consider electrification as an option to decarbonise their activities, do not seem to have been provided with enough incentives to move away from cheap fossil fuels and switch to more expensive green H2.
For instance, earlier this year, the head of European operations at ArcelorMittal, one of the largest players in the steel market, had to acknowledge that they will not use expensive green hydrogen in the foreseeable future because, in the presence of abundant and cheap conventional steel from China, their company would then 'catapult [itself] completely out of the market'.
In these circumstances, it remains unclear who will consume all the green H2 generated within and imported to Europe, even if all the production, storage, and delivery issues have been solved. That is why the signing of the new PCI/PMI list this week looks more like a 'too little too late’ move in the face of the gigantic challenges that the European hydrogen sector needs to address by 2030.
