Fight brews in Europe over how to supply renewable hydrogen

Chief Europe Correspondent

Tucked between two fjords, the Norwegian peninsula of Herøya recently became home to the world’s first fully automated facility that builds electrolyzers, the equipment needed to create a resource critical to the clean energy transition: renewable hydrogen.

It’s a sign this nascent—and still expensive—cleantech sector is starting to pick up, but industry officials worry it won’t happen fast enough to catch up with demand. They are pointing fingers at Brussels, the European Union capital, which has yet to clarify what will count as renewable-energy hydrogen in meeting climate targets.

Hydrogen produced from renewable electricity via a process called electrolysis (often called green hydrogen) can help decarbonize some of the trickiest sectors of the economy, such as transport and the carbon-intensive steel industry.

Pressure is mounting to scale it up quickly since Moscow’s invasion of Ukraine laid bare Europe’s dependency on Russian natural gas. The European Commission, the EU’s executive arm, is set to unveil later this month its long-delayed rules defining how renewable hydrogen is produced.

“We have a backlog [of orders] and the project developers are not taking the investment risks without knowing the rules of the game,” said Constantine Levoyannis, head of EU affairs at Norwegian hydrogen company Nel ASA, which owns the Herøya plant.

The crux of the problem is how to tackle what experts refer to as “additionality”—making sure the hydrogen will come from new renewable energy installations and not divert existing clean power from other decarbonization efforts.

Cipher reported last year on why abundant clean electricity is needed to decarbonize economies around the world, and we recently analysed the challenges renewable permitting delays are creating for bringing green power online.

The legislation, first promised a year ago, has been the source of intense lobbying campaigns, pitting hydrogen developers against environmentalists in influencing the details of a technical file set to decide the industry’s future.

Hydrogen producers’ main complaint is that it takes too long to bring a new wind or solar plant online and connect it to an electrolyzer, so producers should be given flexibility for a few years to source their green electricity from existing assets to allow investments to start flowing.

How much flexibility, how long that transition period should be and how to prove the origin of the electricity are some of the most divisive details of the upcoming rules.

“We have this unique chance of creating a new European industrial champion; the rest of the world will not wait for us to sort out the technical details of a delegated act,” said François Paquet, impact director of the Renewable Hydrogen Coalition, referring to the upcoming legislation. “We need to make sure the perfect is not the enemy of the good.”

The coalition, which includes utilities and solar and wind technology providers, argues the EU needs to massively ramp up its renewable electricity capacity, backing rules on additionality. But it’s also calling for a transition phase that would allow for a gradual phase in of stricter requirements that prove the hydrogen stems from new renewable energy installations.

A recent draft seen by Cipher indicates producers would be granted a transition period of about four years, and flexibility exists over how to set up contracts for sourcing renewable electricity through power purchase agreements, which govern the sale and purchase of power for projects.

Paquet said 69 projects are lined up in the EU that could produce one million tons of green hydrogen by the end of 2023, but they are on hold awaiting legal clarity.

The EU needs to produce 10 million tons of green hydrogen domestically by 2030 (plus 10 million imported tons) to reduce its dependency on Russian gas, according to Commission estimates.

The Commission will host a meeting on Thursday of CEOs of European electrolyzer manufacturers to discuss how to scale up the sector.

Hydrogen Europe, a Brussels-based lobbying group representing companies across a range of industries, including Airbus and Toyota, has been more critical of the additionality principle. It argues this puts too much a burden of proof on hydrogen producers. Nel ASA is part of both the Renewable Hydrogen Coalition and Hydrogen Europe.

“We are not against additionality, we are not for it,” said Felicia Mester, director of public affairs at Hydrogen Europe. “We think we simply need more renewable electricity, and if we buy it with [power purchase agreements] and we prove it’s renewable electricity, then what is there to talk about?”

Marta Lovisolo, policy adviser at Bellona Europe, an environmental NGO, disagrees. She worries that the lack of clear rules on additional capacity from the start will create loopholes that will lead to more fossil-fuel-generated electricity.

Without matching new electricity demand with new supply “you are stealing the renewables that used to be there to decarbonize the whole economy. You are displacing that, and we are left with fossil electricity,” she said.

Lovisolo says renewable hydrogen will be important in cutting the bloc’s emissions: “That’s why I’m so keen to getting the rules right.”

In 2020, renewable energy sources made up 37.5% of gross electricity consumption in the EU, with disparities across the bloc. Lovisolo said the electricity needed to meet green hydrogen production estimates by the end of this decade “is like plugging another France into the European grid.”

“Everyone says they want to decarbonize, and nobody will tell you they are against ‘additionality,’” Lovisolo said. “But when you get down to what that means, we differ a lot.”

Editor’s note: The Renewable Hydrogen Coalition is supported by Breakthrough Energy, which supports Cipher.