Geopolitics lurk in EU’s bet on green hydrogen in energy transition

Chief Europe Correspondent

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<header><h1>Geopolitics lurk in EU’s bet on green hydrogen in energy transition</h1><a href="" rel="author"></a><span class="title"></span><time rel="pubdate" datetime="2022-03-30T00:00:00-04:00">Mar 30, 2022</time></header><p>The European Union is working hard to rid itself of Russian natural gas, and in the process the 27-member bloc is betting on a different gas as a clean alternative: green hydrogen.</p><p>Where it will come from is emerging as a top question—and concern.</p><div class="callout">In <a href="https://ciphernews.com/articles/the-real-test-of-the-eus-energy-freedom-goals-sticking-with-the-plan/" target="_blank" rel="noopener">prior editions</a>, Cipher tackled the geopolitics of transitioning away from natural gas. This week, we dive deep into the race for green hydrogen, which creates new geopolitical dynamics that are sure to change the global energy landscape.</div><p>Green hydrogen can help decarbonize some of the trickiest sectors of the economy, like the carbon-intensive steel and cement industries. But it’s currently too expensive to produce, takes time to scale up and wind and solar installations behind it need a lot of space to operate.</p><p>Those needs are compelling the EU to partner with other countries. The key challenge will be avoid trading Russian gas dependency for another type of dependency, EU lawmakers say.</p><p>The Russian war in Ukraine has shown <a href="https://ciphernews.com/articles/the-real-test-of-the-eus-energy-freedom-goals-sticking-with-the-plan/" target="_blank" rel="noopener">how important</a> it is for Europe to be strategic in its energy choices and boost its energy independence when meeting climate goals, Jerzy Buzek, a Polish member of the European Parliament (MEP) from the center-right European People’s Party group, told Cipher.</p><p>“We have to be very careful not to exchange our vulnerability in terms of external coal, gas or oil supplies with overdependence on hydrogen imports from third countries,” said Buzek, who is also the <a href="https://www.europarl.europa.eu/meps/en/28269/JERZY_BUZEK/home?utm_source=hs_email&amp;utm_medium=email&amp;_hsenc=p2ANqtz--vgkuIpmClZojMKOfKJAQhFeQ9SJaZq_Ul5NYMGog0SwfCFoFu_39DusnpYO6X_Cbq7Ldn" target="_blank" rel="noopener">lead negotiator</a> on one of two key legislative proposals meant to decarbonize the European gas market. “We must therefore rely on ourselves as much as possible and develop a regulatory and investment framework to boost the EU’s indigenous clean hydrogen production as soon as possible.”</p><p>Currently, most hydrogen is made with fossil fuels, which generate carbon dioxide as a byproduct. Hydrogen made from natural gas with captured CO2 is called blue hydrogen. The cleanest version is green hydrogen, made by using renewable energy-powered electricity to break apart water into hydrogen and oxygen, a process called electrolysis.</p><p>The EU has identified hydrogen as “essential” to support the EU’s ambition to reach carbon neutrality by 2050.</p><p>The bloc’s current climate goals envision the use of 5.6 million tons of green hydrogen by 2030, but the European Commission <a href="https://eur-lex.europa.eu/legal-content/EN/TXT/HTML/?uri=CELEX%3A52022DC0108&amp;from=EN%3Futm_source%3Dhs_email&amp;utm_source=hs_email&amp;utm_medium=email&amp;_hsenc=p2ANqtz--vgkuIpmClZojMKOfKJAQhFeQ9SJaZq_Ul5NYMGog0SwfCFoFu_39DusnpYO6X_Cbq7Ldn" target="_blank" rel="noopener">recently revised</a> these numbers considering the urgent need to shed Russian natural gas.</p><p>The new numbers show the potential to reach 20 million tons through increased domestic production and by <a href="https://www.irena.org/news/articles/2022/Mar/Green-Hydrogen-Needs-Industrial-Policy-Making-and-Certification?utm_source=hs_email&amp;utm_medium=email&amp;_hsenc=p2ANqtz--vgkuIpmClZojMKOfKJAQhFeQ9SJaZq_Ul5NYMGog0SwfCFoFu_39DusnpYO6X_Cbq7Ldn" target="_blank" rel="noopener">importing</a> 10 million additional tons by 2030. That&#8217;s compared to <a href="https://commission.europa.eu/news/focus-hydrogen-driving-green-revolution-2021-04-14_en?_hsenc=p2ANqtz--vgkuIpmClZojMKOfKJAQhFeQ9SJaZq_Ul5NYMGog0SwfCFoFu_39DusnpYO6X_Cbq7Ldn" target="_blank" rel="noopener">essentially</a> zero green hydrogen in the EU today.</p><p>Saudi Arabia, Oman, Qatar and the United Arab Emirates, which enjoy year-round sunshine, are <a href="https://www.bloomberg.com/news/articles/2022-03-17/saudi-arabia-to-start-building-green-hydrogen-plant-in-neom?utm_source=hs_email&amp;utm_medium=email&amp;_hsenc=p2ANqtz--vgkuIpmClZojMKOfKJAQhFeQ9SJaZq_Ul5NYMGog0SwfCFoFu_39DusnpYO6X_Cbq7Ldn" target="_blank" rel="noopener">preparing themselves</a> to be key green hydrogen producers. German Vice Chancellor Robert Habeck, who is also the economic and climate minister, visited the latter two earlier in March, <a href="https://www.bmwk.de/Redaktion/EN/Pressemitteilungen/2022/03/20220321-federal-minister-robert-habeck-expand-cooperation-on-hydrogen-with-united-arab-emirates.html?utm_source=hs_email&amp;utm_medium=email&amp;_hsenc=p2ANqtz--vgkuIpmClZojMKOfKJAQhFeQ9SJaZq_Ul5NYMGog0SwfCFoFu_39DusnpYO6X_Cbq7Ldn" target="_blank" rel="noopener">eyeing future partnerships</a>.</p><p>It would also be a “very wise” geopolitical idea to develop hydrogen partnerships with countries in North Africa, such as Morocco or Algeria, which the EU already has energy ties with, said Jens Geier, a German MEP from the center-left Socialists and Democrats group. He is also the Parliament’s <a href="https://www.europarl.europa.eu/meps/en/96833/JENS_GEIER/home?utm_source=hs_email&amp;utm_medium=email&amp;_hsenc=p2ANqtz--vgkuIpmClZojMKOfKJAQhFeQ9SJaZq_Ul5NYMGog0SwfCFoFu_39DusnpYO6X_Cbq7Ldn" target="_blank" rel="noopener">lead policymaker</a> on a legislative proposal to create a hydrogen market.</p><p>“I don’t believe Europe will ever become autonomous in terms of energy provision,” he told Cipher. “It will always be necessary to import some sort of energy, somehow, from somewhere.”</p><p>Foreshadowing this dilemma, EU energy ministers <a href="https://www.euractiv.com/section/energy-environment/news/eu-countries-clash-over-scale-of-future-hydrogen-imports/?utm_source=hs_email&amp;utm_medium=email&amp;_hsenc=p2ANqtz--vgkuIpmClZojMKOfKJAQhFeQ9SJaZq_Ul5NYMGog0SwfCFoFu_39DusnpYO6X_Cbq7Ldn" target="_blank" rel="noopener">clashed</a> last summer during a public debate over how to balance the need for imports with domestic hydrogen production.</p><p>Europe, the Middle East and Africa are projected to account for half the manufacturing capacity of electrolyzers—systems that enable the production of green hydrogen—in the coming years, based on investment plans analyzed in a recent report by the International Renewable Energy Agency.</p><p>“Hydrogen trade and investment flows will spawn new patterns of interdependence and bring shifts in bilateral relations,” states the report. (See today’s Data Dive for more.)</p><p>Geier said imports of green hydrogen are different from those of fossil fuels.</p><p>“We have ample wind and ample sun in different parts of the world, so we are not necessarily bound to countries which are exporting gas or oil,” he said. “That makes it possible to spread the sources from which we import very widely, and that means we can avoid a situation where we depend on only one source.”</p><p>On top of that, setting up global hydrogen markets is also a signal to fossil fuel exporters, said Matthias Deutsch, program lead on hydrogen at the Berlin-based think tank Agora Energiewende. “If they want to stay in business in the long run, they need to embrace the greening of molecules needed for reaching climate neutrality.”</p><p>These new trade dynamics could create unintended consequences for exporting countries’ own decarbonization goals.</p><p>“Hydrogen imports to the EU might mean exporting countries have to face a dilemma between selling renewable hydrogen to Europe at a high price or continue their decarbonization efforts,” said Raphael Hanoteaux, senior policy adviser at environmental think tank E3G.</p><p>African countries and the EU must get it right &#8220;otherwise, exporting renewable hydrogen will divert much needed resources for decarbonization and local electrification,&#8221; he added.</p><p>MEP Buzek said “risk of certain decarbonization illusion” exists if sending green hydrogen to the EU “will turn out to be more profitable [for the export country] than using the same renewable energy for domestic decarbonization needs.”</p><p>“After all,” he said, “we want to tackle global warming challenges globally, not in the EU only.”</p>
Geopolitics lurk in EU’s bet on green hydrogen in energy transition

by -
March 30, 2022
The European Union is working hard to rid itself of Russian natural gas, and in the process the 27-member bloc is betting on a different gas as a clean alternative: green hydrogen. Where it will come from is emerging as a top question—and concern. In prior editions, Cipher tackled the geopolitics of transitioning away from natural gas. This week, we dive deep into the race for green hydrogen, which creates new geopolitical dynamics that are sure to change the global energy landscape. Green hydrogen can help decarbonize some of the trickiest sectors of the economy, like the carbon-intensive steel and cement industries. But it’s currently too expensive to produce, takes time to scale up and wind and solar installations behind it need a lot of space to operate. Those needs are compelling the EU to partner with other countries. The key challenge will be avoid trading Russian gas dependency for another type of dependency, EU lawmakers say. The Russian war in Ukraine has shown how important it is for Europe to be strategic in its energy choices and boost its energy independence when meeting climate goals, Jerzy Buzek, a Polish member of the European Parliament (MEP) from the center-right European People’s Party group, told Cipher. “We have to be very careful not to exchange our vulnerability in terms of external coal, gas or oil supplies with overdependence on hydrogen imports from third countries,” said Buzek, who is also the lead negotiator on one of two key legislative proposals meant to decarbonize the European gas market. “We must therefore rely on ourselves as much as possible and develop a regulatory and investment framework to boost the EU’s indigenous clean hydrogen production as soon as possible.” Currently, most hydrogen is made with fossil fuels, which generate carbon dioxide as a byproduct. Hydrogen made from natural gas with captured CO2 is called blue hydrogen. The cleanest version is green hydrogen, made by using renewable energy-powered electricity to break apart water into hydrogen and oxygen, a process called electrolysis. The EU has identified hydrogen as “essential” to support the EU’s ambition to reach carbon neutrality by 2050. The bloc’s current climate goals envision the use of 5.6 million tons of green hydrogen by 2030, but the European Commission recently revised these numbers considering the urgent need to shed Russian natural gas. The new numbers show the potential to reach 20 million tons through increased domestic production and by importing 10 million additional tons by 2030. That’s compared to essentially zero green hydrogen in the EU today. Saudi Arabia, Oman, Qatar and the United Arab Emirates, which enjoy year-round sunshine, are preparing themselves to be key green hydrogen producers. German Vice Chancellor Robert Habeck, who is also the economic and climate minister, visited the latter two earlier in March, eyeing future partnerships. It would also be a “very wise” geopolitical idea to develop hydrogen partnerships with countries in North Africa, such as Morocco or Algeria, which the EU already has energy ties with, said Jens Geier, a German MEP from the center-left Socialists and Democrats group. He is also the Parliament’s lead policymaker on a legislative proposal to create a hydrogen market. “I don’t believe Europe will ever become autonomous in terms of energy provision,” he told Cipher. “It will always be necessary to import some sort of energy, somehow, from somewhere.” Foreshadowing this dilemma, EU energy ministers clashed last summer during a public debate over how to balance the need for imports with domestic hydrogen production. Europe, the Middle East and Africa are projected to account for half the manufacturing capacity of electrolyzers—systems that enable the production of green hydrogen—in the coming years, based on investment plans analyzed in a recent report by the International Renewable Energy Agency. “Hydrogen trade and investment flows will spawn new patterns of interdependence and bring shifts in bilateral relations,” states the report. (See today’s Data Dive for more.) Geier said imports of green hydrogen are different from those of fossil fuels. “We have ample wind and ample sun in different parts of the world, so we are not necessarily bound to countries which are exporting gas or oil,” he said. “That makes it possible to spread the sources from which we import very widely, and that means we can avoid a situation where we depend on only one source.” On top of that, setting up global hydrogen markets is also a signal to fossil fuel exporters, said Matthias Deutsch, program lead on hydrogen at the Berlin-based think tank Agora Energiewende. “If they want to stay in business in the long run, they need to embrace the greening of molecules needed for reaching climate neutrality.” These new trade dynamics could create unintended consequences for exporting countries’ own decarbonization goals. “Hydrogen imports to the EU might mean exporting countries have to face a dilemma between selling renewable hydrogen to Europe at a high price or continue their decarbonization efforts,” said Raphael Hanoteaux, senior policy adviser at environmental think tank E3G. African countries and the EU must get it right “otherwise, exporting renewable hydrogen will divert much needed resources for decarbonization and local electrification,” he added. MEP Buzek said “risk of certain decarbonization illusion” exists if sending green hydrogen to the EU “will turn out to be more profitable [for the export country] than using the same renewable energy for domestic decarbonization needs.” “After all,” he said, “we want to tackle global warming challenges globally, not in the EU only.”