Content

The European Hydrogen Market: Where Are We and Where Are We Going?.

What is green hydrogen and why is it crucial?.

European Union Objectives: Ambition vs. Ambition Reality.

Challenges for the development of the hydrogen market.

Reality: challenges and opportunities.

Opportunities and solutions to boost green hydrogen.

Key recommendations of the report.

Conclusion: Green hydrogen as a driver of change.

The European Hydrogen Market: Where Are We and Where Are We Going?

Hydrogen is gaining prominence as a fundamental pillar for global decarbonisation. In Europe, targets for renewable hydrogen are ambitious, but ACER’s “Hydrogen MMR 2024” report reveals a more complex reality: discrepancies between targets, high costs and nascent infrastructure. This analysis addresses the challenges, opportunities and advances needed for hydrogen, especially green hydrogen, to drive the energy transition on the continent.

What is green hydrogen and why is it crucial?

Green hydrogen is produced by electrolysis of water, using electricity from renewable sources. This differentiates it from gray hydrogen (derived from fossil fuels) and blue hydrogen (which includes carbon capture).

• Key advantages:
  • It is 100% carbon-free, contributing directly to the EU’s climate goals.
  • It allows renewable energy to be stored, acting as a buffer for the intermittency of sources such as solar or wind.
  • Decarbonizes hard-to-electrify sectors such as heavy industry and long-distance transportation.

However, according to the report, its adoption faces significant barriers, from high production costs to regulatory and infrastructure challenges.

European Union Objectives: Ambition vs. Ambition Reality

The European Union has set ambitious targets for the development of a renewable hydrogen market, with the aim of reducing greenhouse gas emissions and ensuring energy security. The REPowerEU plan, driven by the energy crisis, has further elevated these ambitions. However, the question is: Are we on the right track to achieve these goals?

Europe has put hydrogen at the heart of its energy strategy. Its goals include:

1. Electrolysers: 6 GW installed by 2024 and 40 GW by 2030.
2. Production: 10 million tonnes (Mt) of renewable hydrogen by 2030.
3. Consumption: Increase to 20 Mt in 2030, according to the REPowerEU plan, in response to the energy crisis resulting from the Russian invasion of Ukraine.

But the reality is very far from these aspirations. Currently, the installed electrolyzer capacity is only 216 MW, just 3.6% of the target for 2024. In addition, the hydrogen produced is still heavily dependent on fossil fuels.

Challenges for the development of the hydrogen market

The report identifies several challenges that limit the growth of green hydrogen:

1. Complexity of the regulatory framework

The European regulatory landscape is complex and varies between countries, making it difficult for the market to develop. According to ACER, greater clarity is needed in policies and financing schemes to encourage investments.

2. Insufficient infrastructure

The development of hydrogen transport and storage networks is still in its early stages. Current planning is based on projections of future demand, which increases uncertainty and financial risks.

3. High production costs

Producing renewable hydrogen is significantly more expensive than grey hydrogen. Although costs are expected to decrease with technological advances and economies of scale, the process is slow.

4. Lack of energy integration

Interoperability between hydrogen, electricity and gas infrastructures is limited. This reduces synergies and hinders the efficient deployment of green hydrogen projects.

Reality: challenges and opportunities

The ACER report reveals a number of challenges that hinder the development of the hydrogen market in Europe:

• Insufficient infrastructure: The lack of adequate infrastructure for the production, transportation, and storage of hydrogen is a significant barrier.
• High costs: Renewable hydrogen is still more expensive than hydrogen produced from fossil fuels, making it difficult to compete.
• Complex regulatory framework: The diversity of regulations at national level makes it difficult to create a European single market for hydrogen.
• Uncertainty about demand: The lack of clarity about future hydrogen demand makes it difficult to plan long-term investments.

Despite these challenges, the report also highlights a number of opportunities:

• Industrial demand growth: Sectors such as heavy industry and transportation are showing growing interest in hydrogen as an alternative to fossil fuels.
• Technological innovation: The development of new technologies is reducing the production costs of renewable hydrogen.

Potential to create jobs and economic growth: The development of the hydrogen market can generate new jobs and stimulate the economy.

Opportunities and solutions to boost green hydrogen

Despite these challenges, there are key strategies to unlock the potential of green hydrogen in Europe:

1. Investments in technology and scale

The development of more efficient and economical electrolyzers is crucial. In addition, increasing the scale of production will reduce costs, making renewable hydrogen more competitive.

2. Innovative financing

The European Hydrogen Bank has already started auctions to incentivise renewable production. These mechanisms, together with subsidies and private funding, can accelerate the development of the sector.

3. Integrated network planning

The integration of electrical, hydrogen and gas systems will allow a more efficient use of resources, optimizing the location of electrolyzers in regions with high renewable production.

4. Industrial decarbonization

Green hydrogen plays a key role in heavy industry, especially in sectors such as steel and chemical production. Investing in these areas ensures a constant and viable demand.

The role of hydrogen in the energy transition

Green hydrogen is not only an energy carrier, but also a tool for decarbonizing sectors that would otherwise be difficult to electrify. Its applications include:

• Heavy transport: Trucks, buses and long-distance boats.
• Energy storage: It allows renewable energy to be stored in the long term, stabilizing electricity grids.
• Production of ammonia and fertilizers: Replacing processes based on gray hydrogen.

According to ACER, fostering these applications can ensure a stable and accelerated market for green hydrogen.

Key recommendations of the report

To achieve the EU’s ambitious targets, the “Hydrogen MMR 2024” proposes:

1. Simplify regulation: Reduce complexity and align national policies with the European vision.
2. Accelerate infrastructure: Prioritize transportation and storage networks, based on more realistic demand projections.
3. Incentivize demand: Establish mandatory quotas for the use of renewable hydrogen in industrial and transport sectors.
4. Fostering international cooperation: Developing cross-border projects and sharing best practices.

Conclusion: Green hydrogen as a driver of change

Green hydrogen is more than a technical solution; it is a catalyst for Europe’s energy transition. However, reaching its potential requires a comprehensive approach that combines technological advances, clear regulations, and cooperation between key players.

If Europe manages to overcome the current challenges, green hydrogen could transform industrial sectors, reduce energy dependence and mark a before and after in the fight against climate change. With vision and action, the future of hydrogen in Europe is promising.

The future of hydrogen in Europe is promising, but it requires decisive action by governments, businesses and society as a whole. The ACER report provides us with a clear roadmap to move towards a sustainable and competitive hydrogen economy. However, it is critical to address existing challenges and seize the opportunities that arise.