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EU’s renewable hydrogen agenda: Ambition vs reality

Climate & energy / EPC FLASH ANALYSIS
Marialena Stagianni

Date: 24/11/2023
As Hydrogen Week 2023 unfolds in Brussels, it appears an opportune time for a critical review of the EU’s agenda on renewable hydrogen. While there is no lack of ambitious goals and targets, it begs a more fundamental question: how feasible and relevant are they for accomplishing the EU’s climate objectives? There are several ways of producing hydrogen using fossil fuels or renewable energy sources (RES), each with diverse environmental effects. The cleanest method is hydrogen produced by RES through electrolysis technology.

The EU’s commitment to renewable hydrogen reflects its broader ambitions, aligning with the European Green Deal targets of at least a 55% reduction in greenhouse gas (GHG) emissions by 2030 and reaching climate neutrality by 2050. In response to the energy crisis triggered by the war in Ukraine, REPowerEU set ambitious goals of 10 million tons of domestic renewable hydrogen production and 10 million tons of imports by 2030.

The revised Renewable Energy Directive, which went into effect on 20 November, sets further ambitious targets for renewable hydrogen use in transport and industry sectors for 2030 and 2050. The Delegated Acts on renewable hydrogen rules provide legislative certainty, while the competitive bidding funding tool, launched on 23 November and financed by the Innovation Fund, aims to assist renewable hydrogen projects.

While efforts to create an enabling framework for renewable hydrogen deserve recognition, there are notable caveats to bear. Renewable hydrogen comes with complex difficulties, raising serious doubts about its role in the decarbonisation of the EU’s energy system decarbonisation. Its production and usage pose safety concerns, such as hydrogen leakages, and the cost of electrolysers remains significantly high. As fossil fuels or direct electrification costs remain relatively low, renewable hydrogen projects do not constitute an attractive business case yet. Thus, EU and national funding are necessary for the development of the renewable hydrogen market, especially in the face of rising interest rates.

Furthermore, renewable hydrogen production requires substantial renewable energy inputs, and its transportation and storage face serious challenges. Restricted use of renewable hydrogen seems a more pragmatic path, introducing it to sectors where alternative decarbonisation methods are unfeasible and focusing on reducing GHG emissions across the whole system. Shipping and potentially the aviation sector later emerge as prime candidates for hydrogen adoption, while in other sectors, such as heating, more environmentally friendly alternatives like heat pumps may prove more appropriate.

The significance of renewable hydrogen in the decarbonisation of the EU’s energy sector should be based on an examination of the intricacies surrounding hydrogen production, safety concerns, and the economic landscape. The cost of electrolysers and the energy-intensive nature of renewable hydrogen production are crucial when considering the role of hydrogen in achieving the EU’s climate ambitions.

Marialena Stagianni is a Programme Assistant in the Sustainable Prosperity for Europe (SPfE) programme at the European Policy Centre.

This Flash Analysis is part of the EPC's Climate & Energy Platform

The support the European Policy Centre receives for its ongoing operations, or specifically for its publications, does not constitute an endorsement of their contents, which reflect the views of the authors only. Supporters and partners cannot be held responsible for any use that may be made of the information contained therein.

Photo credits:
John MacDougall / AFP

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