A study commissioned by Bill Gates' Breakthrough Energy sustainability coalition has suggested the EU Hydrogen Strategy ambition of deploying 40 GW of electrolyzer capacity by 2030 could be more than doubled.
Stockholm-based energy transition consultant Material Economics has estimated demand for 540 TWh of hydrogen could be unlocked in Europe by that date. The 40 GW of electrolyzer capacity envisioned by the EU would equate to around 160-200 TWh, according to the white paper published on Monday.
European industry group Solarpower Europe publicized the Material Economics paper on Monday to open the bloc's first EU Hydrogen Week and to launch the Renewable Hydrogen Coalition body of which it is a partner alongside Windeurope, with the organization backed by Breakthrough Energy.
The extent to which mainstream use of green hydrogen – generated using renewable electricity – could benefit the renewables sector is illustrated by an estimate in the Material Economics study which suggests the more ambitious hydrogen capacity target laid out would require 120 GW more solar and wind generation capacity by 2030. That figure is over and above the facilities needed to hit the EU target of sourcing 65% of the bloc's power from renewables by the end of the decade.
The white paper goes further, however, postulating that if conditions are right – green hydrogen costs fall from €4-5/kg to €1.70-2/kg; a Contracts for Difference-backed carbon price hits €50-60/ton; and companies continue to set tough climate targets – European hydrogen demand could hit 1.2-1.4 PWh. Powering that would require 280 GW more renewables capacity, just to hit the bottom of the estimate.
The premise of the publication is a simple one: the price impact of switching from fossil-fuel generated hydrogen to the green version should be considered as an impact on the individual unit price of resulting products, rather than the input cost at source. Material Economics suggests it is misleading to consider green hydrogen uneconomical because its €4-5/kg price is more than double the present cost of €1-2/kg for grey hydrogen, even factoring in the current €25/ton (€0.30/kg) carbon price. The study considers the example of steel content of around a ton in cars. Using green hydrogen to manufacture each ton of steel used, states the paper, would add only €100 to the price of a car, which typically retails for around €29,000 in Europe.
Material Economics points to multinationals which have announced ambitious climate targets as evidence of a willingness – and financial heft – to invest in rapidly embracing a hydrogen economy. It is notable, however, that the paper does not include any direct statements of a willingness to pass the costs on to consumers by brands including Unilever, Nestle, Daimler, Skanska, Volkswagen, Maersk, H&M and DHL.
The European bill for switching to a 1.2 PWh hydrogen market would come in at €545-690 billion, according to the paper, reckoned as €90-105 billion for electrolyzers; a €250-300 billion bonanza for renewable energy generation capacity; and €30-60 billion for transport infrastructure; with those end-user big brands having to contribute €175-225 billion.
Europe has some factors in its favor, states the paper, with 300 TWh of hydrogen already in use in the bloc – albeit virtually all fossil-fuel-generated; 50-60% of hydrogen start-up companies are based in the market; and the bloc boasts 25-30% of the world's electrolyzer capacity. With 1.3 megatons (Mt), Europe also has the world's second largest volume of green hydrogen production announcements, behind only Australia, which has 1.5 Mt worth. On the other hand, Material Economics adds, Chinese electrolyzers can be up to 80% cheaper.
Carbon content rule
To feed green European fertilizers, steel, fuel-cell trucking, shipping and refineries and petrochemicals, the EU will have to supply operating expense support so businesses can purchase the renewable power they need to keep hydrogen production running and throw low-cost finance at the opportunity. A carbon content requirement on buildings and cars – with an associated carbon border tax – would also help, according to the report's authors.
With planning and red tape around renewables plants cited as the biggest obstacle to Europe's hydrogen transition, the white paper cited the need to achieve the two to three-year planning process for clean energy facilities envisioned by the EU Renewable Energy Directive set two years ago. That is a sentiment which will be welcomed by Europe's solar and wind industries, with today's projects taking an average of around five years to take shape.
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