The EU is celebrating European Hydrogen Week this week, with the launch of its “Clean Hydrogen Alliance” set to work through some of the detail. Much has already been said about hydrogen and hydrogen infrastructure to 2050. So what is it that needs to happen to make the difference between hype and actual progress?
A new study by the technical consultancy Artley’s shows there is a lot that needs to be turned upside down now if we are to stand a chance of getting hydrogen to meaningfully contribute to EU climate targets in the near and long term. Three aspects are missing in the discussion.
The hydrogen transition is complex and requires much more than addressing it as a ‘pipe for pipe’ replacement.
First, there are lots of choices involved and time is critical. The Artelys study shows that co-planning hydrogen investments with the location of renewables supply or industry demand offers the potential to reduce costs by decreasing the amount of hydrogen infrastructure needed by 60%.
Secondly, hydrogen is not an automatic ‘sustainability blessing’ for every gas infrastructure project. Some existing gas pipelines are where we expect future hydrogen supply and demand to occur and conversion to hydrogen is a sensible pathway. But for many remaining fossil gas pipelines this is not a sensible prospect. Utilisation rates will drop to extremely low levels and we will need to find ways of retiring them in an orderly fashion. This raises questions for players involved in the European gas network over the next decades.
Finally, the increasingly fierce competition of alternatives to gas – be it renewables in power or efficiency and electrification in heat – will be even tougher for more expensive hydrogen.
Who makes choices over infrastructure and how these are made is critical for success.
We need to rethink our infrastructure governance if we want this complex process to work. Stakeholders planning local decarbonisation, from electricity and gas transmission to renewable electricity and heat production, will need to be involved.
Importantly, demand-side alternatives need to be weighed to avoid bloating the system. Infrastructure plans should provide clarity on who decides when and where to convert existing gas pipelines to hydrogen and which ones to decommission.
More transparency and accountability is required. The current EU process of defining infrastructure needs does not reflect all the energy solutions for tomorrow. It also lacks input from science commensurate with the complexity of the decision and neglects many sustainability aspects.
A fair distribution of costs is essential to driving a managed transition.
We have not even started a conversation about what ‘fair’ looks like in an integrated energy system. The European Investment Bank (EIB) calculates that to reach the 2050 climate neutrality goal, around 3% of the EU’s GDP will have to be invested in the energy system and related infrastructure, compared to today’s 2%.
Ensuring a fair distribution of costs geographically, across sectors and household income will be essential for the social license of the transition.
If we build a cross-European hydrogen network mainly serving the decarbonisation of industry in a handful of Member States, who should pay for that? We should avoid scenarios where a household’s electricity bill is picking up the cost for hydrogen infrastructure elsewhere and vice versa.
How do we ensure incentives across the board stack up? For example, promoting renewable hydrogen for industry is great, but is only a drop in the bucket as long as free emissions trading allocations for unabated hydrogen persist.
The EU is about to propose a revised regulation for developing its cross-border energy infrastructure (TEN-E) which offers the opportunity to solve many of the unsolved questions above. If this proposal is to contribute to tomorrow’s energy agenda and the success of hydrogen, it will need to reform its current governance.
A revisted TEN-E regulation will need to ensure infrastructure decisions are grounded in independent science, weighing off different options – from demand-side solutions to electricity and hydrogen. The result may be a recommendation to build some hydrogen infrastructure, but guard against overbuilding infrastructure that could become a liability to the social and economic viability of the European green deal later on.
Next year, the EU will also embark on a set of reforms and updates to its gas markets policies. The Artelys study illustrates that choices over the location of renewables, grid strengthening, and hydrogen infrastructure are interdependent.
We need to mirror this in infrastructure planning, as set out above, but also in market functioning. The next generation of market design in the EU needs to do three things to succeed:
- facilitate the steep reduction in consumption of unabated fossil gas needed for the European green deal.
- enable the effective decarbonisation of the energy system by allowing all energy solutions to compete where possible and avoid promotion of hydrogen to undermine action on efficiency or electrification.
- develop hydrogen markets where we most need them and have no other options, to make the best use of a valuable and scarce resource.
Then we stand a chance of getting from the hydrogen pipedream to real progress.