Key Developments and Drivers for European Hydrogen Market

by Sep 23, 2022

The European Commission has approved a fresh round of public funding worth €5.2 billion, for a second phase of Important Projects of Common European Interest (IPCEI), called Hy2Use, in the hydrogen value chain as part of their long-term strategy to gradually reduce dependence on fossil fuels especially Russian gas. The IPCEI-II project was jointly prepared and notified by 13 thirteen member states and is expected to unlock additional €7 billion in private investments. The IPCEI will involve 35 projects from 29 companies, including SMEs and start-ups, with activities in one or more Member States. The direct participants will closely cooperate with each other through numerous planned collaborations, as well as with over 160 external partners, such as universities, research organizations and SMEs across Europe.
Likewise, earlier in July 2022, European commission, under EU state aid rules, approved IPCEI first phase to support research and innovation and first industrial deployment in the hydrogen value chain. The project, called “IPCEI Hy2Tech” was jointly prepared and notified by fifteen Member States who agreed to provide €5.4 billion in public funding, which is expected to unlock additional €8.8 billion in private investments. The IPCEI involved 41 projects from 35 companies, including 8 small and medium-sized enterprises (‘SMEs’) and start-ups. The main goal of such series public funding is to jointly fill the market gaps and support those private initiatives whose breakthrough innovations fail to materialize because of the risks involved in such projects.
Apart from ensuring public funds to upscale hydrogen market, September 14 was a historical day for European green hydrogen market as European Parliament (EP) after plenary vote on Renewable Energy Directive II (RED-II), scrapped additionality requirements at EU level and approved binding targets of 45% renewable energy contribution to energy mix by 2030. New binding targets for renewable hydrogen and its derivates in industry and transport are as follows:
•Renewable fuels of non-biological origin (RFNBO) such as green hydrogen and green ammonia should be at least 5.7% of all fuels by 2030, including 1.2% in the hard to abate maritime sector
•50% of industry fuels will have to transition to RFNBOs by 2030, rising to 75% by 2035.

European Parliament passed this amendment to RED-II, by just 4 votes that invalidated the controversial Delegated Act that would have imposed EU wide additionality regulations- mandating all renewable hydrogen producers to source electricity from dedicated green renewable energy projects, however, grid-sourced electricity was allowed only when it could be provided with dedicated supply within the hour. After the nullificaiton of additonality requirements, renewable H2 producers will now be allowed to source electricity from the grid, with a condition that they can verify it as green electricity by securing power-purchase agreements (PPA) from renewables installations for the equivalent amount. Key market players in the hydrogen value chain considered this additionality requirement as a constraint to the development of hdyrogen market but with these new binding targets and simpler regulatory framework hydrogen market is expected to grow quickly within Europe.
According to PTR, aforementioned and other key EU policy initiatives from EU institutions such as European Green Deal, EU Hydrogen Strategy and REPowerEU will send strong signal to the market to upscale this niche market. Europe considers hydrogen as a game changer for its economy as European Commission (EC) president, Ursula von der Leyen, in her state of the union address announced the creation of a new European Hydrogen Bank which will invest €3 billion to help guarantee the purchase of hydrogen, notably by using resources from the Innovation Fund. PTR believes all these developments were resulted in the wake of new US hydrogen tax credits and $7 billion funding for hydrogen hubs, as EC feared investments from key hydrogen players will shift to US.

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