In the 2030 decarbonisation scenario, hydrogen and its derivatives should play an important role. Industry considers hydrogen as one of the most important energy sources to decarbonise sectors where emissions are difficult to reduce and alternative solutions are not available or difficult to implement, such as heavy industry, shipping, aviation and heavy transport.

Hydrogen has also charted an important path as a storage solution and as a pathway that will connect different nations around the world in the pursuit of Net Zero targets.

However, the stakes regarding that coming boom for this technology may bring different challenges. Review Energy spoke to Maryna Hritsyshyna, expert in EU Regulatory Affairs in the hydrogen sector, to find out what the outlets for these future challenges should be and why some of the recent EU initiatives do not seem to be sufficient.

Review Energy (R.E.): The growing demand for hydrogen will also drive demand for electrolysers. How should the EU prepare for this demand?

Maryna Hritsyshyna (M.H.):  It is well-known that the EU has a leadership position in electrolyser manufacturing in the world. However, to reach hydrogen targets the EU indeed needs approximately 80-100 GW of electolysers capacity. In May 2022 the EU electrolyser manufacturers signed the Electrolyser Summit Joint Declaration with commitments about increase of the electrolyser manufacturing capacity in the EU to 17.5 GW by 2025 and with next increase by 2030.

Nevertheless, to ensure the fulfillment of these commitments and to prepare for growing demand it is important also to provide a certain support to the electrolyser manufacturers.

To manage the growing demand for electrolysers during last year the EU introduced several important initiatives. The supportive mechanisms for the electrolyser manufacturers can be found in the Net Zero Industrial Act that was released by the European Commission in March 2023. This document should simplify the permitting process for construction of net-zero technology manufacturing projects that should also include the electrolyser. It is also possible to use the Innovation Fund for scaling-up the manufacturing of electrolysers. And a quite new initiative is a Net-Zero Europe Platform proposed in the Net Zero Industrial Act. This initiative aims to support investments, to exchange information about potential bottlenecks that can be also useful for deployment of electrolyser manufacturing capacity. It means that the European Commission prepared certain regulatory framework for acceleration of the manufacturing of electrolysers for growing demand.

R.E.: The EU launched the Hydrogen Bank which aims, among other things, to support international imports. Is there currently an ideal regulatory framework to attract international players?

M.H.: An ideal regulatory framework is obviously the EU target and the EU Institutions together with market players and stakeholders are working under the regulation for hydrogen economy. The Hydrogen Bank is a very important initiative for support of hydrogen demand. At the same time to ramp up the hydrogen import in the EU it is important to have a clear regulatory framework for the international players at least regarding three main topics: hydrogen production requirements, hydrogen targets and certification.

Requirements for production of renewable hydrogen are determined in the Delegated acts adopted by the European Commission in February 2023. In case of entering into the force of these Delegated acts, their requirements will be applied to production of the hydrogen imported in the EU. Certain clarity regarding rules for hydrogen production can be a precondition for attraction of international players.

International projects for hydrogen import relies on the hydrogen targets for industry and transport sector in the EU as confirmation for future hydrogen demand. The RFNBO targets for the industry and transport should be determined in the Renewable Energy Directive that is now in the process of revision. And one of the most important issues for hydrogen import is hydrogen certification. For purposes of compliance with RFNBO targets in the Renewable Energy Directive, the offtakers will need to receive hydrogen with the RFNBO certificates. The RFNBO certification is in process of development in the EU, but in March CertifHy submitted the RFNBO Scheme documents for approval by the European Commission. This activity confirms quite active development of the certification procedure in the EU.

At the same time there is still a lot of other questions that are important for the international players. The EU should have clear rules for recognition of hydrogen certificates from third countries. It is important to have some clarity about use of low-carbon hydrogen and the adoption of the Hydrogen Package is crucial for development of hydrogen infrastructure.

R.E.: Is the Net-Zero Industry Act sufficient for the successful development of green hydrogen and its entire production chain?

M.H.: The Net Zero Industry Act is a very important proposal from the European Commission for development of the EU hydrogen sector. However, the main task of this regulation is scaling up the manufacturing capacity of net-zero technologies, as renewable energy technologies, RFNBO technologies, electrolysers, carbon capture and others. These technologies refer to the final products, specific components and specific machinery. It means that the Net-Zero Industrial Act covers mostly equipment or plants for hydrogen production.

At the same time the Net-Zero Industrial Act does not cover infrastructure objects for hydrogen transportation. It also does not include issues connected with ramping up hydrogen demand. By the way, the USA has the same situation with the Inflation Reduction Act (IRA) that stimulates development of hydrogen sector, but without development of demand for hydrogen. However, for the demand purposes the European Commission will launch the auctions in the frame of the Hydrogen Bank as a separate initiative for coverage of cost gaps between fossil fuels and renewable hydrogen.

R.E: The EU will auction 800 million in aid for the production of green hydrogen in the autumn. What should be taken into account in this auction?

M.H. The design of this auction is in the process of development in the European Commission. However, this auction will be only for domestic production of hydrogen and when the auctions for hydrogen imports will be launched is not clear. Due to strategies of some EU countries to support hydrogen import from third countries, the European Commission plans to explore the design of the international part of the Hydrogen Bank. There are also questions about funding for the international part of the auction that should be also clarified by the European Commission by the end of this year.

Regarding the first pilot auction it will be useful to have full information about the design of this auction as soon as it possible. The auction should be based on a transparent and equal approach to all participants. At the same time the bids will be ranked according to the prices that perhaps should be based only on the prices of production without additional costs for transportation. The auction should probably also take into account different technologies for hydrogen production. Like in the renewable energy sector we have separate auctions for wind and solar, for hydrogen production it might be also useful to take into account different types of electrolysers and other technical criteria. However, all these questions should be clarified to the auction participants.

R.E.: Many European countries have signed new agreements with Latin American countries to scale up their development of green hydrogen. How can these agreements benefit Europe and what should be taken into account in the future?

M.H.: The REPowerEU Plan defines main targets of renewable hydrogen by 2030: 10 million tonnes of domestic production and the same amount for import. It means that 50% of renewable hydrogen in the EU will be imported from third countries. The key question in this case is how to ensure the energy security of the EU and to avoid any interruption of hydrogen supply in the future. The answer to this question can be found also in the REPowerEU Plan that defines hydrogen partnership as an option for facilitating the import of green hydrogen.

The bilateral hydrogen partnerships between the EU countries and third countries form Latin American, the Middle East and the Northern Africa, play important role for diversifying hydrogen import in the EU. Energy security means a stable and abundant supply of energy that means the importance of avoiding any dependency on a single supplier or transport route, like only one pipeline. Through cooperation with different counties the EU will be able to diversify hydrogen imports and avoid any interruption of the hydrogen import in the future.

R.E.: Is the discussion of low-carbon hydrogen and the use of nuclear energy in the hydrogen production process diverting attention from development in Europe?

M.H.: Hydrogen produced from nuclear energy belongs to low-carbon hydrogen under the Hydrogen Package. For this reason, in both cases the discussions are about low-carbon hydrogen. According to the EU Hydrogen Strategy, the low-carbon hydrogen should contribute to decarbonization in a transition period. The EU Strategy for Energy System Integration also confirms that low-carbon hydrogen is needed in a transitional phase to replace existing gray hydrogen. However, currently the EU regulatory framework does not consider low-carbon hydrogen as an important link between grey and green hydrogen for a transition phase. Moreover, a lot of studies confirm that the role of low-carbon hydrogen will be important also in the later stages of the hydrogen market development.

Most discussions of low-carbon hydrogen connected with hydrogen targets and requirements for production. Low-carbon hydrogen should play an important role in the early stages of the hydrogen market, but there are still no clear rules for production of this hydrogen and GHG emissions methodology that are expected only by the end of 2024. In other words, the EU regulation regarding low-carbon hydrogen is moving too slowly that raises a lot of discussions. At the same time these discussions should not have a negative impact on the general development of the hydrogen sector in Europe.