EU Energy: Strict Green Hydrogen Rules Harm Emerging Industry

One might think that the clash of energy titans would be between those who favor ‘dirty’ fossil fuels and those who champion ‘clean’ renewable energy. Not so in Europe. Sparks have flown over what kind of hydrogen – exactly – should be considered green, and access to any proposed subsidies for the fuel. Those of the European Commission relatively strict attitude is a blow to the emerging industry.

On the face of it, the proposed new rules – which are expected to come into force towards the end of the decade – make sense. Hydrogen does not emit Co2, but the way it is made does. When electricity generated from fossil fuels is used to split water, the process can prove counterproductive.

That’s why the EU doesn’t want hydrogen produced by connecting electrolysers to the power grid to be considered green. However, electrolysers powered by new solar and wind generators running at the same location and time as the electrolyser would qualify. The EU would waive the new restrictions if the grid were largely renewable or nuclear.

That would make European hydrogen truly green – much greener than zero-emission electric vehicles. This hydrogen will also be scarce and expensive. Producing hydrogen only when the sun is shining spreads the equipment cost over relatively little hydrogen. These restrictions will increase hydrogen costs by more than €2/kg or €50/MWh, consultancy Frontier Economics estimates. That is roughly the cost of natural gas in Europe today.

This could bode well for big renewable energy producers like Iberdrola in Spain should the EU’s tough crackdown boost demand for pure renewable energy. An unexpected green light for nuclear power would give France’s hydrogen industry a head start.

But the strict rulebook will prove a setback for the entire European hydrogen industry – from electrolyser manufacturers to energy companies hoping to convert customers to hydrogen. Worse, if the US opts for a more flexible approach, it will fuel the transatlantic fight for green investment.