With the launch last week of its Green Deal Industrial Plan (GDIP), the EU took another welcome step towards a comprehensive effort to promote the net-zero technologies and products required to meet Europe's ambitious climate targets.
But it is still inadequate.
European energy systems and the industry are largely built around fossil fuels, and European countries are not being anywhere near bold enough to unlock the potential of green hydrogen.
The GDIP includes an auction facility for renewable H2 through the European Hydrogen Bank with an indicative initial budget of €800m ($865m), where winners of the auction will receive a fixed premium for each kilogram of green hydrogen produced over ten years.
The European Commission says the plan “will have a similar impact as the production tax credit in the US IRA [Inflation Reduction Act”.
However, this remains to be seen and there are key differences in the approach (a tax credit based on carbon intensity and labour and wage standards in the US, versus an auction in the EU).
While the pilot auction “will be followed by further auctions or other forms of support for hydrogen production and use that contribute towards the REPowerEU hydrogen targets”, the time frame and the amount of support available are unclear.
The Commission also plans to make it easier for member states to provide state aid and will consult member states on a ‘Temporary State Aid Crisis and Transition Framework’. However, the scale, the timing on this and the sources of funding are also unclear.
This is certainly welcome, but clearly not large enough to leverage the investment needed to meet the EU’s targets of ten million tonnes of domestic green hydrogen production per annum by 2030, plus ten million tonnes of renewable H2 imports.
The World Bank said last week that to produce one million tonnes, an investment of $25bn-30bn is required. Given that there is so little green hydrogen is already being produced, ten million tonnes will require investments of $250bn-300bn.
While $800m of public support for the upcoming auction is not the whole picture, such an amount pales in comparison to the massive investment levels we need to see.
This leads us at the Green Hydrogen Organisation to again conclude that we have to work hard with the EU institutions, member states and development finance institutions to urgently provide the instruments required for large-scale renewable energy and green hydrogen projects in developing countries and emerging markets.
On the EU front, the plans on fast-tracking permitting are particularly crucial and something we are taking to the global level through the Planning for Climate Commission with our friends in the Global Renewables Alliance.
it will also be important for the bloc to continue to develop rules and regulations to drive demand for renewable fuels.
The forthcoming FuelEU Maritime provisions are a sector-specific opportunity which would be a game-changer in driving demand for green hydrogen for vessels using EU ports, if a green hydrogen sub-quota is included.
Other similar efforts are required to create the conditions for bankable offtake agreements, paving the way for financial decisions for large-scale production.
We must keep in mind that the energy transition that needs to happen in Europe requires outsized solutions if we are going to avoid climate disaster. The competition from the fossi- fuel industry continues to make it hard to make renewable energy solutions including green hydrogen competitive.
At the moment, the GDIP is simply a set of proposals. All eyes now turn to EU member states at a February 9 meeting, which will discuss the plans ahead of formal proposals to be presented at the European Council in late March.