EU is not even close to being on track to meet its 2030 green hydrogen targets amid slow build-out: PwC

PwC estimates that the 2030 target would require 120GW of electrolysers to be installed over the next six years.

While 205GW of projects in the bloc have been announced — more than enough to meet the target — only 3GW had reached a final investment decision or started construction by the end of 2023, which the consultancy notes would take between three and five years to complete.

“To meet that [2030] target, around 20GW of capacity would need to be added each year for the next six years,” PwC warns in its report.

While the EU also targets ten million tonnes of green hydrogen imports, the consultancy also notes that this ambition could be difficult to reach.

While 840GW of clean hydrogen projects have been announced worldwide, by the end of last year, only 15GW — 1.8% of announcements — have reached FID or started construction.

A major reason for the slow build-out is the mismatch between how much renewable hydrogen costs to produce and what offtakers are willing to pay.

Meanwhile, lowering the price based on economies of scale from large-scale green hydrogen projects will be difficult to achieve. Construction is only getting more expensive amid high interest rates and inflation on the price of building materials, “making formerly profitable projects now unprofitable”.

PwC estimates that electrolysers currently cost between €2-3m per megawatt (or €2-3bn per GW) on average.

Another roadblock for renewable hydrogen development, particularly in Europe, is the pace of deploying new wind and solar.

“Around 500TWh electricity would be needed to produce 10 million tons of renewable hydrogen, so based on one wind turbine producing 20GWh of electricity per year, 25,000 new turbines would be needed to cover the electricity requirements for electrolyzers alone,” PwC warns.

The consultancy also notes that Germany’s net electricity consumption in 2022 was 491TWh — and across Europe, demand is expected to increase as more industries and transport are electrified. For example, electrifying passenger cars and trucks in Europe would add an extra 130TWh of demand for renewable power by 2030 and 350TWh by 2040.

“This is another reason why, initially, low carbon hydrogen may be required to bridge the gap,” PwC argues.

The consultancy also highlights a lack of sufficient government support, particularly given delays to big-ticket subsidies in Europe such as the Important Projects of Common European Interest (IPCEI) scheme.

“These are all costly and long-term projects — the Australian Hydrogen Council estimates it could take as long as eight years to go from initial investigation to a final investment decision on very large projects, for example,” the consultancy warns.

However, of the 2.8 million tonnes a year of production capacity set to be on line next year, two million tonnes will be blue hydrogen rather than green, targeted for local consumption and export to Asia. Even by 2030, when 9.3 million tonnes of annual production capacity is expected to be completed, seven million tonnes will be blue, says PwC.

“Should clean hydrogen production take precedence, North America is poised to become its primary export market, underscoring the significance of foreign investments in its development,” the consultancy adds.

A guest chapter in the report, written by German utility RWE, adds: “While securing offtake and creating infrastructure in Europe is a tough nut to crack, it will be even more difficult and take even longer on an international scale.”

The energy firm points to capital cost and risk playing a major role in large investments for early hydrogen projects — which could benefit projects built in more politically stable regions even if they have a lower renewable-energy potential.

RWE also argues that “the cost advantages of producing hydrogen in eg, Chile, the USA or Australia will quickly be eroded if imports must be shipped to and cracked in the countries of destination”.