With an estimated 500 TWh of renewable electricity needed to produce the 10 million tons per year of clean hydrogen wanted by the European Union by 2030, the recent promise to ramp up European electrolyzer production capacity could give a boost to solar developers grappling with sluggish permitting regimes.
With the EU gunning for a tenfold increase in European electrolyzer manufacturing capacity within three and a half years, the commission last week pledged to soon adopt a recommendation and legislative proposal to accelerate permitting for clean energy projects.
A joint declaration issued by the European Clean Hydrogen Alliance reiterated the estimate that 500 TWh of clean electricity would be needed to produce 10 million tons of green hydrogen annually by the end of the decade. That figure was the ambition announced by the EU in March, when it responded to Russia’s invasion of Ukraine by redoubling its energy security aims under a “RePower EU” initiative. The policy drive included a goal of doubling domestically produced clean hydrogen, while scaling up imports to a further 10 million tons per year by 2030.
EU Internal Market Commissioner Thierry Breton and the chiefs of 20 European manufacturers met at a European electrolyzer summit last week and promised to work together to scale up the bloc’s annual electrolyzer production capacity tenfold from its current 1.75 GW by 2025. That 1.75 GW figure is based on the volume of hydrogen the electrolyzers could produce; when measured by the amount of clean electricity needed to power the equipment, the figure is around 2.5 GW.
Clean power requirement
It has been estimated the production of 10 million tons per year of clean hydrogen would require 90-100/140 GW of electrolyzer capacity in 2030.
With industry representatives identifying a lack of supportive legislation, of large-scale finance, and of equipment components and raw materials as the chief hurdles to overcome, the commission committed to help address those concerns. The bloc promised to prioritize assessment of hydrogen projects when it is notified by EU member states of proposals to give state aid and said it would aim to decide the merits of the first hydrogen-related important projects of common European interest (IPCEIs) within six weeks of submission, with a view to completing assessment of the initial IPCEIs “by summer.”
The EU also pledged to drive forward proposals for carbon contracts for difference (CCFDs). The contracts would fix an auction-determined level of income for companies which produce carbon allowance certificates which would be linked to the market-driven price of the certificates on the European emissions trading scheme (ETS). Instead of being subject to fluctuation in the carbon price, certificate producers – in this case, electrolyzer makers – would receive a publicly funded top up to the value of their certificates when the ETS-determined price is below the CCFD figure. When the ETS carbon price is higher than the CCFD strike price, the certificate holders would refund the difference back to the appropriate public fund.
The bloc also offered the financial support of its lender, the European Investment Bank, which it said has already financed €550 million ($580 million) of hydrogen projects and is currently assessing the merits of more than €1 billion of further project credit lines.
In return, electrolyzer manufacturers said they would put forward “only … high-quality project proposals,” and would work to reduce the raw material requirements of the technology, as well as improving the use of recycled materials.
Both parties to the agreement also pledged to devote funds to the research and development effort, which could be expected to drive down electrolyzer costs.