Delta EE’s analyst Mr Robert Bloom in a recent White Paper has highlighted concerns & analyzed the trends in setting up large hydrogen projects in EUCurrent disconnect between ambition for green hydrogen and realityHydrogen and the role it will play in the transition has shot to the top of the list of hot topics over the last 3 years, moving from possible bit-part player to a likely pillar of the energy transition. At least that is what you would think looking at the energy sector news. If you look behind that hype, the number of green hydrogen projects operational today is few and far between. This is a new industry that needs to be built from almost scratch. To put things in perspective, we estimate there is approximately 118 MW of electrolysers operating at end 2021 across Europe. This equates to the production of a maximum of only circa 0.02 million tonnes of green hydrogen in Europe. Compare this to over 8 million tonnes of largely grey hydrogen and the circa 500 million tonnes of oil equivalent of natural gas that was consumed in Europe in 2021, and you can see that green hydrogen is still very much on the starting block. According to the European Commission's target set in 2020, electrolyser capacity needs to reach 6 GW by 2024, an increase of over 50 times in just 3 years. Will this growth be achieved?There has been a rush of larger projects being announced in 2021Things are moving in the right direction. Looking back just over 6 months ago, our Clean Hydrogen Projects Database anticipated just 1.6 GW of announced projects due to come online by the end of 2024. This has now increased to just over 6 GW, already meeting the EU targets and representing an increase in announced capacity of 4.4GW or 375%. This is a highly promising sign that industry ambition is now matching targets being made in Europe. However, the critical question to ask is that will all the announced capacities become operational? The reality today is that few of these projects have reached a point that makes it certain they will go ahead. The truth is that most of the sponsors of these projects need the clarity and security of policy support and subsidies before they will make final investment decisions; that clarity and security still does not exist. At Delta-EE we think 2022 will be the year we see targeted policy, funding and incentives become clearer. Thus, enabling this year to become the launching pad for Europe's green hydrogen industry, and to bring the 6GW by 2024 target within reach. Only 26% of announced projects for 2023 are currently firm. This illustrates the importance of decisions in 2022, as project sponsors await national decisions on green hydrogen.Three countries to watch in 2022At the international level, the EU has made significant progress in setting out its policy position over the last 6 months mainly through the Fit for 55 and gas decarbonisation packages but also with proposed changes to the REDII delegated act. These policies have brought real ambition to the growth of green hydrogen, and between them will look to:1. Set targets of 50% green hydrogen in industry and a minimum of 2.6% renewable fuels of non-biological origin (read green hydrogen) in transport by 2030.2. Allow cross-border movement of natural gas with up to 5% hydrogen in natural gas grids.3. Define exactly what is considered green hydrogen - and the degree to which additionality of renewables is required for certification.So, if 2021 was the year that the EU really signalled its ambitions for green hydrogen, 2022 will be year that individual countries need to convert that ambition into national plans for implementation.Analysis of our project data shows that three countries account for 77% of the 1.3GW of capacity that is announced for 2022 and 2023 but not yet firm. Germany is the most important country, followed by the UK and Netherlands. Focusing on these three countries, what progress has been made in achieving the kind of policy clarity that project organisers are calling out for? What types of developments can we look out for in 2022? And what is our view on these developments?Delta EE view on 2023Based on our analysis of announced projects and national policy initiatives, we are optimistic that 2022 will prove to be the year when the European green hydrogen sector reaches the required speed of development - the critical decisions will be clarity on subsidies and definitions for green hydrogen, and discussions on these topics are already well advanced. The launch of contracts for difference style subsides for green hydrogen are exactly the type of long-term policies that project organisers are anticipating and can be the first and most dramatic step to reducing financial risk on projects to an acceptable level. Given the recent momentum, politically and within the industry, it would indeed be a surprise if these decisions were not made in a timely manner. Given this, our risked scenario based on currently announced projects shows the capacity we would expect to be online out to 2026. It looks like 2023 will be the real take off for the green hydrogen sector in Europe - but the important decisions will be made in 2022 and this is the year that really counts.
Delta EE’s analyst Mr Robert Bloom in a recent White Paper has highlighted concerns & analyzed the trends in setting up large hydrogen projects in EUCurrent disconnect between ambition for green hydrogen and realityHydrogen and the role it will play in the transition has shot to the top of the list of hot topics over the last 3 years, moving from possible bit-part player to a likely pillar of the energy transition. At least that is what you would think looking at the energy sector news. If you look behind that hype, the number of green hydrogen projects operational today is few and far between. This is a new industry that needs to be built from almost scratch. To put things in perspective, we estimate there is approximately 118 MW of electrolysers operating at end 2021 across Europe. This equates to the production of a maximum of only circa 0.02 million tonnes of green hydrogen in Europe. Compare this to over 8 million tonnes of largely grey hydrogen and the circa 500 million tonnes of oil equivalent of natural gas that was consumed in Europe in 2021, and you can see that green hydrogen is still very much on the starting block. According to the European Commission's target set in 2020, electrolyser capacity needs to reach 6 GW by 2024, an increase of over 50 times in just 3 years. Will this growth be achieved?There has been a rush of larger projects being announced in 2021Things are moving in the right direction. Looking back just over 6 months ago, our Clean Hydrogen Projects Database anticipated just 1.6 GW of announced projects due to come online by the end of 2024. This has now increased to just over 6 GW, already meeting the EU targets and representing an increase in announced capacity of 4.4GW or 375%. This is a highly promising sign that industry ambition is now matching targets being made in Europe. However, the critical question to ask is that will all the announced capacities become operational? The reality today is that few of these projects have reached a point that makes it certain they will go ahead. The truth is that most of the sponsors of these projects need the clarity and security of policy support and subsidies before they will make final investment decisions; that clarity and security still does not exist. At Delta-EE we think 2022 will be the year we see targeted policy, funding and incentives become clearer. Thus, enabling this year to become the launching pad for Europe's green hydrogen industry, and to bring the 6GW by 2024 target within reach. Only 26% of announced projects for 2023 are currently firm. This illustrates the importance of decisions in 2022, as project sponsors await national decisions on green hydrogen.Three countries to watch in 2022At the international level, the EU has made significant progress in setting out its policy position over the last 6 months mainly through the Fit for 55 and gas decarbonisation packages but also with proposed changes to the REDII delegated act. These policies have brought real ambition to the growth of green hydrogen, and between them will look to:1. Set targets of 50% green hydrogen in industry and a minimum of 2.6% renewable fuels of non-biological origin (read green hydrogen) in transport by 2030.2. Allow cross-border movement of natural gas with up to 5% hydrogen in natural gas grids.3. Define exactly what is considered green hydrogen - and the degree to which additionality of renewables is required for certification.So, if 2021 was the year that the EU really signalled its ambitions for green hydrogen, 2022 will be year that individual countries need to convert that ambition into national plans for implementation.Analysis of our project data shows that three countries account for 77% of the 1.3GW of capacity that is announced for 2022 and 2023 but not yet firm. Germany is the most important country, followed by the UK and Netherlands. Focusing on these three countries, what progress has been made in achieving the kind of policy clarity that project organisers are calling out for? What types of developments can we look out for in 2022? And what is our view on these developments?Delta EE view on 2023Based on our analysis of announced projects and national policy initiatives, we are optimistic that 2022 will prove to be the year when the European green hydrogen sector reaches the required speed of development - the critical decisions will be clarity on subsidies and definitions for green hydrogen, and discussions on these topics are already well advanced. The launch of contracts for difference style subsides for green hydrogen are exactly the type of long-term policies that project organisers are anticipating and can be the first and most dramatic step to reducing financial risk on projects to an acceptable level. Given the recent momentum, politically and within the industry, it would indeed be a surprise if these decisions were not made in a timely manner. Given this, our risked scenario based on currently announced projects shows the capacity we would expect to be online out to 2026. It looks like 2023 will be the real take off for the green hydrogen sector in Europe - but the important decisions will be made in 2022 and this is the year that really counts.
