​Europe is firming up ambitious plans to build scale in the Hydrogen economy as part of the continent's attempts to decarbonise energy supply and move away from Russian oil and gas.

The European Commission's new REPowerEU strategy aims to produce 10 million tonnes (MT) of renewable hydrogen and 10 MT of imported renewable hydrogen by 2030 while simultaneously ending the import of Russian fossil fuels. The strategy also aims to achieve climate neutrality by 2050.

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The continent's hydrogen plans have been under the spotlight after the US government announced an estimated $13 billion in value across the hydrogen industry over the next 10 years. That works out to up to $3 per kilo of hydrogen depending on the levels of carbon emitted, with credits based on a sliding scale.

Experts have lauded the US government's approach for its simplicity and size, contrasting it with Europe's.

"Rules and schemes in the European market are complex, making it more challenging for project developers," Murray Douglas, Head of Hydrogen Research at energy consultancy Wood Mackenzie, told Reuters.

In comparison, the US structure is easier to work with, Douglas said. "Project developers really like the production tax credit in the US because it's very simple and very generous – it will simply help get the low-carbon hydrogen industry going and allow it to compete against carbon intensive alternatives more quickly."

Europe's challenge

Europe has a fair idea of the challenges it faces. The EC has noted that a production target of 10 MT of renewable hydrogen would require around 80 to 100 GW of electrolyzer output capacity (compared with the existing 160 MW) and about 150 to 210 GW of additional renewable power capacity.

The total investment required to produce, transport, and consume 10 MT of renewable hydrogen is forecast to be between 335 and 471 billion euros, with 200 to 300 billion euros needed for additional renewable electricity production.

An additional 500 billion euros of investments will be needed in international value chains to enable the import of 10 MT of renewable hydrogen, the other part of Europe's plan.

Europe's Answer

Europe's moves to strengthen its hydrogen market pivot around a bank and an auction.

The European Hydrogen Bank (EHB) aims to accelerate investments in renewable hydrogen while making the energy source feasible vis-à-vis fossil fuels.

Johanna Schiele, Policy Officer Innovation Fund at the European Commission, pointed out at a recent webinar that the EHB is not a 'bank' or financial institution. "This is about scaling up a hydrogen market from niche to scale by bringing together demand and supply. To do that we need to bridge the cost gap between the high cost of renewable hydrogen and the much lower cost of grey hydrogen or natural gas," Schiele said.

The continent has also scheduled an auction at year end for subsidised green hydrogen contracts. Hydrogen producers will be awarded a subsidy in the form of a fixed premium per kilogram of hydrogen produced for a maximum of 10 years of operation.

Experts say the auction – if run along the incentives of the US hydrogen subsidy – would deliver about 100,000 tonnes of hydrogen per year, a long way from the 20 MT annual target. However, EU officials say the pilot auction is a market test with more funds available if it is successful.