The Role of Hydrogen in the European Energy System

Roberto Palea
Former President of the CSF, a member of the Italian Association of Environmental and Natural Resources Economists (IAERE)

Since taking office, the Commission chaired by Ursula von der Leyen has shown its determination to push Europe into a world of the future, accelerating Europe’s race to be (under the European Green Deal and then the Next Generation EU) the first climate-neutral continent by 2050. As the President said in her recent State of the Union Address, that “mission” must be at the heart of the Green Deal, not least because, despite the lockdown due to the Covid-19 pandemic, the planet’s average temperature is continuing its perilous rise.

To address this unfavourable global situation, the Commission has deemed it necessary to increase its emission reduction target from 40% to 55% by 2030, supported in its decision by a large group of entrepreneurs and investors. The effort proposed is very challenging, and cannot be achieved unless all available resources and technologies are used, including those for the production and use of hydrogen from renewable energies.

Hydrogen is present in water (11.19% of its mass), which covers 71% of the Earth’s surface.

Its chemical bond with oxygen is so strong that it is very expensive to isolate it. Despite this high cost, it is produced industrially, using polluting techniques, transforming coal or oil (also called “gray hydrogen”) or methane gas (“blue hydrogen”). Current demand is equal to about 500 billion cubic metres, therefore it is only used when there are no valid alternatives: about 65% by the chemical industry, 5% by refineries, 10% by other industrial activities.

This impact on the climate can only be eliminated by using “green” hydrogen, produced using an electrolyser (or fuel-cell) powered exclusively by renewable energy.

This objective has yet to be pursued, because in 2020 “green hydrogen” accounts for only 0.1% of global hydrogen production. However, it is technically viable as experiments and small production runs have shown.

Despite these difficulties, the Vice-President of the Commission, Franz Timmermans, head of the Green Deal, declared that “The new hydrogen economy can be a growth engine to help overcome the economic damage caused by Covid-19”. The production and use of hydrogen from renewables, which does not generate greenhouse gas emissions, is needed to power the storage and accumulation systems of renewable energies (which are intermittent by nature), foster electric mobility through the use of fuel cells, convert existing building stock, power aircraft, ships and trucks, and decarbonise particular energy-intensive industrial plants (e.g. steel production).

On 8 July the Commission released the Communication “A hydrogen strategy for a climate-neutral Europe“, setting out ambitious targets for hydrogen production, using electrolysis plants powered by renewables. The plan illustrated in the document set the goal for the EU of creating plants for 40,000 MW of electricity from renewables by 2030. To stress the urgency of this change of pace, it has also set an intermediate target of 6,000 MW by 2024, capable of producing up to one million tons of hydrogen from renewables: a huge leap, considering that, at the moment, only 250 MW of renewables are available for electrolysers throughout the world.

According to the document, in 2050 about a quarter of renewable electricity will be devoted to hydrogen production from renewables. This should accelerate the competitiveness of hydrogen from renewables, whose production cost has already dropped by 50% since 2015, and could further reduce by 30%, making “green” hydrogen more competitive than hydrogen from fossil fuels.

Since it is impossible to reach the required levels of electricity production from renewables on European soil alone, renewable energy production in African countries should also be stimulated, and organised to permit the transport of hydrogen produced in these countries to European territory. This explains SNAM’s ideas for producing hydrogen in the countries on the southern shores of the Mediterranean, making Italy the European hub, and exploiting its interconnections with the various distribution networks. According to SNAM CEO Marco Alverà, 70% of Italian pipelines are already able to transport hydrogen gas between the two shores of the Mediterranean.

As part of the Next Generation EU, the Commission has identified hydrogen as a unique opportunity for research and innovation, technological leadership, economic development and employment and, finally, to develop partnerships with African Union countries. However, Germany also shares the same conviction, and has announced a 9-billion euro National Hydrogen Investment Plan, with the aim of producing 5,000 MW electrolysis plants by 2030. Following Germany’s announcement, France also launched a 7-billion euro National Hydrogen Plan. These plans have in turn attracted the interest of entrepreneurs who, together with the Commission, set up the European Clean Hydrogen Alliance in March.

Despite the drop in the cost of producing electricity from renewables (solar and wind energy), efforts are focused on designing and manufacturing electrolysers that further reduce production costs (which has already halved in the last decade): this process is continuing.

In the interim, during the transitional period, blue hydrogen obtained from methane (e.g. ENI’s proposal) could still be used, taking into account that “green” hydrogen can already be mixed with “blue” hydrogen at a percentage of 10% or 20%, with significant results.

In the light of the considerable interest hydrogen has raised in Europe, Jeremy Rifkin’s somewhat visionary, yet forward-looking arguments in his 2002 essay The Hydrogen Economy come to mind. His essay concluded with the following remark: “There are rare moments in history when a generation of human beings are given a new gift with which to rearrange their relationship to one another and the world around them. This is such a moment. We are being given the power of the sun. Hydrogen is a promissory note for humanity’s future on Earth. Whether that promise is squandered in failed ventures and lost opportunities or used wisely on behalf of our species and our fellow creatures is up to us.”

It took the shock of the Covid-19 pandemic emergency to move Europe towards Rifkin’s rational dream, and create a willingness to make it come true worldwide, starting in our continent.