As the global community ramps up efforts to mitigate the worst effects of the climate crisis, renewable hydrogen has emerged as a critical tool for decarbonizing hard-to-abate sectors. From industrial processes to transportation, hydrogen can play a pivotal role in Europe’s shift to a sustainable, low-carbon energy system. However, unlocking the full potential of this versatile fuel requires a comprehensive policy framework to spur large-scale deployment and drive down production costs.
Hydrogen Production and Supply
Renewable Hydrogen Generation
The production of green hydrogen using renewable electricity and water electrolysis is rapidly gaining momentum across Europe. Several countries, including Germany, France, and the Netherlands, have unveiled national hydrogen strategies that set ambitious targets for electrolyzer capacity by 2030. These targets, however, fall far short of the International Energy Agency’s estimate of 850 GW of global electrolyzer capacity needed by 2030 to align with a net-zero emissions pathway.
Targeted policy support is essential to bridge this gap and accelerate the buildout of renewable hydrogen production facilities. Measures such as production tax credits, contract-for-difference schemes, and other financial incentives can help offset the current price premium of green hydrogen over fossil-based hydrogen. Regulatory frameworks that mandate the use of renewable hydrogen in specific applications, akin to Clean Energy Standards in the power sector, can also create a reliable demand signal for producers.
Hydrogen Storage and Transportation
Beyond production, the successful deployment of a sustainable hydrogen economy hinges on the development of robust storage and transportation infrastructure. Policies that support the construction of hydrogen pipelines, storage facilities, and refueling stations can help establish the physical backbone for this emerging energy system.
Knowledge infrastructure, such as guarantee of origin and production certification schemes, is also crucial to ensure the meaningful reduction of carbon dioxide emissions associated with hydrogen production and use. Validation and verification of these schemes can be supported through targeted policy interventions.
Hydrogen Production Costs
The current global average cost of green hydrogen production, ranging from $3 to $6 per kilogram, presents a significant hurdle to widespread adoption. However, this figure masks substantial regional variations, with certain areas already approaching cost parity with blue hydrogen (produced from natural gas with carbon capture).
Policymakers can harness these regional variations by deploying targeted financial incentives in areas where green hydrogen is poised to become cost-competitive. By accelerating deployment and driving down production costs through economies of scale and technological advancements, the need for long-term subsidies can be minimized, and the transition to a self-sustaining sustainable hydrogen economy can be achieved.
Hydrogen Applications and End-Uses
Mobility and Transportation
The transportation sector is a prime candidate for the widespread adoption of hydrogen fuel cell electric vehicles (FCEVs). Policies that mandate or incentivize the deployment of FCEVs, particularly in commercial and heavy-duty applications where battery-electric alternatives face challenges, can catalyze the growth of this technology.
Complementary measures, such as zero-emission vehicle mandates, clean truck standards, and public procurement programs, can create a reliable demand for hydrogen-powered mobility solutions. Simultaneously, investments in hydrogen refueling infrastructure along major transportation corridors will be crucial to enable the large-scale rollout of FCEVs.
Industrial Processes
In hard-to-abate industrial sectors, such as steel production, cement manufacturing, and chemical processing, renewable hydrogen can play a pivotal role in decarbonization efforts. Policymakers can support the integration of hydrogen into these processes through targeted research, development, and demonstration (RD&D) programs, as well as financial incentives for capital investments in hydrogen-based technologies.
Power Generation
The versatility of hydrogen extends to the power sector, where it can be used for grid balancing, seasonal storage, and peaking power generation. Policies that incentivize the co-location of renewable energy generation and hydrogen production, such as through power purchase agreements (PPAs) or Contract for Difference (CfD) schemes, can help establish a thriving hydrogen-to-power ecosystem.
Regulatory and Policy Frameworks
Hydrogen-Specific Policies
To accelerate the deployment of sustainable hydrogen, policymakers must craft a comprehensive regulatory framework that addresses the unique challenges of this emerging energy carrier. This includes the development of safety standards, certification schemes, and labeling protocols to ensure the integrity and safety of the hydrogen supply chain.
Harmonizing these policies across national and regional boundaries can further enhance the scalability and interoperability of the hydrogen economy.
Incentives and Financial Supports
Targeted financial incentives, such as production tax credits, investment tax credits, and loan guarantee programs, can help offset the higher upfront costs of green hydrogen production and infrastructure development. These measures can be tailored to specific segments of the value chain, from electrolyzer manufacturers to end-users, to catalyze sustained growth.
Innovative financing mechanisms, like carbon pricing and emissions trading systems, can also create a market-based incentive for the adoption of renewable hydrogen by pricing the environmental benefits of this fuel.
Emissions Regulations
Policies that mandate the reduction of greenhouse gas emissions and the adoption of low-carbon technologies can indirectly drive the uptake of renewable hydrogen. Examples include emissions performance standards for industries, carbon intensity reduction targets for transportation fuels, and renewable energy mandates for power generation.
By aligning these regulations with the unique attributes of hydrogen-based solutions, policymakers can create a level playing field and incentivize the development of a thriving sustainable hydrogen economy.
Technological Advancements
Fuel Cell Technologies
Continued research and development in fuel cell designs, materials, and manufacturing processes will be essential to drive down costs and improve the performance of hydrogen-powered mobility and stationary applications. Policymakers can support these efforts through targeted RD&D funding, as well as by fostering collaboration between industry, academia, and research institutions.
Hydrogen Infrastructure
The deployment of hydrogen refueling stations, storage facilities, and pipeline networks will require substantial investment and coordinated planning. Policies that enable the integration of these infrastructure elements with existing energy systems, as well as provide financial support for their construction, can help accelerate the buildout of a resilient hydrogen ecosystem.
Electrolyzer Developments
Breakthroughs in electrolyzer technology, both in terms of efficiency and scale, are crucial to lowering the cost of green hydrogen production. Policymakers can incentivize research, development, and commercialization of advanced electrolysis systems through targeted funding programs, innovation challenges, and public-private partnerships.
The road ahead for the sustainable hydrogen economy is both promising and daunting. By implementing a comprehensive policy framework that addresses the unique challenges of this emerging energy carrier, European policymakers can catalyze large-scale deployment, drive down production costs, and unlock the full potential of renewable hydrogen to decarbonize the most hard-to-abate sectors. The stakes are high, but the opportunity to secure a sustainable energy future for Europe has never been more within reach.
