Ambitious hydrogen targets for 2030 are beginning to face questions over feasibility. Key to navigating this landscape are policy regulations, which play a pivotal role in driving down costs and narrowing the focus of hydrogen, thereby enhancing the speed of its deployment.

“We always have this phase. This is the initial disappointment after overpromising,” remarked Emmanouil Kakaras, executive vice-president for engineering firm Mitsubishi Heavy Industries EMEA at the FT Hydrogen Summit 2024.

Europe is facing a reality check following this "overpromising", where policy support mechanisms are delayed and the continent grapples with the aftermath of the energy crisis.

There is plenty of hype on offer, including a target of 40GW of renewable hydrogen electrolysers by 2030 (i.e. production of 10mt of renewable hydrogen). The EU wants to use hydrogen to decarbonise steelmaking, trucks, rail and some maritime transport applications and other transport modes.

“We always have this phase. This is the initial disappointment after overpromising” Kakaras, Mitsubishi

It would also serve for balancing: daily and seasonal storage, backup and buffering. Meanwhile, infrastructure will need to be designed to transport and distribute hydrogen, including a network for refuelling stations, and for heating in residential and commercial buildings (notably in hydrogen valleys).

Kakaras remarked that "the lack of policy instruments that facilitate hydrogen, especially in Europe", further widens the gap between the ambitious targets and what can realistically be achieved.

The initial wave of Important Projects of Common European Interest primarily ranged from 50MW to 100MW in size, representing the first attempts at commercial-scale hydrogen deployment. However, most of these projects were submitted to the EU during the early stages of the energy crisis. Considering the subsequent inflation, especially in energy prices, alongside the unrealistic original target prices set for hydrogen, the situation has changed significantly.

Despite the EU offering the choice of capital spending support or operational spending support for these projects, “you need more support than that, and you also need to see it in the context of the challenges that come with this very specific molecule. It is not just about producing it; you also need to transport it and find buyers", said Olivia Breese, CEO of Denmark’s Orsted.

This underscores how the initial enthusiasm for hydrogen now confronts the practical challenges of logistics, which may not have been fully anticipated at the outset.

Policy support

Policy support is critical in driving down costs. A significant challenge lies in the multitude of interconnected issues, especially for hydrogen. The hydrogen value chain spans production, transportation, storage, distribution, and utilisation, with each stage entailing significant costs. Michael Liebreich, CEO of advisory services firm Liebreich Associates, asserted that “hydrogen will not be used when there is something else that is cheaper, safer, [and] more convenient”.

Suppliers hesitate to scale production until they see developer interest, developers delay scaling manufacturing until demand is assured, and potential buyers await policy assurances before committing. Moreover, infrastructure remains a significant challenge in this dynamic environment.

“So, what you need from policy is really the courage to break all of those eggs simultaneously, and to see it as a jigsaw, which they are doing, and there is the ambition to do it, but from the ambition you actually need the implementation,” remarked Breese, emphasising the need for entire value chains to progress simultaneously.

There is an increasing momentum towards narrowing the focus of hydrogen utilisation to sectors and projects that are most practical and viable.

“There is a temptation today to use hydrogen to fix lots of problems because we have convinced ourselves and, actually other people, that it can solve everything” Bradley, ScottishPower

“We cannot promise that hydrogen will come everywhere, in every household, in every application. There is a need to prioritise and to be very strict on this priority,” said Kakaras.  

He noted that “narrowing down the targets, infrastructure, and a level playing field between imported and local manufacturing” are key elements that, with adequate policy support, can help reduce the gap between ambitions and on-ground progress in hydrogen.

Mark Bradley, hydrogen director at UK energy company ScottishPower, echoed this, stressing the need to identify the right sectors, particularly in Europe, where he noted that “there is a temptation today to use hydrogen to fix lots of problems because we have convinced ourselves and, actually other people, that it can solve everything”, highlighting the need to identify markets targeted for hydrogen and building policy around it.

---

Author: Shweta Dilawari