Seven large-scale green hydrogen projects look set to move forward in Spain on the back of a major government funding programme, although the sector faces challenges in the form of cost overruns, construction delays and rising competition from datacentres for grid connections.

The Spanish government has provisionally awarded funding of €1.21b ($1.3b) to a shortlist of seven projects totalling nearly 2.3GW of electrolysis capacity. The projects, which will mostly deploy alkaline electrolyser technology, span 11 facilities located in the regions of Aragon, Andalusia, Castile and Leon, Catalonia and Galicia, worth around €5b in total investments.

2.3GW – Total capacity

All projects meet the minimum capacity threshold of 100MW, with the highest graded projects including the production of hydrogen-based fuels such as sustainable aviation fuel, e-methanol and ammonia. The shortlist of projects is subject to technical objections that could lead to changes in selection, the government said.

The grants were allocated as part of Spain’s H2 Valles programme, which aims to create hydrogen clusters in large industrial hubs. Spain’s National Energy and Climate Plan (NECP) targets 12GW of capacity by 2030. With its renewable power resources, the country has emerged as one of Europe’s most competitive locations for green hydrogen production.

Projects awarded support include Spanish firm Cepsa’s 400MW Onuba electrolyser, part of the Andalusia green hydrogen valley, which was awarded over €303m in funding. Construction is expected to start later this year, the company told Hydrogen Economist, although the project has yet to reach FID.

Another project, being developed by renewable energy company Ignis and Spanish oil and gas firm Repsol, obtained nearly €180m. The 600MW green hydrogen and renewable ammonia plant will be situated in Bens in the province of A Coruna with an initial phase of 280MW and is scheduled to start up in Q2 2028. The permitting process for the project “is well underway”, Ignis told Hydrogen Economist.

The hydrogen plant submitted its integrated environmental authorisation (AAI) application in February and is expected to receive approval in Q3 of this year.

Phase I will produce around 26,000t/yr of hydrogen, allocated primarily for the generation of green ammonia in a new facility being developed by Armonia Green Galicia in the A Coruna port area.

Part of the remaining volumes are destined for local industrial customers.

The project will help consolidate the Port of A Coruna’s role as a major European hydrogen hub.

It has attracted interest from large European utilities, interested in securing long-term offtake agreements, the company said. “[The offtake]  will ensure the financial viability of the project while contributing to the broader decarbonisation of industrial and energy-intensive sectors across the continent,” Ignis said.

Nonetheless “the permitting process, while improving, still requires streamlining to accelerate project development timelines for the associated renewables,” the company added. “Infrastructure deployment, including hydrogen pipelines and storage facilities, must also keep pace with production growth to enable a fully functional market.”

Challenges

Alejandro Zerain, Iberia lead analyst at consultancy Aurora Energy Research, said the Spanish hydrogen sector faces challenge similar to those encountered across Europe.

“Projects are struggling to reach FID, mainly due to difficulties in securing offtake agreements and maintaining cost-competitiveness,” he said.

Finding creditworthy buyers willing to pay a premium for low-carbon hydrogen “remains a significant obstacle”.

Shortlisted projects in Spain were required to demonstrate that at least 60% of their hydrogen had a secured initial offtake agreement. However, projects must be completed within three years of receiving support, meaning they risk losing financial backing if affected by supply chain disruptions or construction delays, Zerain said.

Furthermore, securing grid access has become an increasing challenge in Spain. “Hydrogen projects face growing competition not only from within the sector but also from energy storage projects and datacentres, making it more difficult to obtain the necessary infrastructure for project viability,” he said.

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Author: Beatrice Bedeschi