To become independent from Russian energy imports, in particular natural gas, the European Commission has published REPowerEU – a plan to rapidly reduce dependence on Russian fossil fuels and fast forward the green transition. Hydrogen is a cornerstone of this plan reflected in the aim to develop hydrogen infrastructure, storage, and terminal facilities. In addition, the plan’s ambition is to produce 10 million tons domestically and import 10 million tons of renewable hydrogen to the EU by 2030. To meet its aspiration, the European Commission is setting up different incentives such as the Global European Hydrogen Facility and the Green Hydrogen Partnerships to create investment certainty and business opportunities for hydrogen. By doing so, the EU is taking a step in the right direction in the development of international hydrogen supply chains. However, the market is still in an early stage and further policy measures are needed to meet the 10 million tons import target.
Hydrogen can be imported via pipelines or ships. The appropriate transport option depends on the quantities, distances, form of hydrogen carrier, end use, and overall cost of supply. Gaseous hydrogen is typically compressed and transported through pipelines. For shipping, hydrogen can be either liquified or embedded in one of its potential carriers e.g., liquid organic hydrogen carriers, ammonia, synthetic methane, or methanol. Import terminals dedicated for hydrogen carriers already exist but the capacities need to be expanded significantly to cope with the expected import volumes.
Next to scaling up dedicated hydrogen import infrastructure, repurposing existing natural gas pipelines and LNG terminals can facilitate hydrogen imports. Two factors are decisive to meet the 10 Mt hydrogen import target. First, production projects of renewable and low-carbon hydrogen in exporting countries need to be realized in time. Second, sufficient import capacities must be realized for hydrogen imports by 2030. In the short to medium term, gas import infrastructure is at full capacity to compensate for Russian natural gas. Therefore, it is highly uncertain to what extent gas pipelines and terminals could be repurposed for hydrogen imports in the coming years.
Figure 1: Existing gas import infrastructure which could potentially be repurposed on the long term, both terminals (left), as well as pipelines (right)
Imports of hydrogen (carriers) require an enabling policy and regulatory framework. To this end, clear sustainability criteria, including pragmatic auditing schemes and certification procedures, are imperative to allow for hydrogen trade. The lack thereof creates uncertainty along the hydrogen value chain causing delays in investments in international hydrogen projects and import infrastructure. On top of this, if Europe and its member states want to be successful in realizing large amounts of hydrogen by 2030, fast-tracking of import infrastructure is necessary, for instance through simplified and streamlined permitting procedures.
Currently, no support mechanisms exist on a European level dedicated to hydrogen imports from third countries. However, there are EU funding mechanisms in place targeting the ramp-up of the domestic hydrogen market, which could incentivize exporting hydrogen to the EU. Examples of this are the Connecting Europe Facility – Energy (CEF-E) and the Recovery and Resilience Facility (RRF). Other measures that could facilitate hydrogen imports to Europe include setting up new and intensifying existing hydrogen partnerships with third countries or implementing contract for difference schemes such as H2Global that de-risk investments along the hydrogen value chain. H2Global is a centralized renewable hydrogen auctioning scheme that is designed to guarantee offtake contracts but is currently limited to Germany. Expanding this across the EU can trigger the rapid development of global hydrogen supply chains.
Urgent and targeted actions are needed to meet the 2030 hydrogen import target. To succeed in this challenge:
Before hydrogen imports can help reduce European dependency on Russia and accelerate the decarbonization to a net-zero energy supply, there is still a lot of work to be done.
This blog was co-written by Jaap Peterse, consultant, and Tareq Zahw, managing consultant.
Complexity demands a trusted guide with the unique expertise and cross-sector versatility to deliver unwavering success. We work with organizations across regulated commercial and public sectors to catalyze transformation and pioneer new directions for the future.