Green hydrogen in Europe: A promising future with hurdles to clear

Green hydrogen, produced by splitting water using renewable electricity, is a key player in Europe's clean energy transition. However, significant challenges remain on both the demand and supply sides.

Demand: A Soaring Appetite (but Infrastructure Lags)

European demand for green hydrogen is projected to surge. The REPowerEU plan aims for 20 million tonnes by 2030, with half produced domestically. This hydrogen will decarbonize hard-to- abate sectors like steel, chemicals, and heavy-duty transport. However, the infrastructure for large-scale hydrogen transportation and utilization is still in its early stages.

Supply: A Technological Race with Economic Hurdles

On the supply side, Europe is witnessing a flurry of green hydrogen project announcements. For instance, a recent event like "Connecting Green Hydrogen Europe 2024" [Connecting Green Hydrogen Europe 2024] brings together industry leaders to accelerate this development. However, a significant gap exists between announcements and Final Investment Decisions (FID). This can be partly attributed to:

• Disfavorable macro conditions: High energy prices and supply chain disruptions create uncertainty for investors.

• Subsidies – A Necessary Push, But Not a Long-Term Solution: While crucial for initial project development,  subsidies like those offered through the European Hydrogen Bank auction [unknown specific details on auction - suggest client research for specifics] can distort the market and hinder long-term economic viability.

Electrolyzer Technology – The Engine Room

Electrolyzers are the heart of green hydrogen production, using electricity to split water molecules. Two main technologies dominate:

• Alkaline Electrolyzers: Mature and commercially available, they are well-suited for large-scale production. However, their efficiency is lower compared to the alternative.

• Proton Exchange Membrane (PEM) Electrolyzers: More efficient but currently more expensive than alkaline technology. PEM electrolyzers are seen as a promising future technology due to their potential for higher efficiency and compactness.

The Road Ahead: Balancing Ambition with Reality

Europe's green hydrogen ambitions are clear, but bridging the gap between announcements and large-scale deployment requires a multi-pronged approach:

• Stable and predictable regulatory frameworks that provide long-term investment certainty.

• Focus on cost reduction through technological advancements and economies of scale.

• Development of a robust hydrogen infrastructure for transportation and storage.

• Strategic partnerships to secure a diversified green hydrogen supply chain.

By addressing these challenges, Europe can turn the promise of green hydrogen into a reality, driving economic growth and achieving its climate goals.