EU falling short of 2030 hydrogen target due to high costs and poor coordination: ACER

A recent EU report has revealed that Europe is facing a significant shortfall in achieving its 2030 hydrogen production and electrolyser capacity targets, with a gap of up to 12.8 million tonnes.

The EU has set an ambitious target of consuming 20 million tonnes of renewable hydrogen by 2030, but current consumption stands at just 7.2 million tonnes—99.7% of which is derived from fossil fuels, according to a report by the EU Agency for the Cooperation of Energy Regulators (ACER).

With just 216 MW of installed electrolyser capacity as of 2023, the report warns that EU Member States are “likely to miss” the over 100GW required to achieve the domestic target of producing 10 million tonnes of renewable hydrogen.

H2 View understands that projects accounting for another 1.8GW of capacity, mostly captive to a single off-taker or industry, are under construction and expected to become operational by the end of 2026.

Additional projects accounting for around 60GW of capacity announced as operational by 2030 are awaiting a final investment decision (FID).

ACER claimed that varying domestic strategies in Europe has led to a lack of alignment with EU-wide targets. “Ambition varies across countries, leading to different paces of development across the sector, and requiring further efforts to align with the broader EU hydrogen vision,” it said.

The report added, “Although funding instruments are becoming increasingly available, the actual deployment of these projects remains at risk due to sector uncertainties, in particular the evolution of demand and renewable hydrogen cost prospects.”

Specifically, to meet the 10 tonnes of green hydrogen goal, 100GW electrolysers, 550TWh of renewable electricity, 180GW of solar and wind, and a vast grid expansion is required by 2030.

Additionally, the location of electrolysers will be crucial in accounting for “bottlenecks in electricity network development and to ensure that electrolysers alleviate rather than increase electricity network congestion.

“Proximity to renewable electricity production sites, and the use of pipelines to transport hydrogen, might reduce the need for more extensive electricity networks.”

ACER has earmarked consistent cross-border initiatives as key to facilitating the ramp-up in hydrogen capacity. “National regulatory frameworks should be developed in coordination with neighbouring Member States,” the report read.

However, transmission system operators (TSOs) have faced challenges here too. Last month, Energinet pushed back plans to construct a hydrogen pipeline connecting Denmark and Germany from 2028 to 2031, due to different levels of project maturity in the market.

Read more:Denmark-Germany hydrogen pipeline faces three-year delay

The report also highlights the high cost of renewable hydrogen as a significant market barrier, noting that it currently costs two to three times more to produce than hydrogen derived from natural gas.

“Existing cost gaps and expectations of significant future reductions create substantial risks for first movers, prompting delays in investment decisions and hesitation in making long-term commitments.

“As the market evolves, increasing transparency around hydrogen costs is essential for directing investments in production and infrastructure.”

Despite all this, the European Commission’s President, Ursula von der Leyen reiterated earlier this month that Europe is leading investment in the hydrogen industry because it has set clear targets.

Read more:€1.2bn European Hydrogen Bank auction to take place in December

“Investment in European hydrogen is set to grow by 140% in 2024, with Europe contributing nearly a third of global investments in electrolysers,” she said.

The President did admit however that it had been a challenging year for the European hydrogen industry, adding that “there’s a lot of work ahead of us.”