Industry has long been complaining that the complex rules governing the production of hydrogen from renewable electricity are limiting investment. Now the European Commission’s new ‘AccelerateEU’ package, designed to address the impact of the war in the Middle East on fossil fuel prices, will bring forward a review of the rules to this year, with a widely expected loosening. Germany has already decided to sidestep the strict requirements and offer support to all forms of low carbon hydrogen. And where Germany leads, the rest of the EU normally follows.
The rules are designed to make sure that developers built additional renewable electricity capacity for hydrogen production, rather than just take it from the grid, which risks depriving established users. An admirable aim but a self-defeating one, because it is difficult, even for the EU, to dictate where international companies invest. The green hydrogen regulations evolved into a quagmire of ‘additionality’[1], ‘temporal correlation’ and ‘feedstock exclusion’ rules, and so developers just took their funds elsewhere. Hydrogen Europe has proposed exemptions to the application of additionality, to find a compromise which would enable the rollout of green hydrogen to progress faster.
But the carbon footprint of the energy source is the important metric, and how it is supplied should be left to the market. There is an argument that if renewable electricity is taken from the grid for hydrogen and then replaced by fossil electricity, the GHG savings are reduced. However, attempts to impose this type of cascading use rule for the application of new technology won’t work when private operators are being asked to provide funds. They have their own priorities. And anyway, renewable electricity provision isn’t a zero sum game. An increase in demand will send a signal to investors to build new wind and solar farms. The grid will expand and adapt to handle more renewable energy. Consumers will be empowered with digital tools to access electricity at the lowest prices.
Additionality rules affecting how renewable electricity is procured, have also infiltrated into other sectors with predictable outcomes. Aluminium smelting is a huge consumer of electricity so any efforts to replace fossil electricity should be welcomed. The Aluminium Stewardship Initiative, the sustainability scheme for the sector is urging members to convert to renewable electricity, but it has imposed additionality requirements, which are much easier for some operators to achieve than others. Certain smelters have been unable to achieve the strict decarbonisation requirements resulting in a problem for the Scheme.
In a low carbon economy, the future uses of renewable electricity and green hydrogen are intertwined. Electrification of transport and heating will proceed, but, in certain sectors or locations, combustible low carbon fuels such as hydrogen will be required for a long time. Cement production, for example, will require combustible fuels for the foreseeable future and so will aviation and maritime transport. Some chemicals production units can be engineered to run on electricity, others can’t easily be converted. It makes sense, therefore, to let regions decide for themselves how to transition to renewable energy, be it electricity, hydrogen or a different technology.
And what about materials in a low carbon economy? They need carbon and hydrogen atoms, the building blocks for the chemicals, plastics, and fibres that society relies on. Biomass is currently the leading contender to provide these constituents. And biomethanol is being tested out as an intermediate for production of olefins and plastics. The technology has been proven, but the economics need to stack up. E-methanol, made from carbon dioxide and renewable hydrogen is a competitor in-waiting for biomethanol in regions where renewable electricity will be widely available. The Methanol Institute updated its database earlier this year, tracking current and announced capacity for all renewable methanol projects worldwide. Europe is amongst the leaders at this early stage. Let’s hope that rules and regulations don’t get in the way.
[1] “Additionality” for grid-connected green hydrogen means that the production is accompanied by an additional source of renewable energy capacity and implies that there is a degree to which this additional capacity needs to be matched in space (geographical correlation) and time (temporal correlation). Source IRENA
Published: 4 May 26
