Financing, demand gaps stalling EU hydrogen projects – report
Clean Energy Wire
Europe's hydrogen market expansion has not stalled due to lacking corporate interest, but because regulatory, economic and infrastructure risks have made investments too costly and uncertain, energy industry association BDEW said in a new report.
Green hydrogen is viewed as a cornerstone of the European Union's efforts to curb reliance on fossil fuel imports and to decarbonise heavy industries such as steel. Yet, both supply and demand have fallen far short of expectations, despite billions in subsidies in countries such as Germany.
The study examined risks in the sector from production and transport to storage and end use. It found that uncertainties and high costs are weighing on projects at every stage, making it harder for companies to commit to major investments. The report was based on interviews with industry players, including chemicals group BASF and German trade union IG Metall.
The authors said piecemeal steps will not be enough and called for coordinated policy packages to reduce uncertainty and improve financing conditions. Among their recommendations, the authors urged lawmakers to temporarily relax renewable power sourcing rules that require hydrogen producers to rely on newly built wind and solar parks rather than using existing ones, arguing the current setup pushes up costs and delays projects. At the same time, infrastructure such as a hydrogen core network must be developed.
To boost demand, the study also called for clearer incentives for buyers, including quotas and public procurement to support products such as green steel and help boost market formation. "We need visible large-scale projects to demonstrate the feasibility and scalability of hydrogen projects," said Kirsten Westphal, BDEW executive board member.
A recent report by energy research institute EWI found Germany's expansion of electrolyser capacity to produce green hydrogen is moving at a slow pace. The previous government had aimed to have 10 gigawatts (GW) of hydrogen electrolysers in use by 2030 to help decarbonise heavy industry, yet the country has only 181 megawatts of capacity in operation, EWI said.