For the green hydrogen sector in Europe, 2022 is set to be “the year that really counts”, where important decisions are made, to allow 2023 to be a “real take off”, a paper has said.
On 10 February, Delta-EE published a whitepaper, exploring the viability of reaching the European Commission’s target of 6GW of electrolyser capacity by 2024, setting out how the decisions made by national governments and regulators on green hydrogen in 2022 will be pivotal to determining its rate of growth from 2023 onwards.
As it stands, there is a disconnect between green hydrogen ambition and reality. While it has grown from being seen as a possible bit-part player to a likely pillar of the energy transition, the number of projects operational are small in number. There were around 118MW of electrolysers in operation at the end of 2021 across Europe, equating to 0.02mn tonnes of green hydrogen. In contrast, Europe consumed over 8mn tonnes of grey hydrogen and 500mn tonnes of oil equivalent of natural gas last year, with the paper emphasising how green hydrogen is a new industry that must be built virtually from scratch.
According to Delta-EE’s Clean Hydrogen Projects Database, things are moving in the right direction as, just six months ago, it only foresaw 1.6GW of announced projects due to come online by the end of 2024. This has now grown to just over 6GW, meeting EU targets, and representing a 375% ramp up in announced capacity.
Despite this, there are no guarantees these projects will become operational, with those behind them needing clarity and security of policy support and subsidies to make final investment decisions (FID), neither of which currently exist. Its project risking methodology grades projects against a series of metrics – have they gone through a FID, or been awarded public funding for construction, or signed offtake agreements? – to judge whether they are “firm” or “uncertain”. While 90% of projects in 2022 were found to be firm, the picture for 2023 is very different at just 26%, with 1.3GW of capacity still deemed to be uncertain.
The average size of projects being announced is growing – 2.25MW in 2021, rising to an expected 50MW in 2023 – while the focus is also shifting, with a growing number aiming to sell competitive green hydrogen solutions to customers. The commercial competitiveness of these will likely be built on predictions from feasibility studies of what the future energy, policy and commercial environment could look like, meaning owners, operators and investors will likely wait until anticipated policy measures are finalised and implemented to reduce financial risk to an acceptable level, before making a FID.
Germany, the Netherlands and the UK account for 77% of the “uncertain” capacity announced for 2022 and 2023 – just over 1.3GW – which saw them singled out as three countries to watch. In particular, Germany and the UK have the clearest targeted policy timelines for green hydrogen. Germany is planning to double its 2030 electrolysis capacity goal to 10GW in an update to its national hydrogen strategy, and the UK planning to have a standard for low carbon hydrogen and finalised hydrogen business model in place by the end of the year. Considering these, the flurry of activity at an EU level, and other nations, Delta-EE tipped 2022 to be a year where the political groundwork is laid to de-risk much larger projects expected for 2023, giving greater certainty for project organisers.
As it stands, Delta-EE’s risked scenario sees a shortfall close to 1.8GW on announced projects by 2024, meaning the EU would miss out on its target. However, it noted this excludes any projects yet to be announced and could become operational for 2024, and with 4.4GW announced over the last six months, should similar growth be seen in 2022, the capacity becoming operational by the end of 2024 will likely exceed the EU’s 6GW goal. It added that given the likelihood of positive announcements on national subsidies for green hydrogen in 2022, it believes meeting the 6GW target for 2024 is likely.
