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Europe’s hydrogen revolution: the outlook for transport

On 8 July, the European Commission unveiled its long-anticipated Hydrogen Strategy, laying out a roadmap to make the EU the global leader in the hydrogen economy. The Hydrogen Strategy aims to foster the energy transition and act on the ambition of achieving climate-neutrality by 2050. The Commission aims to grow the share of hydrogen in the EU’s energy mix from the current 2% to 13-14% by 2050.

The momentum for hydrogen has grown in recent months. Market demand has significantly increased and the costs of renewable energy have decreased. Moreover, several Member States already published national hydrogen initiatives (e.g. Germany, France, the Netherlands). According to the Commission, a coordinated approach at EU level is necessary to scale up fast and streamline investment needs.

With the Hydrogen Strategy, the Commission charts the path towards ‘green’ hydrogen, based on renewable electricity (e.g. solar and wind energy). However, as green hydrogen is not yet cost-competitive against fossil-based hydrogen, the Commission acknowledges the potential of low-carbon hydrogen (e.g. Carbon Capture Storage) as a facilitator to scale up production and stimulate the market demand for hydrogen.

Hydrogen as enabler of emissions-free transport

The Hydrogen Strategy presents opportunities for the transport industry to act on the ambition of decarbonization and reducing CO2 emissions. Although electrification seems to be the most viable option on the short term, hydrogen is dubbed as the energy source for the future of transport. According to the Commission, the application of hydrogen in the transport industry is likely to develop through a gradual trajectory.

  • In the first phase (2020-2024), the objective is to produce up to 1 million tonnes of renewable hydrogen and to facilitate the take up of hydrogen consumption in commercial fleets (e.g. taxi’s) and specific parts of the railway network. Moreover, it could also be applied to heavy-duty transport, such as buses, lorries, coaches – currently responsible for about 6% of total EU CO2 emissions.
  • In the second phase (2025-2030), the objective is to make hydrogen an intrinsic part of an integrated energy system and to produce up to 10 million tonnes of renewable hydrogen. In this phase, green hydrogen should be cost-competitive with other forms of hydrogen production, but demand-boosting policies will be needed for the application of hydrogen in the railway sector and maritime transport (e.g. short-sea shipping and inland waterborne transport).
  • In the last phase towards maturity (2030-2050), renewable hydrogen and hydrogen-derived synthetic fuels could be applied to several hard-to-decarbonize modes of transport, such as aviation and deep-sea shipping, although the Commission acknowledges more research and innovation efforts are required to realize these ambitions.

In order to realize the hydrogen ecosystem and trajectory for transport, the Commission opts for an integrated value chain approach. In doing so, the Commission incorporates several aspects which are necessary to facilitate the hydrogen transition, ranging from infrastructure (e.g. the deployment of hydrogen refueling networks for the different modes of transport) to production techniques and market regulation (e.g. EU incentives to stimulate demand-side support policies).

The Commission is still exploring further renewable hydrogen appliances in the transport industry. This broader uptake of green hydrogen in the transport sector will be reflected in the Strategy for Sustainable and Smart Mobility, which is due for publication in the fourth quarter of 2020, and for which the public consultation has recently opened

Stimuli for the Hydrogen revolution

The Clean Hydrogen Alliance, a Commission-led coalition that brings together industry, governments and civil society, will identify a robust pipeline of projects to accelerate the upscaling of hydrogen production. The Alliance will be strongly anchored in the hydrogen value chain, covering green and low-carbon hydrogen from production via transmission to mobility, industry, energy and heating applications.

Financial instruments such as InvestEU, the Horizon partnership for clean hydrogen and the Cohesion Fund, which will expectedly be topped up by financial resources from the €750 billion Next Generation EU Recovery Fund, will help drive clean hydrogen past its tipping point.

05
Jun
Blog

From Green Deal to Green Recovery

While the COVID-19 crisis has seen unprecedented challenges for the European transport sector, it also demonstrated the crucial role transport plays to ensure an uninterrupted supply of goods and services across Europe. Although the recovery of the sector is of vital importance of Europe’s economy, the recovery from the crisis also provides a momentum for the industry to act on the ambition of decarbonization and reaching climate neutrality by 2050. As put forward in the Commission’s EU Recovery Plan, the COVID-19 recovery phase should be used to pave the way towards not only a resilient and reliable transport sector, but also a sustainable one that is at the heart of the European Green Deal.

Following the publication of the Commission’s plan for recovery – dubbed as ‘Next Generation EU’ – as well as its updated Work Program for 2020, we have a clearer picture how the greening of the sector will unfold in the coming years. Dr2 Consultants’ transport team presents four take-aways for sustainable transport that will dominate the EU’s policy agenda in the years to come.

1. Alternative fuels, sustainable vehicles

Alternative fuels are a key priority for the Commission to cut emissions and create jobs. The EU’s executive arm aims to accelerate the production of low-emission fuels and the deployment of sustainable vehicles and vessels. In order to finance this, public investment should come with a commitment from the industry to invest in cleaner and more sustainable mobility.

The roadmaps for the further deployment of different fuel types are expected to be part of the highly-anticipated FuelEU proposals – to be published later this year – that will aim at increasing the use of alternative fuels in the maritime and aviation sector. Furthermore, in early 2021, the Commission will put forward the revision of the Alternative Fuels Infrastructure Directive, which will ensure the development of the necessary infrastructure across Member States to stimulate the uptake of sustainable fuels for all transport modes. 

2. The convergence of the energy and mobility systems

In order to decarbonize the transport sector, no stone is currently left unturned. Although electrification seems to be the most viable option on the short term, hydrogen is dubbed as the energy source for the future. The Commission’s flagship instrument for research and innovation, Horizon Europe, will be instrumental to kick-start the clean hydrogen revolution. The Commission has increased its budget in the new Multiannual Financial Framework (MFF) with €13.5 billion, bringing Horizon Europe’s new budget to a total of €94.4 billion.

Later this month, the Commission will launch the Clean Hydrogen Alliance to stimulate the upscaling of clean hydrogen production in Europe. Also, the work of the European Battery Alliance will be accelerated. On 24 June, the Hydrogen Strategy is expected to be published.

3. Cities at the heart of sustainable mobility

With over 70% of EU citizens currently living in urban areas, achieving sustainability in cities across Europe is one of the main challenges of the recovery period. As a direct result of the COVID-19 crisis, noise pollution and air quality figures have dropped to an unprecedented level. Moreover, cities reinvented the way citizens move around, e.g. by giving priorities to pedestrians, introducing speed limits for vehicles and implementing new cycling lanes. The shift towards smart and more livable cities, therefore, places a big responsibility on the transport sector.

The Commission aims to increase the support for zero and low-emission mobility in cities by investing significantly in clean urban mobility. Funding calls in the Connecting Europe Facility (CEF) and InvestEU programs will focus on clean fleet renewals by cities, the deployment of charging points and mobility-as-a-service solutions.

4. Taxation, anyone?

In the Next Generation EU, the Commission proposes to generate additional own resources by new taxes. Although the Commission still must draw up the specifics, it floated the option of extending the EU’s Emissions Trading System (ETS) to the maritime sector, thereby raising up to €10 billion annually that will feed into the EU’s budget. In addition, the so-called carbon border adjustment mechanism is likely to be introduced, putting a carbon levy on non-EU imports.

Raising these kinds of ‘European’ taxes is unprecedented. As Member States have diverging views on this matter, it remains to be seen whether we can expect a breakthrough on these new own resources any time soon.

Next steps

The Commission aims to have the new MFF and recovery fund operational by 1 January 2021. EU leaders are expected to start the negotiations on the budget proposal during the European Council Summit on 19 June and will have multiple rounds of very difficult talks until a compromise is made. This ultimately means that the budget as proposed now for transport-related funding instruments can still change. The budget negotiations are expected to accelerate when Germany takes over the rotating six-months Presidency of the Council of the EU on 1 July 2020.