Industry in particular is waiting for clarity on hydrogen

High costs due to slow sustainability of electricity

In 2023, the European Commission adopted two so-called 'delegated acts' that determine when hydrogen - Renewable Fuels of Non-Biological Origin (RFNBO) - can be called 'green' and can count towards the above goals. The most important rule is that hydrogen is sufficient if the electricity in a country is produced to a very large extent renewable (90%) or_CO2-free (18 grams of CO₂ / MJ). Many countries in the EU will comply with this in the coming years, but not the Netherlands. Partly due to new strict rules on solar and wind farms and delays around offshore wind, the roll-out is slower than previously expected, PBL recently calculated. As a result, the production of green (RFNBO) hydrogen in the Netherlands is subject to complex requirements that drive up costs, such as a time correlation with the production of electricity from sun and wind, which means that electrolysers have to stand still for thousands of hours a year. The slow sustainability of electricity production is therefore driving up the price of Dutch green hydrogen, with adverse consequences for our industry.

Blue hydrogen: a cheaper but dead end

Meanwhile, a much cheaper alternative is hanging over the market: blue or so-called 'low-carbon' hydrogen. This is hydrogen made from natural gas or fossil residual gases, whereby only part of the released_CO2 emissions are captured and stored. The above-mentioned Letter to Parliament calls this route a 'fast and affordable sustainability of industry and the electricity sector'. This is seen as a promising route, especially for hydrogen power plants in the electricity sector. Moreover, this sector is not covered by the above-mentioned blending obligation for green hydrogen. Blue hydrogen is heavily subsidized: the SDE++ covers the additional costs and the national government takes the 'flooding risks' of the CO₂ infrastructure, as was evident from answers to previous parliamentary questions.

The consequence of the support for cheaper blue hydrogen is that market parties are becoming even more reluctant to invest in electrolysis capacity for truly renewable, green, but now even more expensive hydrogen. If this blue hydrogen were truly carbon-free or low-carbon, then this would not be a problem. However, the reality is different. The subsidies for the capture and storage of_CO2 apply to the Steam Methane Reforming process with only 65% capture; the rest goes to the atmosphere. This is not all: a very large part of the gas for hydrogen comes from shale gas fields in the US. The methane losses that occur during this extraction are enormous. Methane is a more harmful greenhouse gas that warms the atmosphere dozens of times more than_CO2. Although importers of hydrogen, for example, have to pay for the emissions that took place outside the EU during production - the Carbon Border  Adjustment Mechanism  - methane emissions are not included in this. Subsidized blue hydrogen is therefore only low-carbon on paper. At the same time, it is pushing carbon-free and renewablely produced green hydrogen out of the market.

Around 2040, industry in Europe will have to operate_CO2-free. With blue hydrogen, this point will never be reached for the companies. It is therefore a short-lived attractive, but ultimately dead end. 

Clear policy for green hydrogen needed

What is needed now is mainly clarity for market parties so that industries are willing to switch to green hydrogen and energy companies, among others, want to invest in electrolysis. This requires a number of things: 

• Give industries an obligation for an increasing share of green hydrogen, but at the same time tempt these industrial companies by fully reimbursing the additional costs.
• It is better to opt for a lower ambition for 2030 than for an expensive, partly uncompensated obligation that will cause problems for industries or make them decide not to use hydrogen.
• Blue, so-called 'low-carbon' hydrogen is not a logical intermediate step, but an obstacle to green and truly_CO2-free hydrogen. Let companies pay most of the additional costs themselves, as an option to avoid their_CO2 costs.
• Electrolysers can limit grid congestion in an area by reducing peaks of wind and solar power at the right time and in the right place. Value this with low grid tariffs, according to the results of a recent study by CE-Delft.
• Develop virtually_CO2-free electricity production as soon as possible. Then hydrogen made from electricity is always green (RFNBO) according to EU rules and is therefore cheaper to produce. With less strict rules on solar and wind farms, this will certainly be possible around 2030.

The role of green hydrogen in making the energy supply more sustainable is therefore major and ultimately crucial. It is now important for the government to offer positive and, above all, clear policy to get the market going and to gain confidence among investors.