The past two months has seen a flurry of final investment decision announcements for green hydrogen projects in Europe:
- BP recently announced that they are moving forward with their 200 MW project in Castellon, Spain, as well as a smaller 10 MW project in Aberdeen, Scotland.
- TotalEnergies announced that they were buying a 50% stake in the Oranjewind offshore wind project and planning to build 350 MW of electrolyzer capacity to supply hydrogen feedstock for their refineries.
- German utility EWE is purchasing electrolyzers from Siemens for their 280 MW Emden project in northwestern Germany.
- Shell is also moving forward with their 100 MW Refhyne II hydrogen project near Cologne.
- Virya Energy, HyoffGreen and Messer are going ahead with a 25 MW project in Zeebrugge, Belgium.
Why is the European Union moving forward, while the United States is seemingly lagging behind? This has been typical in past phases of renewable energy development for wind and solar. The EU leads, and the U.S. follows soon after.
Many of these projects benefit from the “important projects of common interest” (IPCEI) grants program, which works similarly to the U.S. Hydrogen Hubs, providing federal funding to match private investment in key projects needed for the energy transition.
In recent years the EU has instituted a variety of “carrot” policies providing positive incentives for green hydrogen production:
- The EU Hydrogen Strategy (2020) provides a roadmap and financial support for the development and deployment of green hydrogen technologies, including funding for research, innovation, and infrastructure development.
- RED II and the proposed RED III provide clear targets for renewable energy use, including green hydrogen, and offer incentives for meeting these targets, such as sustainability criteria and support for renewable hydrogen production.
- The EU Innovation Fund offers financial grants to cover up to 60% of the additional costs for large-scale renewable energy projects, including green hydrogen, thus reducing the financial risk for investors and developers.
- The Clean Hydrogen Partnership promotes research and development through public-private collaboration, offering financial and technical support to accelerate green hydrogen technology adoption.
- State Aid Guidelines for Climate, Energy, and Environmental Protection allow Member States to offer additional financial support for green hydrogen projects, providing the necessary regulatory framework for subsidies and other financial incentives.
- The proposed Carbon Contracts for Difference policy would provide financial support to green hydrogen producers by covering the cost difference between green hydrogen production and conventional fossil fuels, making green hydrogen more economically viable.
The EU also uses regulatory mandates – the “stick” approach – to promote adoption. The Fit for 55 package introduced stricter emission standards and carbon pricing mechanisms that penalize high-emission activities. This creates a financial disincentive for using fossil fuels and indirectly promotes green hydrogen as a cleaner alternative.
Europe is getting a head start now, but don’t expect it to last. Once the IRS guidelines for the section 45V green hydrogen tax credit program created by the Inflation Reduction Act are finalized, this will provide investors with much greater certainty. Projects funded under the Hydrogen Hubs program will develop crucial infrastructure to allow greater market adoption of green hydrogen.
Leave a Reply