France and Brazil announce ambitious plans to bolster the production of low-carbon hydrogen. These two nations, with their distinctive approaches, are positioning themselves as global leaders in the race to harness the power of green hydrogen.
In a resolute move towards a sustainable future, the French government has committed to allocating €4 billion in contracts-for-difference (CfDs) over a three-year period, from 2024 to 2026. These CfDs are not just financial instruments; they represent a substantial push to promote clean hydrogen production.
The significance lies in the duration of these CfDs – a substantial 15 years. This long-term commitment sends a clear signal that France is determined to bridge the cost gap between clean and grey hydrogen, the latter being derived from fossil gas. The funding will provide essential financial stability for clean hydrogen projects, encouraging investors to take the leap into this promising sector.
Price is a pivotal factor in selecting projects for CfDs, accounting for a substantial 70% of the selection criteria. However, France recognizes that there’s more to clean hydrogen than just the bottom line. The remaining 30% of the criteria are focused on non-price elements, emphasizing the broader impact and sustainability of the projects.
Further incentives are in place for projects capable of redirecting renewable electricity to the grid during periods of high demand. This innovative approach aligns the growth of the hydrogen sector with the grid’s needs, ensuring stability in the energy ecosystem.
Moreover, plants where at least 50% of the power input comes from newly built renewables will receive additional incentives. This not only encourages the integration of renewable energy sources but also accelerates the transition to a greener grid.
It’s important to note that France’s definition of “low-carbon” hydrogen may not perfectly align with the European Union’s definition of renewable hydrogen. France is advocating for a 20% discount on the EU’s Renewable Energy Directive target for industrial hydrogen use to be renewable.
The country’s significant nuclear power mix may exempt it from needing additional renewables when producing renewable hydrogen. In regions with a carbon intensity below a certain threshold, electricity can be sourced from the grid without the requirement for additional renewables.
On the other side of the Atlantic, Brazil is also making substantial strides in the low-carbon hydrogen arena. The Brazilian government is actively working on a Triennial Work Plan aimed at establishing a robust regulatory system for hydrogen by year-end.
This plan goes beyond definitions; it aims to define what qualifies as “low-carbon” or “green” hydrogen, and it expands the role of existing oil and gas regulators. Certification schemes, lifecycle emissions methodologies, and alignment with international standards are integral components of this regulatory roadmap.
Brazil has already laid the groundwork for a low-carbon hydrogen revolution, boasting a pipeline of projects valued at an impressive $30 billion. However, the absence of regulations and firm offtake agreements has made international investors somewhat hesitant to fully commit to these ventures.
Recognizing the need for incentives, Brazilian officials are considering tax incentives to bolster the green hydrogen sector. While specifics about the nature of these tax credits and whether they will support supply, demand, or both are yet to be disclosed, it’s a clear signal of Brazil’s intent.
France’s €4 billion CfD commitment and Brazil’s regulatory journey and tax incentive considerations are testaments to their shared commitment to promoting low-carbon hydrogen production. These initiatives have the potential to shape the future of clean energy in both nations and contribute significantly to the development of a sustainable hydrogen economy on a global scale.
As the world races towards a cleaner, more sustainable energy future, France and Brazil are leading the charge, demonstrating that the path to low-carbon hydrogen is paved with visionary policy decisions and innovative financial mechanisms. Their partnership in this endeavor holds the promise of a greener and more sustainable world for all.
