European Union (EU) sets its sights on importing vast quantities of renewable hydrogen by 2030, the path to realizing these ambitions is not without challenges.
Green hydrogen, generated through the electrolysis of water using renewable energy sources like wind and solar, holds the promise of a cleaner energy future. Developing countries in the Global South, often blessed with abundant wind and solar resources and available land, stand to gain significantly from this renewable energy source.
The EU, in its forward-looking plans, has committed to importing ten million tonnes of renewable hydrogen by 2030. For cash-strapped developing nations, this presents a unique opportunity to tap into a new revenue stream while contributing to global decarbonization efforts.
The Hurdles Facing Export-Focused Green Hydrogen Projects
While the potential is immense, green hydrogen projects focused on export face substantial initial challenges, primarily related to financing and construction. Developing economies frequently encounter higher capital costs, which can impact the final price of hydrogen.
One potential solution lies in securing capital through development banks, often backed by governments. However, this approach has implications for renewable energy projects powering green hydrogen production. EU regulations permit state aid for renewable energy assets built alongside an electrolyser or with a direct connection. Yet, electrolysers cannot rely on renewable projects previously built with state aid, even if they meet regulatory criteria.
Drawing on development bank finance can trigger state aid rules, potentially impacting hydrogen’s eligibility as a renewable fuel of non-biological origin (RFNBO) and its participation in future auctions or industrial use mandates.
To inspire investor and bank confidence in emerging economy hydrogen projects, the EU has introduced member-state pilot auctions alongside its commitment to importing renewable hydrogen.
Germany’s H2Global import program, designed to purchase green ammonia, methanol, and synthetic aviation fuels from outside the EU on ten-year contracts, is a key element of the EU’s hydrogen strategy.
Participating in the H2Global auction, however, is not a straightforward process. It involves an extensive document-heavy procedure, potentially disadvantaging companies with limited German-language operations or access to translators. Strict compliance with EU public procurement laws and state aid regulations adds to the complexity.
The auction criteria are non-negotiable, and any failure to meet them leads to disqualification. Smaller or newer firms may find it necessary to partner with others or hire subcontractors to fulfill the requirements.
The overwhelming volume of paperwork involved has caused delays in the auction process, highlighting a potential hurdle for export-oriented green hydrogen projects seeking access to the EU market.
France’s Quest for Natural Hydrogen Reserves
While green hydrogen production is gaining momentum, another hydrogen source is capturing attention: natural hydrogen. France has recently seen a surge in applications for exclusive mining exploration permits to uncover natural deposits of hydrogen and other elements.
Although determining the exact global quantity of natural hydrogen remains challenging, France’s geological and biological forces make it an attractive prospect for natural hydrogen prospecting. Estimates suggest that these deposits could potentially meet a significant portion of global demand, pending further data confirmation.
The increase in permit applications in France is attributed to policy changes, particularly the inclusion of “native hydrogen” in the country’s mining code. France is now the only European nation with such a provision, reflecting its commitment to exploring this cost-effective hydrogen source.
Natural hydrogen can be found through various processes, including serpentinisation, radiolysis of water, deep degassing, iron reduction, sulfur oxidation, thermal decomposition of organic matter, and biological activity.
