The European Union at a Crossroads: Unlocking Renewable Hydrogen’s Potential

Abstract

European countries are at a crossroads on their path to carbon neutrality. Today, they are at the forefront of the global clean hydrogen race but going forward they would be better served by collaborating instead of working alone.

Overall, the European Union (EU) is highly competitive in clean technologies manufacturing and thus well-positioned to benefit from the emergence of global hydrogen markets. But a narrow focus on short-term cost considerations could drive member states to implement national roadmaps with little or no coordination among themselves and hence little or no chance of competing globally.

As a bloc, the EU has pledged to reach carbon neutrality by 2050. Clean hydrogen is a cornerstone of this transformational effort; accordingly, in July 2020, the EU adopted its hydrogen strategy with the ambition of deploying open and competitive clean hydrogen markets for all energy sectors and segments by 2050.1

Success hinges around implementing a cohesive long-term strategy to address a fundamental ques- tion and its associated challenges: where could the EU source competitive and secure renewable hydrogen supplies?

As our previous research shows, all countries have access to renewable resources (such as solar or wind), to different degrees, and could produce some renewable hydrogen locally. However, while resource-rich countries, such as Spain, could evolve into regional exporters, no EU member state has the potential to become a global export champion. At the same time, North African countries, such as Morocco, are well-situated to act as key suppliers to the EU. Furthermore, imports from resource-rich regions like North America could help to address security of supply concerns.2

Today, EU hydrogen demand stands at 7.8 million tons per year (Mt/yr), equivalent to about 10% of global demand. Germany and the Netherlands are the largest consumers, accounting for over a third of EU demand, followed by Poland, Spain, Italy, Belgium, and France, which consume about 0.5 Mt/yr each.3 According to available projections, as hydrogen use grows across all economic sectors, EU hydrogen demand could reach 76 Mt/yr by 2050.

But while the EU strategy sets clear targets on electrolyzer deployment by 2030, it provides very few details on how the bloc could meet demand—and at what cost—by 2050.