Europe's Ambitious Hydrogen Plans Face Challenges

By Tsvetana Paraskova - May 05, 2023

Europe is betting on hydrogen to cut the use of fossil fuels and achieve climate neutrality by 2050, but the hydrogen industry faces challenges in making the sector a scalable and cost-effective replacement for natural gas.

The EU's renewables strategy includes the ambition to produce 10 million tons and import 10 million tons of renewable hydrogen in the EU by the end of this decade. The European Commission has outlined a 'hydrogen accelerator' concept to scale up the deployment of green hydrogen, which, the EC says, will contribute to accelerating the energy transition and decarbonizing the EU's energy system.   

In March, the Commission set out new plans to incentivize and support investment in sustainable hydrogen production through a European Hydrogen Bank (EHB), an initiative aimed at accelerating investment and bridging the investment gap for the EU to reach its ambitious hydrogen targets under the REPowerEU plan.  

Last month, the leaders of some of Europe's biggest economies pledged to turn the North Sea into an offshore wind, hydrogen, and carbon capture energy hub. 

But scaling up hydrogen production and imports would need the creation of an entirely new market, which could face challenges in offering and pricing, experts tell Energy Voice.

European ports could play a part in a future hydrogen economy, and the Port of Antwerp-Bruges plans to capture a part of this new market, the port's hydrogen program manager Maxime Peeterst told Energy Voice.  

Industry officials believe that the EU needs to revise some provisions in the hydrogen regulation in the coming years to make Europe's hydrogen industry globally competitive. The complexity of EU regulations compared to other jurisdictions makes Europe less competitive in hydrogen project advancement, Daryl Wilson, executive director of industry body the Hydrogen Council, told Hydrogen Economist in an interview last month.

"In terms of the raw number of projects proposed and announcements, there are many more projects in the EU versus the US. But there are more projects moving to FID in the US," Wilson said.  

Moscow offers new subsidies for Arctic hydrogen

Natural gas company Novatek will get major tax relief for its projected hydrogen and ammonia project in the far northern Yamal Peninsula.

Natural gas production in Yamal Peninsula. Photo: Atle Staalesen


By Atle Staalesen
April 24, 2023

The natural gas that is spent on production of hydrogen and ammonia in the Arctic will be exempted tax, the Russian government decides.

The measure follows a request from Novatek, Kommersant reports. It could significantly benefit the company’s plans to build a hydrogen and ammonia plant in the region.

Novatek has long planned to develop its Ob project, but international sanctions introduced against Russia following its war against Ukraine has halted progress.

The company initially planned to produce up to 5 million tons of LNG in the project, but then instead decided to go for ammonia.

Contracts were signed with international companies Uniper, RWE and Mitsui in 2021. Few months later, the partners pulled out.

The Russian government now seeks to stimulate a resumption of plans. The bill that this week was sent from Government to the State Duma proposes to remove the production tax on natural gas used to generate hydrogen and ammonia.

The Ob project includes the annual production of 2,2 million tons of ammonia and 130,000 tons of hydrogen. The first part of the project was originally planned launched in 2026 and the second in 2027. It is all based on the natural gas resources of the Verkhnetiuteyskoye and Zapadno-Seyakhinskoye, and later also the Neytinskoye and Arkticheskoye, fields.

Included in the project plans are also the catch and storage of up to 4 million tons of CO2 per year, which was to make the ammonia and hydrogen attractive for the EU market.

There are currently several more Arctic projects on hydrogen and ammonia production.

In northern Norway, company Horisont Energi plans to use natural gas from the Snøhvit field for the production of up to 3,000 tons of blue ammonia per day. In the Norwegian town of Berlevåg, the company Varanger Kraft is in the process of building a plant on the production of green hydrogen based on its local wind power farm. Similar plans have also been discussed in Murmansk, at the Kola Wind Farm.

As international energy have markets increasingly turned towards new and renewable sources, Russian authorities have highlighted hydrogen as a priority area. On the 15th of October 2021, Prime Minister Mikhail Mishustin confirmed that 9 billion rubles (€110 million) over the next three years will be invested in new and domestically developed technology for production, transportation and storage of hydrogen.

The plan was based on Russia’a vast natural gas reserves, as well as nuclear power and renewable energy sources.