Hydrogen Europe – The European Court of Auditors report in a nutshell.
The European Court of Auditors not only checks the regularity of European spending, but increasingly its political justification. It is therefore important for the hydrogen sector that it is recognised not only to have been managed correctly, but also to be making a significant contribution to the European energy and mobility transition.
Hydrogen Europe commends the ECA for their exhaustive and good analysis of the current state of affairs regarding the hydrogen sector in Europe. The ECA is right on highlighting that the targets set by RePowerEU were rushed and lacked a major impact assessment. The ECA rightly congratulates how much legal framework has been set in record time and this is very positive. But also key pieces of legislation such as the definition of renewable hydrogen have taken too much time, deferring important investments into the sector.
The assessment in an nutshell:
- The Commission was fast – but one sided: With its 2020 Hydrogen Strategy and the 2022 REPowerEU plan, the Commission set targets at EU level for renewable hydrogen production and for importing renewable hydrogen.
- Within a relatively short period of time, the Commission has proposed most of the legal acts to regulate the hydrogen market. Less focus on low-carbon hydrogen: although mentioned, no targets were set.
- An act defining the methodology for assessing greenhouse gas emissions savings for low-carbon hydrogen is still outstanding. Work on standardisation and certification is still required
- However, the renewable hydrogen targets were not clearly defined and driven by political will rather than being based on robust analyses. In addition it was unlikely that set targets for 2030 could be achieved.
- The Commission did not ask the Member States to set targets in line with the EU’s targets and did not establish a coordination to ensure an alignment. In late 2023, it was the Commission President who announced that the Commission will assess how member states will provide a clear hydrogen roadmap towards 2030.
- The speed and degree of implementation of the legal requirements relating to demand targets and permitting depend on the member states. Apart from lengthy and time-consuming infringement proceedings, the Commission has no means to ensure that member states adhere to these targets or requirements.
- The definition of renewable hydrogen was crucial from the very beginning. Investment decisions until the rules for producing renewable hydrogen (Delegated Act) were published in June 2023. Once published, these rules delivered the much needed legal certainty.
- However, the Commission had not yet assessed the impact of these rules on either the cost or the timing for rolling out renewable hydrogen. In fact, several public studies show that the temporal correlation (hourly correlation) rule increases the production cost for renewable hydrogen, thereby reducing its competitiveness compared to fossil-based hydrogen.
- The Commission estimated the amount of investment that would be needed to create a market for renewable hydrogen but did not consider all parts of the hydrogen value chain. The demand side was not properly considered and the Commission’s estimates across different documents were not consistent.
- EU funding is scattered over several programmes with different funding rules. This makes it difficult for hydrogen project developers to determine which programme is best suited to their project. In late 2023, the Commission President announced that the Commission would relaunch a one-stop shop solution to guide project developers on EU funding.
- In the years to come, large amounts of investments will be required all along the hydrogen value chain, the bulk of which will have to be provided by the private sector. In an emerging market like hydrogen, there is a case to incentivise and support industry in making these investments, be it through national and EU public funding or through public authorities that build the essential infrastructure.
Recommendations:
In close collaboration with the member states, the Commission should decide on the strategic way forward towards decarbonisation without altering the competitive situation of key EU industries, which could potentially result in further deindustrialisation. In particular, the Commission should
(a) update its Hydrogen Strategy
(b) update the renewable hydrogen production and import targets set by the REPowerEU plan so that they are ambitious but realistic. In so doing, it should consider regional and industrial sector specificities and the role of low-carbon hydrogen.
The Commission should by mid-2025:
(a) Create a one-stop shop solution for stakeholders under the European Hydrogen Bank and guide hydrogen project developers on available EU funding.
(b) Decide on the future of the Clean Hydrogen Alliance in terms of its scope and number of roundtables and adopt a clear and time-bound mandate for its future work.
In close collaboration with the member states, the Commission should (until mid-2026):
(a) set out and publish an EU roadmap for the development of a hydrogen value chain towards 2030 and beyond, based on its assessment of the national energy and climate plans and its updated Hydrogen Strategy,
(b) monitor the EU’s and member states’ progress in achieving binding and non-binding targets by means of a scoreboard.
READ the latest news shaping the hydrogen market at Hydrogen Central
Hydrogen Europe – The European Court of Auditors report in a nutshell. source
