Hydrogen landing zone – we need the rules of the game now – Shell.
Hydrogen might be the smallest and lightest molecule in the universe, but at Shell we believe that it will play a big role in the energy transition. Deploying clean hydrogen as both a feedstock and a fuel will enable the clean-up of CO2 emissions from heavy industries such as petrochemicals and steel, as well as heavy-duty trucks.
Together, these sectors account for 26% of EU GHG emissions. This alone would make a major contribution to the European climate neutrality target, which we support.
This summer we took a bold decision with the final investment on Holland Hydrogen I, the biggest electrolyser project in Europe with its planned 200MW capacity. It will transform North Sea wind generated electrons into hydrogen, which will feed into transport fuels. Our decision was at least in part motivated by the encouraging vision and policy set out by the EU.
The EU Commission has proposed a target to use 20 million tonnes of renewable hydrogen by 2030. This is part of the REPowerEU strategy to accelerate decarbonisation and move away from Russian fossil fuels.
By 2030 no less than 50% of hydrogen in industry should be renewable. Likewise, for road transport, shipping and aviation, ambitious targets have been set. We support a swift agreement on these measures through the revision of the Renewable Energy Directive (RED).
But while the ambition is high, the rules of the game are still not clear. We still don’t know whether and when the hydrogen we will produce can be qualified as renewable. The Delegated Acts (DAs) that will regulate this are crucial pieces missing from the puzzle.
This is important for projects in Europe, including those that aim to bring renewable hydrogen from the sunny South to the rainy North, but also for countries with great potential for exporting renewable hydrogen to Europe.
These Acts have been discussed for at least three years. The latest twist in this saga was the recent plenary vote in the European Parliament on the relevant article in the RED, resulting in further delays. Don’t get me wrong – it’s an important discussion.
The additional hydrogen needs to stimulate additional renewable electricity generation, while ensuring there remain sufficient renewable electrons to decarbonise the rest of the system.
It is now time to act. We have discussed every potential angle of every potential detail. We should rise above the differences and look to the future. We want to, and Europe needs to, scale up. We need legal certainty for the coming decade and a level-playing field throughout the EU.
We need to ensure that renewable hydrogen lives up to its potential to decarbonise industry and transport. We need a solution that ensures sufficient volumes of renewable hydrogen are produced, imported, and consumed. A solution that is flexible enough, especially in the start-up phase, to kick start the market.
We must reach a landing zone now. This means allowing the two relevant DAs on ‘additionality’ and on calculation rules for greenhouse gas emissions savings to be finalised. Their legal basis should not be undermined by changing the RED.
In this landing zone, the DAs would reflect a transition period to 2028. It would stimulate the early movers, who are willing to take the investment risk when the market does not yet exist. Projects starting before that date would be allowed to maintain their power purchase agreements (PPAs) for up to 15 years.
There would be a maximum of 36 months between the coming online of an electrolyser and a renewable generation asset for it to be qualified as producing Renewable Fuels of Non-Biological Origin (RFNBO). Matching generation on a monthly basis of renewable electrons with production of hydrogen would be sufficient until 2030, with possible tightening thereafter based on a Commission assessment.
The offshore wind potential of the Dutch North Sea would be allowed to enable renewable hydrogen production in the German Ruhrgebiet. In other words, sourcing electrons from outside of the bidding zone would be allowed while booking transmission capacity.
To optimise running of an electrolyser, it would be possible to top-up a renewable PPA with grid electricity on a monthly basis (and hourly post 2030). The average carbon intensity of that combination in that period would determine whether the hydrogen produced qualifies as RFNBO.
Repowered assets, which have received support in the past, would be allowed to count towards RFNBO producing. And finally, to reduce electrolyser downtime, we should be able to produce hydrogen from electrons in storage regardless of their age or location. Simultaneously, we need an accelerated and sustained roll-out of renewable electricity. This will need fast-tracking of permitting rules.
With these elements in place, the investment case for renewable hydrogen would be clear. It would unlock a whole suite of projects to move forward in Europe and abroad. It would ensure the true sustainability of the produced renewable hydrogen is beyond doubt and will stand the test of time.
As VP Hydrogen, I have one of the most challenging and rewarding jobs in Shell. Our company has the financial capability and technical know-how to make big and bold investment decisions. Decisions that enable the switch from CO2 intensive to clean energy use.
Now we need policymakers to take bold steps to complete the rules of the game for every player that is ready to take early action and get the hydrogen economy moving.
Let’s get going.
READ the latest news shaping the hydrogen market at Hydrogen Central
Hydrogen landing zone – we need the rules of the game now, October 31, 2022
