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Europe’s hydrogen infrastructure plans need a reality check

Europe is proposing tens of thousands of kilometres of expensive hydrogen pipelines – but the demand case for some of this infrastructure is doubtful.

  • The range of plausible estimates for European hydrogen demand is vast, not least due to uncertainty around practicable use cases and production costs.
  • There are “no regret” industrial applications for the molecule, which will likely require a pipeline network. But such a network will be far smaller than the one being proposed.
  • Proposals from gas infrastructure operators need heavy scrutiny. It is vital not to award public funding or subsidies to unrealistic projects.
  • The UK should focus on its own domestic hydrogen needs. Claims the country will be a key exporter of green hydrogen are based on hope and hype – not hard data.

The European Commission adopted its sixth list of Projects of Common Interest (PCI) late last year. A total of 166 infrastructure projects were shortlisted, of which more than one-third were hydrogen and electrolyser projects. The list of hydrogen projects included multiple parts of the European Hydrogen Backbone (EHB) initiative, which is being developed by a group of 33 gas infrastructure operators.

They are proposing a 53,000 km EU-wide hydrogen pipeline network, using 60% repurposed natural gas pipelines and 40% new pipelines. This would cost hundreds of billions of euros.

Source: EHB

In a 2021 report justifying this ambitious proposal, the EHB concluded that the EU and UK could see total hydrogen demand of up to 2,750 TWh (around 83 million tonnes) by 2050. It is the prerogative of asset owners to try to monetise and utilise their assets as best they can. The problem is that there is vast uncertainty over what EU hydrogen demand will be in 2030 – let alone 2050.

The main risk that we see across hydrogen and hydrogen governance is the oversizing of the network.

Raphael Hanoteaux, E3G

Other estimates see hydrogen contributing far less to Europe’s energy transition. In its 2023 Energy Outlook report, UK oil and gas giant BP created an “accelerated” scenario where the world manages to cut CO2 emissions 75% by 2050, and keep average temperatures increases well below 2 degrees Celsius. Even in this hopeful scenario, BP sees EU hydrogen consumption at around 35 million tonnes – less than half the EHB estimate.

“The main risk that we see across hydrogen and hydrogen governance is the oversizing of the network,” says Raphael Hanoteaux, senior policy advisor on gas politics at think tank E3G. The firm has surveyed estimates of European hydrogen demand by 2030 and uncovered a range from 2 to 26 million tonnes.

Nor is there any less disagreement when it comes to hydrogen demand from specific countries. Germany will almost certainly be the largest source of European hydrogen demand. FNB Gas – the German association of gas transmission grid operators – released plans for a 9,700km core network last year with an estimated cost of almost €20bn. The plans were based on the expectation that German hydrogen demand will reach 279TWh by 2032. INES – the association of gas storage system operators – commissioned a study from Aurora Energy Research. The research firm estimated Germany will need just 73TWh of hydrogen in 2030.

Construction of the European natural gas pipeline EUGAL near Gustebin, Germany, in 2019.

Rising costs

The sheer range of estimates on hydrogen requirements is unsurprising.

The industry is at a nascent stage and there is vociferous debate around the interlinked issues of cost, transport, use-cases, demand and political support. The EHB analysis argued that in 2050, up to 2,500 TWh of European green hydrogen could be produced for less than €1.5/kg. Aurora’s most recent projections have the average wholesale price of low-carbon hydrogen at over €3/kg by that date. Some analysts think that is still overly optimistic.

Green hydrogen is looking more expensive, not less.

Anne-Sophie Corbeau, of Columbia University’s Center on Global Energy Policy

Estimates of 2030 prices are similarly diverse – and they are going up, not down. In 2021, Boston Consulting Group (BCG) described a consensus view that the wholesale price of green hydrogen available to Europe in 2030 would be less than €3/kg. In October last year, BCG essentially doubled its assumption to €5–8/kg. Some of the factors driving the increase are cyclical. Capital costs have risen along with interest rates. Supply chain constraints have hit wind and electrolyser manufacturers. These costs may come down in time.

Other cost factors are structural. BCG highlights that electrolyser systems are complex, and there is limited scope for cost reduction across many of the components. Europe’s focus on the additionality principle means that green hydrogen has to come from new renewable generation. Under additionality, it would require doubling the world’s entire solar and wind capacity just to replace grey hydrogen with green. This raises the issue of land availability and transmission infrastructure.

“As people start to investigate hydrogen they realise it’s more complicated than they thought,” says Anne-Sophie Corbeau, a global research scholar at Columbia University’s Center on Global Energy Policy. “Green hydrogen is looking more expensive, not less.”

The cost of producing hydrogen is one key factor in determining practicable use cases. Another is efficiency. When it comes to residential heating, most engineers deride hydrogen as vastly inferior to direct electrification and heat pumps. There may be a stronger case for hydrogen in decarbonising industrial heat. But even here direct electrification – for example using resistance or electric arc furnaces – will be an option.

In transport there is growing consensus that hydrogen makes no sense for cars and other light-duty vehicles. European regulation on alternative fuels infrastructure (AFIR) will require a network of both hydrogen and electric charging infrastructure across the continent. But EVs look increasingly likely to dominate the bus and truck markets in Europe, with hydrogen playing a far smaller role.

When it comes to short-haul aviation and shipping, hydrogen will likely fight it out with batteries. Many analysts see potential for hydrogen-based e-fuels in long haul aviation and freight shipping. But the variation in estimates for hydrogen across transport is considerable.

Show some backbone

This is not an argument against a European hydrogen pipeline network – but it is an argument for nuance. Gniewomir Flis, a clean tech consultant specialising in hydrogen, believes it will make sense to have some form of hydrogen backbone.

“This is particularly the case for countries that have significant heavy industry and no way of producing sufficient quantities of hydrogen themselves,” he says. It is no surprise that the EHB initiative has its origins in Germany, the Netherlands and Belgium.

A report from German think tank Agora Energiewende – on which Flis was an author – argues for building hydrogen infrastructure around a core set of “no regret” industrial use cases. Europe already uses almost 10 million tonnes of grey hydrogen derived from natural gas each year. Much of this is as a feedstock for ammonia or as a refining agent. Emma Woodward, European hydrogen market lead at Aurora, says the first driver of hydrogen use should be replacing grey hydrogen at Europe’s industrial hubs.

Agora Energiewende’s no-regret corridors for 2030 based on industrial hydrogen demand. Source: Agora Energiewende & AFRY (2021)

The industrial demand from key countries like Germany and the Netherlands suggests the creation of a hydrogen backbone is more likely than not. Flis says other parts of Europe are also likely to need hydrogen infrastructure. Italy has the renewables potential for hydrogen production but not the storage capacity. Greece is in a similar position. Poland is a large user of hydrogen but lacks the renewables capacity to produce green hydrogen domestically. The hydrogen infrastructure projects on the PCI list involve all these countries (see the table below).  

Hydrogen IPIC Projects
Hydrogen interconnections in Western Europe (HI West)
1: Corridor Portugal – Spain – France – Germany
2: France – Germany cross-border hydrogen valleys
3: Internal hydrogen infrastructure in France to the Belgium border [currently known as Franco-Belgian H2 corridor]
4: Internal hydrogen infrastructure in Germany [currently known as H2ercules West]
5: Internal hydrogen infrastructure in Belgium [currently known as Belgian Hydrogen Backbone]
6: Internal hydrogen infrastructure in the Netherlands [currently known as National Hydrogen Backbone] 
7: Hydrogen interconnectors National Hydrogen Backbone (NL) – Germany
8: Offshore hydrogen pipeline Germany [currently known as AquaDuctus]
9: Hydrogen interconnector Denmark – Germany
Hydrogen interconnections in Central Eastern and South Eastern Europe
1: Hydrogen corridor Italy – Austria – Germany
2: Hydrogen interconnector between Czechia and Germany
3: Hydrogen interconnector between Greece and Bulgaria
Baltic Energy Market Interconnection Plan in hydrogen (BEMIP Hydrogen)
1: Hydrogen interconnector between Sweden and Finland [currently known as Nordic
Hydrogen Route – Bothnian Bay]
2: Hydrogen interconnector between Finland, Estonia, Latvia, Lithuania, Poland and
Germany [currently known as Nordic-Baltic Hydrogen Corridor]
3: Hydrogen interconnector between Sweden, Finland and Germany [currently
known as the Baltic Sea Hydrogen Collector]
Source: European Commission

Aurora and Agora Energiewende also expect hydrogen demand to emerge from new use cases. One such case would be its use in Europe’s steel industry. And even those on the more sceptical end of the hydrogen spectrum think the molecule could provide seasonal storage to firm up the power sector.

Yet forecasting demand from new use cases is challenging. Agora notes that the long-duration storage landscape is increasingly crowded with technologies including liquid air, compressed air, advanced geothermal, new battery chemistries, flow batteries and thermal storage.

Ultimately, European hydrogen demand is likely to be much lower than many of the estimates coming from the hydrogen industry and infrastructure operators. That in turn has clear implications for how much infrastructure is required. Flis says EHB will be around half of what the initiative has envisaged.

Woodward says the uncertainty over demand means Europe’s backbone network plans need a lot more thought.

“We need to consider where we’re expecting to produce hydrogen, where we’re expecting to import it and where future hydrogen demand is going to develop,” she says.

Industrial ambition

This touches on another factor that creates fertile ground for disagreement over hydrogen needs. Even where cost and efficiency are not in hydrogen’s favour, political support can tip the scales. The more vocal critics of government hydrogen plans are worried that policy support and subsidies will create infrastructure for which there is no economic rationale.

“Companies are making the case that they need public support for ramping up the hydrogen network – through the European Investment Bank, through EU or national funding,” says Hanoteaux. “This is very dangerous because we’re looking at plans where we don’t have the demand, we don’t have solid data.”

The question of politics and policy also extends beyond EU-level subsidies. A recent study from the Austrian Institute of Technology found that one of the cheapest sources of green hydrogen would be importing it from Spain through pipelines. Other countries that aim to be serious producers of green hydrogen include Morocco, Chile and the UAE.

But the question is whether these countries will be happy to simply produce green hydrogen for export, or whether they will attempt to move up the value chain and build their own industrial hubs.

“German industrial players are concerned that their products made with imported hydrogen will be too expensive,” says Corbeau. “You could see green hydrogen-producing countries investigating semi-finished and finished products that compete directly.” Estimating hydrogen demand in 2050 means reckoning with whether Europe is importing hydrogen to make ammonia and steel, or importing green ammonia and steel directly.

A dose of reality

All this has implications for the UK’s own hydrogen plans.

Like the rest of Europe, the UK has a set industrial use cases for which green hydrogen makes sense. The UK produces and consumes around 700,000 tonnes of grey hydrogen each year. Much of it goes to make fertiliser and refine oil. This first priority should be replacing this with green supplies.

There could also be scope for using hydrogen in seasonal storage or even to rejuvenate a flagging steel industry. Most other proposed use cases – including hydrogen for home heating – are literal pipe dreams.

But the UK and Germany have already held discussions over a potential hydrogen pipeline from the UK to Europe. The Scottish government has awarded the Net Zero Technology Centre (NZTC) £200,000 to demonstrate the feasibility of hydrogen exports to Germany. The announcement followed an NZTC report published last year arguing for a hydrogen pipeline connecting the two countries at an estimated cost of £2.7bn.

It is hard not to view this argument as the product of contagious hydrogen hype – one based entirely on theoretical scenarios rather than reliable data.

The NZTC used a World Energy Council (WEC) estimate from 2021 that suggests total EU demand for hydrogen and its derivatives could reach 60 million tonnes by 2050. The fundamental lack of clarity over demand in 2030 – let alone 2050 – is entirely unaddressed.

Similarly, the analysis uses estimates from a 2021 International Energy Agency report on Northwest Europe to suggest that Scotland could produce hydrogen from offshore wind in the North Sea at below €2.6/kg by 2030. More recent estimates – even those from gas operators pushing for hydrogen pipelines – are far higher.

German gas transmission operator GASCADE commissioned DNV to look at hydrogen production in the North and Baltic sea. In February last year, DNV concluded that the lowest costs a North Sea offshore hydrogen production system could achieve in 2030 would be well over €4/kg.

The energy industry needs estimates, it needs projections, it needs scenarios. But these should illustrate the uncertainty and the breadth of possible outcomes. They should not be cherry picked as the basis for specific projects – especially critical, national infrastructure in receipt of public funds.

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