Europe is facing an energy crisis. Hydrogen may have some of the answer, raising similar opportunities and challenges in the UK and Spain.

Where the UK is making slow progress, Spain has announced a number of initiatives to support the green hydrogen sector. The government has provided support to companies and plans are picking up pace.

The Ministry for Ecological Transition has designated green hydrogen as a “country project” for Spain. In the UK, meanwhile, government has taken a more hands off approach, broadly supporting both blue and green hydrogen.

How green is your valley

Spain’s Cepsa is one company trying to crack the problem of green hydrogen production. It set out plans for its first of a kind green hydrogen valley in Andalucia in December 2022.

It contracted Siemens Energy to build a 100 MW polymer electrolyte membrane (PEM) electrolyser in May. At the same time, it contracted ThyssenKrupp Nucera for another 300 MW alkaline electrolyser.

The valley plan covers projects in Palos de la Frontera, in Huelva, and Campo de Gibraltar in Cadiz. Cepsa, commenting to E-FWD, said it planned to reach 2 GW of capacity at these two sites by 2030. It expects this to be a 3 billion euro (£2.5 billion) investment.

The aim is to build one of the largest projects in Europe, comprising 1 GW at its energy park in Huelva and 1 GW at its energy park in Cadiz.

The company will use both solar PV and onshore wind electricity, in addition to biogas, to produce green hydrogen from electrolysers as well as steam reformers.

It aims to source power for the electrolysers mainly from new projects. The EU requires that renewable hydrogen be produced from new sources of power, rather than cannibalising existing generation.

Cepsa intends to bring the Huelva site into operation by 2028. The two projects together should create 10,000 jobs and reduce emissions of CO2 by 6 million tonnes per year.

Cepsa's green hydrogen valleys plan — *Cepsa’s green hydrogen valleys plan*

Greening options

Cepsa’s valley plan aims to position Andalusian ports as “world leaders” in international green hydrogen corridors and in supplying new green fuels for maritime transportation. The aim is to establish green corridors running to northern Europe, via Rotterdam.

The company also aims to use the hydrogen to help decarbonise its own operations, in addition to Fertiberia’s. The latter aims to use green hydrogen to produce ammonia and subsequently fertiliser.

Cepsa and Fertiberia agreed a strategic alliance early in 2023, they dominate the supply and demand of hydrogen. Cepsa also aims to produce biofuels and e-fuels.

Specialist from the Oxford Institute for Energy Studies (OIES) Aliaksei Patonia noted the high cost of green hydrogen continued to be a challenge.

It is “still much more expensive than conventionally generated” hydrogen, he said. “Industries do not seem to be too enthusiastic about making their ultimate product more expensive just because they will be using more sustainable energy source or feedstock. This, for instance, is the case in steelmaking and other sectors that are considered to be the most likely offtakers of green and blue H2.”

Patonia said there had been many memorandums of understanding (MoUs) but few final investment decisions (FIDs). “So the progress is very much declaratory and industries do not seem to be as enthusiastic about paying extra for green H2 as they are expected to by the European Commission.”

Patonia went on to say offtakers “in both Rotterdam and the rest of Europe are pretty hesitant (at least at the moment)”.

Transportation problem

Where hydrogen projects do move forward, Patonia said, these would be where supply and demand are close.

This can be seen in the UK also. RWE is working to develop green hydrogen at Grangemouth, which it will supply to the local refinery.

The UK’s National Grid set out plans for a hydrogen “backbone”, in 2021. It aims to build a 2,000 km network by 2030. This will see it repurposing existing pipelines to connect supply and demand. Jacobs and ERM began studies on the project in November 2023.

The UK aims to produce 10 GW of low-carbon hydrogen by 2030, of which 6 GW should come from electrolysers. The Labour government committed to invest £500 million into green hydrogen during their campaigning.

Delivery plans

Cepsa’s plans to export hydrogen as ammonia to Rotterdam looks challenging. The roundtrip efficiency is poor and, as Patonia noted, demand is not yet clear. In the longer term, as the REPowerEU plan kicks into gear, companies may become more willing to pay a premium for hydrogen deliveries into northwest Europe.

Spain’s transmission system operator, Enagás, at least, is putting its money where its mouth is.

In 2022, it launched its strategic plan calling to refocus its operations in Europe – and on hydrogen. On July 10, the company announced the sale of its 30.2% stake in US-based Tallgrass Energy to Blackstone Infrastructure Partners for $1.1 billion (£859 million).

The company explained that this would strengthen its balance sheet and allow it to carry out its “investment plan in renewable hydrogen infrastructure”.

In 2023, Spain designated Enagás as the manager of the Hydrogen Backbone Network.

The company has also recently sold down gas stakes in Mexico and Chile, while acquiring more infrastructure in Europe. It boosted its stake in the Trans Adriatic Pipeline (TAP) and bought into the Hanseatic Energy Hub.

In September last year it reached an agreement with Reganosa for an energy hub in Spain’s northwest. This saw it take a stake in the El Musel regasification terminal.

Enagás CEO Arturo Gonzalo said the deal would pave the way for co-operation on new opportunities “to further improve security of supply and move forward with decarbonisation goals”.

The plan is to use the hub to bring together local green hydrogen production with transportation options.

Curtailment

As countries add more renewable energy, fluctuations in supply pose problems to the grid. There is not always enough demand at the right time to consume additional supply. Hydrogen is one option to solve this problem.

Spain has been facing up to curtailment problems since 2022, Patonia said. “This problem comes from the increasing share of intermittent renewable power generation represented primarily by solar PV and wind,” she noted.

“In this context, chemical energy storage options and power-to-X alternatives such as the production of green hydrogen with surplus power may potentially be viewed as a way out.”

Policy environment

At the heart of this progress is Spanish government support for the move towards a hydrogen economy.

Early this month, Spanish Energy Minister Teresa Ribera approved subsidies worth 794 million euros (£671 million) to support 652 MW of major green hydrogen projects. She said the cash would unlock private investments of up to 6 billion euros (£5 billion).

The Third Vice-President of the Government of Spain and Minister for Ecological Transition and Demographic Challenge, Teresa Ribera, walks through the Moncloa gardens Foto: Pool Moncloa/Fernando Calvo 2021.7.13

The European Commission approved the seven projects, declaring they had regional value. Another factor cited by officials was the sites’ proximity to consumers.

Nearly three quarters of the government support will go to two projects Repsol is working on, and another by Iberdrola. The two Repsol projects have 100 MW of capacity each, while Iberdrola’s plan in Puertollano has 220 MW.

The Spanish government has also provided 100 million euros (£85 million) as a grant to support innovation in electrolyser technology. It has talked of supporting “large-capacity electrolysers in industrial environments”.

Other areas are also hoping to move into the green hydrogen space. The Castilian and Leonese Hydrogen Association (H2CYL) has championed northern Spain, highlighting its wind and solar resource.

H2CYL held a conference on opportunities in Burgos, in the Castilla y León area. High gas pipeline network penetration is another factor the associated cited as supporting a move into hydrogen.

Enagás set out three possible renewable hydrogen supply models to 2030 last year.

In the high case scenario, the consultation results forecast Spain could produce 7.9 million tonnes per year of green hydrogen and 74.3 GW of electrolysis capacity. In the low-case scenario, these numbers fall to 1.6mn tpy production of green hydrogen and 13.4 GW electrolysis capacity.

From this range of scenarios, it seems clear that there is no clarity over the future of green hydrogen in Spain. To achieve the high case, many more FIDs will need to be signed – not just MoUs, as Patonia pointed out.

However, with governmental support for projects and companies willing to sign deals, the country’s focus on green hydrogen appears to be paying off. Whether Spain – and its companies – can translate this into commercial success is still to be determined.

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