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EU goes big on hydrogen and ammonia subsidies

The European Commission is poised to funnel billions of euros of subsidies into hydrogen, ammonia and carbon capture and storage (CCS) after adopting its sixth list of Projects of Common Interest (PCI). A total of 166 infrastructure projects were shortlisted as PCIs to receive funding from the Connecting Europe Facility (CEF), which boasts a budget of €5.84 billion for the 2021-27 period. They also benefit from simplified regulatory conditions, and accelerated planning and permitting processes.

The sixth PCI list is the first to be drawn up under the EU’s revised Trans-European Networks for Energy (TEN-E) Regulation, which the Commission claims “ends support for fossil fuel infrastructure and focuses on cross-border energy infrastructure of the future”. Activists and campaigners were quick to point out that many of the CH3 receiving terminals and H2 electrolysers and pipelines are promoted by companies with fossil fuel interests.

The Commission said all PCI and PMI project candidates were subject to “a mandatory sustainability assessment, making sure that they contribute significantly to the integration of renewable energy into the grid or the reduction of greenhouse gas emissions”. In addition, developers will have to report on their compliance with EU environmental legislation and demonstrate that projects do “no significant harm”.

Out of the 166 selected PCIs and PMIs, over half (85) are electricity, offshore and smart electricity grid projects, with many expected to be commissioned between 2027 and 2030. For the first time, hydrogen and electrolyser projects (65 in total) are included – a core plank in EU efforts to establish a hydrogen market in Europe and globally. The list also includes 14 CO2 network projects in line with EU goals to create a market for carbon capture and storage.

Who’s-who in H2

The PCI list reads like a who’s-who of EU hydrogen pipeline and electrolyser projects. It includes numerous parts of the European Hydrogen Backbone (EHB) initiative, a 53,000 km network based on using 60% of repurposed natural gas pipelines and 40% new pipelines stretching like tentacles across the entire continent of Europe.

The EHB, which includes subsea pipelines and interconnectors linking countries to offshore energy hubs and potential export regions such as Norway, requires an estimated total investment of €80-143 billion by 2040.

The sixth PCI list includes several “ammonia reception facilities” in Belgium, Germany, the Netherlands and France. Some are located at sites that already host – or are soon to host – liquefied natural gas (LNG) import terminals.

One example is Wilhelmshaven in Lower Saxony, which became home to Germany’s first LNG terminal when it opened in December 2022. Uniper intends to adapt the facility to import ammonia from global markets, and equip it with an ammonia cracker for converting the CH3 back into green or blue hydrogen. Willemshaven will also host two electrolysers – both of which also appear on the sixth PCI list.

Piping H2 into the EU

The Commission also adopted several PMIs – Projects of Mutual Interest – which connect the EU with non-member states such as the UK, which is promoting its own hydrogen business model, as well as Norway and countries in North Africa.

A notable inclusion on the PMI list is the Clean Hydrogen to Europe (CHE) pipeline, a joint project between Norway’s Equinor and Germany’s RWE. CHE involves the construction of a new hydrogen pipeline between Norway and Germany along part of the route of the existing Europipe 1 and 2 and Nordpipe, as well as the development of hydrogen downstream infrastructure in Germany.

CHE would pipe blue hydrogen produced from Norwegian natural gas with carbon capture into Germany, where it would be mixed with green H2 generated from offshore electrolysis in the German North Sea. The hydrogen would be injected into Germany’s proposed H2ercules hydrogen network – itself a PCI project.

The blended green-blue H2 will replace gas as fuel for converted power stations in Germany – a use case that has been widely questioned by hydrogen experts as being a low-value application of a high-value green fuel. The hydrogen would also be supplied to industrial users across Germany.

Gas or hydrogen pipeline and valves

Creating a carbon market

A cross-border carbon dioxide network is a “priority thematic area” for the latest PCI list. Three CO2 projects were extensions (or carried over) from the fifth list, adopted in 2021, while the other nine are entirely new additions.

The CO2 projects are more discrete than the hydrogen initiatives, insofar as they are not part of an overarching ‘backbone’ of carbon infrastructure. As a result, they are targeting storage in diverse locations, both in underground onshore facilities and in offshore reservoirs, as well as CO2 exports to unspecified storage locations.

For example, the CCS Baltic Consortium is a cross-border CO2 rail transport initiative between Latvia and Lithuania with a “multi-modal” liquefied CO2 terminal based in Klaipeda. Another is Callisto, a series of multi-modal CO2 hubs in the Mediterranean storing CO2 emissions from France and Italy.

The UK features on three of the PCI and PMI CCUS projects. But the UK North Sea – which could play a pivotal role in the formation of a Europe-wide carbon storage market – is not mentioned specifically.

ECO2CEE is an open-access cross-border CO2 transport and storage project with storages sites in Denmark, Norway, Netherlands and UK. Notably, emitters in the UK could end up exporting sequestered carbon to the EU as part of the Norne project, which involves building transport infrastructure and onshore and possibly offshore storage sites in Denmark.

Northern Lights – a CO2 cross-border connection project between several European capture initiatives – is included as a PMI after being carried over from the fifth PCI, as well as Nautilus CCS – a project to capture emissions from Le Havre, Dunkirk, Duisburg and Rogaland areas and transport the volumes by ship to various sinks in the North Sea.

The revised TEN-E regulation offered continued support the transport of carbon dioxide for the purpose of permanent storage. Whether the diverse mix of CO2 transportation and storage sites on the PCI and PMI lists can fulfill the Commission’s aspirations to create a unified European market for carbon capture and storage remains to be seen.

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