Contrasting European hydrogen pathways: An analysis of differing approaches in key markets
The year 2020 will be remembered as the year when the Covid-19 pandemic swept the world, but it has also seen increasing momentum behind the urgency of tackling the longer-term global challenge of climate change, with more and more countries making pledges to achieve "net-zero" emissions. The UK and France started in mid-2019 with targets to achieve net-zero by 2050, but perhaps the most significant development in 2020 was the pledge by China to achieve net-zero by 2060.
In this context, there has also been growing momentum behind the view that low-carbon hydrogen will play a significant role in the decarbonisation of the energy system. Decarbonisation will certainly lead to a significant increase in the role of electricity, with it perhaps meeting over 50 per cent of final energy demand by 2050, compared with typically around 20 per cent today. Currently, the remaining 80 per cent of final energy demand is provided by molecules like oil, gas, and coal. There will still be a significant role for molecules as well as electrons in the future decarbonised world. Since the unabated use of fossil fuels will not be consistent with net-zero targets, low-carbon, or preferably zero-carbon, hydrogen will be required. Further details on the potential for hydrogen and some of the challenges, particularly around cost and scale, have been covered in previous OIES and EWI papers published during 2020.
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In Europe, the EU published its Hydrogen Strategy in July 2020, closely linked to its Energy Sector Integration Strategy. Several European countries have also published their own hydrogen strategies during 2020 (e.g. Netherlands, Norway, Portugal, Germany, France, and Spain). While other countries (e.g. Italy and the UK) have not yet finalised formal strategies, they are actively developing plans for hydrogen to play a role in the energy transition. Outside Europe, several other countries have also published hydrogen strategies.
While it is relatively straightforward to publish a document setting out a strategy, it is likely to be significantly more challenging to put in place the required budgets, incentives, and regulatory structures to enable the required investments to proceed within the aspired timetables. In this paper, we examine the intended hydrogen pathways in six key Western European markets and compare the approaches being developed in each of those countries. The selected countries are France, Germany, Italy, Netherlands, Spain, and the UK, chosen since they are all significant current natural gas markets and all are envisaging a significant role for hydrogen in the energy transition. It is notable that while all have similar ambitions and (apart from the UK) are all part of the EU, there are different approaches being developed in each country. It is likely that the use of molecules in the decarbonised energy system will vary by country and region, perhaps to a greater extent than the rather homogenous natural gas market across Europe today.
The paper is structured with an initial summary section (Section 2) with some overall themes and comparisons between the individual countries. This is followed by sections on each country arranged in alphabetical order, for those readers who would like more detail on each country. Each section is structured with an initial consideration of relevant policy, followed by sections on current and potential hydrogen demand and then supply. Finally, Section 9 draws some overall conclusions.
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