May 22 (Renewables Now) - A leaked draft of the EU’s Green Deal Recovery package, to be presented officially next week, reveals that the bloc is planning significant support for green hydrogen and renewable energy tendering.
The package includes a proposal for the introduction of a “carbon contracts for difference (CCfD)” pilot scheme to bridge the cost gap between conventional, or grey, hydrogen and decarbonised, or green, hydrogen. It also proposes a 15-GW EU tendering programme for renewable power capacity over a period of two years.
Green vs grey hydrogen
The leaked document, published by Euractiv, shows the cost of a planned “1 Million ton of clean hydrogen commitment” would range between EUR 5 billion (USD 5.5bn) and EUR 30 billion, to be covered by the Innnovation Fund. This calculation is based on the assumption that clean hydrogen production would need to be supported for the first 10 years. Much will depend on the further reduction of renewable electricity costs.
The EU currently produces 8 million tonnes of grey hydrogen annually, from natural gas through a highly carbon dioxide (CO2) intensive process. There are many plans and ideas involving green hydrogen production, using power from renewable energy sources and electrolysis, in Portugal, Germany, France and other EU countries, as well as globally, but the cost is significantly higher than that of grey hydrogen. The CCfD mechanism proposed could pay the difference between a CO2 strike price and the actual CO2 price.
The Green Deal Recovery draft mentions the fertiliser industry and refineries as short-term priority areas where grey hydrogen can be replaced more easily.
Tenders for more renewables
An EU tendering scheme is being considered to compensate for reduced tendering activity at country level in the next two years. About 7.5 GW per year could be tendered. The total capital investment for the two years is estimated to be EUR 25 billion, but the actual public support will be lower.
Additional EU funding as a multiplier for member state funding for renewables tenders is also planned. This would amount to EUR 10 billion of EIB co-financing over two years.
The draft also proposes funding support for hydrogen and zero-emission mobility innovation, building renovation, decarbonsation of transport, expansion of biogas production and use, digitalisation of the agri-food sector and more. A final plan will have to be approved by the European Parliament and Council.
(EUR 1 = USD 1.1)