The European Union is planninga 15-gigawatt renewable energy
tender and auctions for green hydrogen projects as part of a
trillion-dollar Green Deal package, according to draft
proposals leaked this week.
revealed in December 2019, the EU’s Green Deal was initially
structured as a roadmap for the bloc to achieve its goal of
net-zero status by 2050. But early progress has been hampered since
the Green Deal was revealed by European Commission President Ursula
von der Leyen. The coronavirus outbreak and a failure to agree on
the EU’s next seven-year spending framework have created division
among some member states, nervous about the economic fallout of
Next week, the reworked â€” and renamed â€” Green Deal Recovery
package will be presented in full, with a string of near-term
policies added to act as an economic stimulus. It will be an early
indicator of policymakersâ€™ willingness to act on promises of a
A draft document obtained by Bloomberg and Euractiv lays
out a series of planned policies. With the EU budget still
unresolved, many of the finer details and financial figures appear
in square brackets, denoting that they have not yet been settled.
But with less than a week before the Green Deal’s planned release,
the shape of the policies laid out are less likely to change, even
if budgets do.
Any plan will need the backing of the European Parliament and
the European Council, made up of its 27 member states.
Scaling up support for Green hydrogen
The scale and breadth of support for green hydrogen is
particularly striking. While there is more support for R&D, the
Green Deal Recovery package would move far beyond that,
offering stable revenues for those using hydrogen created with
renewable power â€” known as green hydrogen.
The EU package contemplates the adoption of a contract for
difference (CFD) system for carbon for green hydrogen projects,
effectively acting as a hedge against carbon prices. Such a system
would see green hydrogen users bid the level at which they can
offset a ton of carbon with their project and still make a
return. If the carbon price moves above that strike price, they
would pay back the difference. If the carbon price fell below that
level, the EU would make up the shortfall, just like a renewable
CFD system based on power prices.
This would give investors stability and allow them to leapfrog
the current phase of lower CO2 prices. Research by Standard &
Poor’s suggests Europe’s carbon prices, currently around â‚¬21 per
ton, could rise
seven-fold by 2030.
Lisa Fischer, senior policy advisor with the think tank E3G,
welcomed the development of the carbon CFD approach and efforts to
target existing industry. â€œHydrogen is the right sector to focus
on,â€ Fischer said in an interview.
â€œItâ€™s expensive if you want to produce it sustainably and
the volume we can produce is limited. There are quick wins to be
had by focusing on those already using grey hydrogen. Much of the
infrastructure will already be in place so thatâ€™s the sweet spot
for a starting place,â€ Fischer said, adding that tax regimes
would also need to support green hydrogen and avoid the chance of
double taxation on the hydrogen and the electricity used to produce
Grey hydrogen, produced from natural gas, is used widely in
refineries and chemical plants. Focusing first on converting that
grey hydrogen to green creates an immediate demand â€” and
immediate emissions reductions.
Green hydrogen is already attracting attention in markets with
access to large volumes of cheap renewable power. BP is exploring
the feasibility of producing hydrogen and ammonia from a wind- and
solar-powered facility in Australia. A cluster of projects on the
coastlines of the North Sea, and its offshore wind concessions, has
brought interest from Ã˜rsted, Equinor and Shell.
Shell, which has previously called for support for hydrogen,
would not comment on the draft when contacted by GTM.
The draft Green Deal Recovery package also mentions efforts to
reduce electrolyzer costs. While Fischer acknowledges that this is
essential, she said they account for a small portion of the cost of
green hydrogen. Electricity is up to 80 percent so even when
looking at reducing the cost of what has been identified as an
essential energy carrier, the argument swings back around to
Huge wind and solar stimulus
The EU is also considering a bloc-wide tender for 15 gigawatts
of new renewables over the course of two years, although details
remain scarce. Such a tender would support wind and solar at a time
when deployment is struggling in many parts of Europe amid low
wholesale power prices, as the International Energy Agency pointed
out this week.
But Fischer warned that there’s a risk that the tender would
benefit nations with the most favorable finance conditions, leaving
behind countries most in need of economic stimulus.
â€œWe need to think about who this tender is going to benefit.
Is it all going to go to North Sea offshore wind? How can you make
sure that it’s balanced in terms of the job creation in terms and
of the manufacturing supply chain,â€ she said.
Whatâ€™s else is included in the draft
An array of measures have been set out in the draft covering
grid, generation and efficiency. Hereâ€™s an (unexhausted) list of
the proposals as they stand:
- â‚¬25 billion in grants and â‚¬65 billion of loan guarantees
for building renovations including rooftop solar PV, insulation and
more efficient, or renewable, heating and cooling.
- â‚¬20 billion in grants and loan guarantees to support EV
- â‚¬10 billion of EIB co-financing to match national
governmentâ€™s funding on a 1:1 ratio for national renewables
- â‚¬10 billion of EIB loans for network infrastructure projects
that support the rollout of green hydrogen and/or renewable
Source: FS – GreenTech Media
Leaked Document Lifts Lid on EU’s Green Deal ‘Recovery’