EGEC Winter Statement 2022/2023: Do I get it right?

After including gas and nuclear in the EU taxonomy, does this now mean the EU institutions wish to see nuclear and fossil fuels as renewable energy sources?

Firstly, the negotiation on the RES (recast) were halted and negotiations became difficult due to want of polluting fossil gas and nuclear sectors to be included. Now it seems they have potentially succeed to be included in the RED through hydrogen under the label of renewable fuels of non-biological origin (RNFBOs).

Secondly, the EP compromised an amendment in EPBD, deciding that Hybrid heating systems, with boilers not exclusively using fossil fuels shall not be considered fossil heating systems! Can you believe it?

In winter, while confronted with an energy crisis and the issue of a secure energy supply & high energy prices, this greenwashing wave hampers the finalisation of a key legislative text that will ensure affordable heat to families and industries next winter. The EU consumption of fossil fuels has dropped by 20.1% in the period of August to November 2022, compared with the average gas consumption for the same months (August to November) between 2017 and 2021. This achievement was made possible mainly due to the willingness of individuals and the industry.

A political will to achieve ambitious pieces of legislation for climate and energy can even further reduce EU consumption of fossil gas.

The recast of RED brings important measures to develop geothermal and other RES, especially in the heating and cooling sector. The new REPOWEREU ambition (45% RES in 2030—much better than the initial 27% target proposed in 2014) cannot and must not be halted by fossil and nuclear action.

I admit that I was upset in December 2022, when the hydrogen sector published a paper on the heating market with statements showing ignorance, such as: “the buildings sector is emissions-intensive and hard-to-abate”. When you are dealing with the heating market for 20 years, as I am, it is clear that the main barrier to decarbonise our buildings remains the awareness about the biased market conditions in favour of fossil fuels. Technologies exist. They are local and already affordable! Geothermal DH was already 3 times cheaper than fossil fuels in 2019, so imagine today its competitiveness! So here is my ‘plat froid’, to explain our views and positions about hydrogen as presented today: a trojan horse for fossil fuels and nuclear in RED: a 20 year-old story about hydrogen. First, I have to say that our sector is neutral towards renewable hydrogen. Geothermal can produce renewable hydrogen, but in Europe its competitiveness still needs to be proven. But non-renewable hydrogen could also be a competitor to geothermal heating, cooling and electricity supply. So for us, renewable hydrogen must be from RES and not from non-renewable sources!

“Hydrogen and fuel cells are seen by many as key solutions for the 21st century, enabling clean efficient production of power and heat from a range of primary energy sources.”  This sentence is not extracted from the EU Green Deal, but from the High-Level Group for Hydrogen and Fuel Cells Technologies initiated in October 2002 by the Vice President of the European Commission, Loyola de Palacio, Commissioner for Energy and Transport, and Mr Philippe Busquin, Commissioner for Research.

Little happened in this sector from 2002 until now, and the State of the Energy Union did not refer to hydrogen in its 1^st edition (2015). In 2017, the 2^nd and the 3^rd States of the Energy Union referred to the first Fuel Cells and Hydrogen projects, such as the public-private partnership, which delivered the first publicly accessible hydrogen refuelling station in Belgium, and the CEF grant funding to the Riga Transport Company in building up its hydrogen fuel infrastructure to run hydrogen fuel cell buses.

One cannot state that hydrogen reached any milestone to be considered as a breakthrough technology. But since 2017, hydrogen is presented as a new silver bullet solution, the year of discussion for a new Climate an Energy package 2030?: Was it a coincidence?

Surely not, if you remember the reaction of the fossil fuel industry to the first RED was low ambition for 2030, reform the state aid rules to hamper RES deployment, biased modelling for 2050, etc. Indeed, the first clear reference to hydrogen in the state of the Energy Union was in 2017. Hydrogen-related subsidies have remained low from 2015 to 2021 (€330 million in 2021), but have significantly increased in 2022 reaching around €900 million.

In the current European hydrogen market, over 95% of hydrogen production capacity was from fossil fuels in 2020. The conventional hydrogen market in Europe remained stable with around 11.5 Mt of production capacity and 8.7 Mt of demand (a kilogramme of hydrogen  – the unit most often used – has an energy value of about 33.3 kWh. So, one tonne of hydrogen delivers about 33 MWh and a million tonnes about 33 terawatt hours (TWh)).

The market expected 523 MW to come online in 2022, but only 35 MWel of power-to-hydrogen capacity came online in 2022 by August, reaching 162 MWel—still a very niche market.

So not really a breakthrough, but the global race on fuels cells is about to be lost—making me think to remind the EU not to lose the global race for geothermal lithium in the upcoming Critical Raw Materials Act. Without a breakthrough, the increased attention to hydrogen by EU policy makers was made by what? Just look at the wording about hydrogen:

• In April 2019, the 4^th State of the Energy Union was then suddenly promoting the creation of European value chains in critical and emerging sectors such as batteries and hydrogen.
• In October 2020, the 5^th report continued and referenced that “Projects of common interest can also boost Member States’ decarbonisation efforts and lay the foundation for hydrogen-led markets in Europe.” The Commission launched a European Clean Hydrogen Alliance.
• In 2020, the Commission also adopted a hydrogen strategy, setting out its vision to significantly increase the role of “clean hydrogen” as an energy carrier. This included a path towards ensuring that “renewable and low-carbon hydrogen and hydrogen-derived synthetic fuels” becomes cost-competitive.
• Here the wording ‘clean hydrogen, renewable and low-carbon hydrogen and hydrogen-derived synthetic fuels’ is problematic.
• RNFBOs must not be confused with renewable and low-carbon hydrogen and hydrogen-derived synthetic fuels.
• In 2021, the 6^th report stated: “In line with the hydrogen strategy’s objective to deliver 40 GW of renewable hydrogen electrolysers in 2030, the Commission proposed to include, in the Renewables Directive, binding targets for the use of renewable hydrogen in transport and industry.” The demand for hydrogen may come from transport and industry, not from buildings!
• Finally, In October 2022, the 7^th report was issued  stating that: “a substantive increase in funding options at EU and national level for the European hydrogen value chain. Under the Important Projects of Common European Interest mechanism, EUR 10.6 billion of public investments in the hydrogen value chain have been approved as incentive to crowd-in private investment in the hydrogen sector.”

With the Hydrogen Accelerator proposed in the REPowerEU Action Plan, the Commission has provided an estimate of the investment needs, and additional costs with a specific focus on replacing natural gas use. Low carbon hydrogen from fossil gas is not to replace fossil gas use.

Last September, the President of the Commission announced the setting up of the European Hydrogen Bank. The Hydrogen Bank aims to move the hydrogen market from niche to scale by accelerating the production and the use of renewable hydrogen, and connecting these by developing the necessary infrastructures in a coordinated manner.

Let’s see if the Bank will also fund low carbon hydrogen…

See you after this winter to check the progress of Europe makes.

Philippe Dumas

EGEC Secretary General