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Iberdrola, Enel slam plan to add blue hydrogen to EU Renewable Energy Directive

13 April 2021 Cristina Brooks

Utilities that invest in renewable energy have asked the European Commission (EC) to drop current plans to include fossil fuel-origin hydrogen, aka blue hydrogen, in a revision to the EU's main renewable energy growth policy, the Renewable Energy Directive (RED).

Spanish electric utility Iberdrola, which plans to double its 33 GW of renewable energy capacity, as well as Italian power and natural gas company Enel, with 49 GW of renewable energy capacity held by its renewable generation subsidiary, both signed a 31 March letter calling for blue hydrogen's exclusion to better align with the bloc's long-term Paris Agreement commitments.

Wind power industry body WindEurope and the European Renewable Energies Federation, representing sectors such as wind, solar, and bioenergy, also signed the letter. Other trade bodies on the letter hailed from heating-related sectors, like biofuel and heat pumps, that often compete with natural gas.

Blue hydrogen is one of the low-carbon fuels the signatories are hoping to exclude. "When we speak of low-carbon fossil fuels, we refer to any form of fossil-based fuel including steam methane reforming from natural gas and carbon capture and storage. This includes so-called blue hydrogen," WindEurope Press and Communications Manager Christoph Zipf told IHS Markit.

The RED's aims should be as clear as its name. "As the headline puts it, we believe that the directive should be kept for renewables," added Zipf.

The directive drives state support for not only renewable power generation, but also for renewable gases like biomethane and hydrogen from electrolysis of renewable electricity, aka green hydrogen.

A 2018 revision (RED II) to the directive provided laws encouraging cross-border sales of green hydrogen to companies to use toward corporate greening targets, the Guarantees of Origin (GO) framework, but it still excludes other low-carbon gases such as hydrogen from natural gas, according to a 2020 paper on gas decarbonization by The Oxford Institute for Energy Studies.

The EC in 2020 proposed introducing an EU-wide criteria for the certification of renewable and low-carbon hydrogen "possibly building on" parts of the directive. The EU's next revision of the directive (RED III) could boost support for both green and blue hydrogen through GOs, according to a paper on European hydrogen legislation by law firm Baker McKenzie.

High levels of hydrogen investment in Europe are expected to lead to increased green hydrogen production levels across the continent, according to IHS Markit Power-to-X data. Today's level of blue hydrogen production is also low, with just five large-scale production locations, but this number could grow 20-fold by 2030, according to an IHS Markit global hydrogen production report.

EU seeks transport fuel solution

EU member states must invest in renewable energy generation and fuel to comply with RED II. The 2018 revision also enshrines a bloc-wide renewable generation target of 32% by 2030, and a renewable fuel target for road and rail transportation of 14%, both of which are transposed into member state regulations.

To make steeper cuts to the bloc's GHG emissions, reducing them 55% from 1990 levels, the EC plans to revise policies for renewable energy, energy efficiency, and transport. For example, the EU target for renewables must be raised to 38.5%, the EC said in its Climate Target Plan in December.

While the EC plans to grow renewable investment, it is also seeking to decarbonize hard-to-abate sectors. Hydrogen "will be crucial" for decarbonizing heavy-duty transportation as well as, in derivative forms, the aviation and maritime sectors, according to the EC's plan.

The directive will be expanded through certification schemes and incentives for both renewable and low-carbon fuels, Commissioner for Energy Kadri Simson said in a speech in February.

GO certification a test ground

Shell, for example, shares the EC's view that a revision of the directive should include sector-specific targets to create markets for blue hydrogen in hard-to-abate sectors, it said in its response to the EU's consultation on the topic.

It also said that GOs should be extended to cover hydrogen derived from natural gas, which would be essential for providing income to producers and "demonstrating the renewable/low-carbon/decarbonized nature of gases."

European oil refining trade body FuelsEurope, whose members include Shell, BP, Total, and ExxonMobil, said that the EC's proposed public-private alliance on low-carbon value chains should work on policies "to give equal recognition to all renewable and low-carbon technologies, according to the [EC's] principle of technology neutrality."

The Oxford Institute for Energy Studies paper noted that if the EU were to pivot to green hydrogen post-2030, its green hydrogen sector might not develop fast enough to meet its targets. It suggested that policymakers ensure a "genuine level playing field between low carbon gases, and between gas and electricity networks," it said.

But the EU-backed Environmental Coalition on Standards said in a recent briefing paper that extending GOs to blue hydrogen increases the risk of greenwashing and hurting public trust.

Utilities that supply natural gas are also fighting for the revision to include blue hydrogen, according to a position paper on the directive's revision from the European Network of Transmission System Operators for Gas.

Gas networks embracing hydrogen could catch the next wave of EU subsidy schemes as the natural gas subsidy wave appears to have peaked. The EU is making policy changes to support its greening ambition, within the European Investment Bank and Trans-European Networks for Energy regulation, that could end public support for natural gas investments, according to a recent paper by Global Energy Monitor.

Posted 13 April 2021 by Cristina Brooks, Senior Journalist, Climate & Sustainability, IHS Markit

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