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Market potential for Hydrogen in France and implications on the power market – February 2021

We are pleased to present our latest Strategic Insight Report on ‘Market potential for Hydrogen in France and implications on the power market’.

The latest IPCC forecast paints a stark picture – under current trajectories, global temperatures will increase by almost 3 degrees by 2050, a far cry from the target of under 2 degrees. In this context, decarbonisation has emerged as a key concern amongst policymakers globally. France, for example, has pledged through the Energy and Climate Law to reach carbon neutrality by 2050 through reducing emissions six-fold between 1990 and 2050. This ambitious target poses a very unique challenge for France. While the French power sector boasts one of the lowest emissions in EU, economy-wide emissions are still considerably high due to a large reliance on fossil fuels in the industrial, residential, tertiary and transport sectors. This report explores the role of hydrogen in meeting net-zero, analyses its impact on the French power market and discusses implications for investors and policy makers.

Key takeaways include:


  • Reaching carbon neutrality in France means reducing reliance on fossil fuels which are primarily used in the transport sector, industry and for heating buildings. Alongside improvements in energy efficiency and electrification, hydrogen has a pivotal role to decarbonise the hardest to abate sectors across the entire economy.
  • The rise in demand for hydrogen in France – forecasted to be between 63 TWh and 178 TWh by 2050 – must be met by yellow/green hydrogen to maximise emission reductions. However, while interest is growing amongst investors for electrolysers, the current pipeline of 1.2 GW continues to pale in comparison to the Government’s 6.5 GW target by 2030.
  • The introduction of electrolysed hydrogen in the power system would improve renewable economics through a combination of higher capture prices and lower levels of curtailment. Compared to a scenario without electrolysed hydrogen, onshore wind and solar sees an annual gain in gross margins of 50% and 32% respectively in the 2040s.
  • Hydrogen storage facilities should be deployed alongside electrolysers to maximise system benefits. Specifically, deploying an optimal level of H2 storage level will improve renewable economics, reduce peak power demand, and lower emissions without leading to a rise in system cost.
  • Both policy makers and investors must play a part in developing the robust pipeline of hydrogen projects. CfDs and carbon pricing are emerging as potential options for policy support, while developers are exploring co-location with renewables, and partnerships with end-users as potential business models.

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