Thought piece by Kirsten Stone, Research Associate for European Hydrogen Markets
In late September, I had the privilege of attending the second (my first) Aurora Energy Research Hydrogen Conference in London. The conference’s theme, Scaling up the European Hydrogen Economy: Unlocking Opportunities and Investments, resonated with the pressing need for sustainable energy solutions in today’s world. This event brought together a diverse spectrum of industry experts, policymakers, and investors to explore the potential and challenges of hydrogen in Europe. Here are some of my key takeaways and insights from this thought-provoking conference.
The Backdrop: A Shifting Energy Landscape
The conference took place against the backdrop of significant advancements in Europe’s hydrogen economy. The urgency to transition to cleaner energy sources was accentuated by the European Energy Crisis, prompting governments, the European Commission, and industry stakeholders to intensify their efforts. Hydrogen standards have been established, setting the stage for a flurry of support schemes and ambitious projects. With an ever-expanding pipeline of initiatives and an increasingly capable supply chain, the hydrogen industry in Europe is on the cusp of a transformation.
Alexander Voigt, HH2E, struck a chord with a compelling analogy during his panel discussion. He likened the journey of constructing the hydrogen economy to the building of the railway network in the 1800s. Voigt pointed out the contrasting perspectives in the industry and government – while many are eager to build “stations” (hydrogen projects), there’s a hesitation stemming from the necessity of heavy subsidies and the intricate regulatory framework, reminiscent of the challenges faced in the 1800s railways with “colour of the trains, position of the stations, and the gauge of the lines.” It’s further complicated by the unique rules of different countries. This analogy vividly captured the complex and dynamic nature of the hydrogen industry.
The Aurora Hydrogen Conference was structured around two keynotes and three engaging panels, each focusing on different aspects of the hydrogen industry. These sessions provided a platform for thought leaders and experts to dissect the diverse challenges and opportunities in the world of hydrogen. I’ve included some of my key takeaways from each session below.
Panel 1: A Deep Dive on Hydrogen Policy in the UK
In this panel, chaired by Dan Monzani, Aurora, the focus was on the crucial influence of government policy in shaping the hydrogen sector. The discussion turned to the pivotal role expected of the Energy Bill, which is presently under scrutiny in the UK Parliament, in ensuring financial certainty and enhanced transparency for both the hydrogen and Carbon Capture Storage (CCS) sector. The insights shared by Colin Hudson, the Managing Director of Banking & Investments at UKIB, offered a comprehensive view of the UK Infrastructure Bank, while Paro Konar, Director for Hydrogen & Industrial Carbon Capture at DESNZ, emphasized the government’s unwavering dedication to hydrogen and its immediate goals.
Keynote 1: Electrolyser Business Models & Subsidy Eligibility
During her keynote Dr. Dilara Caglayan, Aurora, examined the complexities of various hydrogen business models and the crucial aspect of subsidy eligibility. She emphasized the significance of clear regulatory frameworks and the recent EU approval of the Delegated Acts which define renewable hydrogen. Access to subsidies is undeniably important for the success of hydrogen projects, and this newly defined framework provides much-needed clarity. You can see in the slide from her presentation, how various countries have different standards in which they offer subsidies.
She also delved into the need for REDII compliance to qualify for European Hydrogen Bank subsidies as well as many national or import support schemes for renewable hydrogen. The cheapest REDII compliant electrolyser business model differs in each country. Fully grid connected electrolysers in Scandinavia produces renewable hydrogen less than 3 €/kg in 2030. Electrolyser projects in Denmark, Sweden, Norway, Ireland, and Spain can be profitable without a subsidy by 2030 if a pay-as-produced offtake agreement is secured. Other countries need up to 2.5 €/kg H2 support to have economically attractive business models.
Panel 2: Opportunities & Challenges in Electrolyser Economics & Financing
This panel, chaired by Adjmal Sekander Sirak, Aurora, provided a comprehensive overview of the investment climate for hydrogen electrolyser projects. It underscored the importance of long-term hydrogen off-take agreements and explored efforts to bridge the gap between production costs and off-taker willingness to pay. The experts’ emphasis on the need for a supportive framework to drive the hydrogen industry forward was a recurring theme. They also discussed the various challenges and opportunities that exist within the hydrogen market.
During the panel, Liliya Ivanova, InfraRed Capital Partners Ltd, highlighted the significant advancements within the hydrogen sector while underscoring the crucial role of economics, subsidy assistance, and regulatory transparency. Dalia Majumder-Russel, CMS, engaged in a discussion about the intricacies of aligning producer expenses with the capacity of off-takers to pay, all while stressing the necessity for market development. Stefanie Hiesinger, European Commission, shed light on the European Union’s Innovation Fund and pilot auctions, both serving as effective means to cut production costs and invigorate hydrogen projects. Drawing a compelling parallel, Alexander Voigt, HH2E, emphasized the need for increased support and incentives to drive industry expansion and meet demand.
Keynote 2: Hydrogen Offtake Agreements: Key Considerations for Developers
In her keynote address, Emma Woodward, Aurora, provided a comprehensive exploration of the intricacies surrounding Hydrogen Purchase Agreements (HPAs). She emphasized the crucial role of key clauses within HPAs and their complex interaction with subsidies, stressing the importance of meticulous structuring to maintain subsidy eligibility while optimizing access. Emma’s presentation featured a slide that showcased how delivering green hydrogen to a baseload or daily shape profile can significantly escalate production costs and necessitate a higher HPA price and subsidy support. Moreover, this approach poses the risk of increased carbon emissions, as it requires drawing on grid power—a critical balance to strike in the ever-evolving hydrogen landscape.
Panel 3: Hydrogen Users & Offtake Agreements
The final panel of the conference, chaired by Richard Howard, Aurora, underscored the pivotal role of consumers in driving the hydrogen market. It explored the challenges faced by hydrogen producers, including the lack of offtakers, revenue support, and the need for hydrogen storage and transport infrastructure. The panel delved into various initiatives and strategies aimed at bridging the gap between supply and demand in the hydrogen sector.
The panel discussion featured valuable contributions from each expert. James Richardson, Climate Change Committee, shed light on the UK’s bold journey towards achieving Net Zero emissions, emphasizing an expected 100 TWh demand by 2035. Richardson underscored three critical areas of offtake, including hydrogen’s vital role in supporting renewable energy during periods of reduced sunlight, the urgent need to decarbonize high-temperature heat industries, and the increasing use of ammonia in the shipping sector. Catherine Raw, SSE Thermal, emphasized the significance of storage, stressing its role in managing the intermittency of green hydrogen and addressing fluctuating demand, noting that these concepts remain largely untested in practice. Moreover, Bart White, Santander, discussed the intricacies of financing with a focus on offtake agreements, highlighting the complexities involved in evaluating a project’s bankability in the emerging hydrogen market. Each panelist’s insights provided a comprehensive view of the challenges and opportunities in the hydrogen sector, offering valuable takeaways for conference attendees.
A Bright Future Ahead
