EU bets on hydrogen as gas crisis looms – POLITICO

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The European Commission on Friday announced a record 5.4 billion euros in hydrogen subsidies even as questions arise over the opaque approval process and the fledgling technology’s potential to reduce gas emissions greenhouse effect in polluting industries.

The grants exceed previous large-scale cross-border projects, including the €3.2 billion the Commission approved for a battery project in 2019.

Friday’s state aid decision launches 41 projects in 15 countries centered on hydrogen technology, in what is only the first of four expected waves of state aid approvals for hydrogen projects in the European Union. New waves on the decarbonisation of industry, infrastructure and mobility are expected to follow, with billions in additional subsidies.

The German Bosch, the Italian energy group Enel and the French railway manufacturer Alstom are among the 35 companies selected to benefit from subsidies in four types of technologies: hydrogen production, fuel cells, storage and distribution and end-user technology.

The public support is expected to unlock an additional €8.8 billion of private investment, the Commission said.

“Hydrogen has enormous potential for the future. It is an indispensable element for the diversification of energy sources and the green transition,” said European Commissioner for Competition, Margrethe Vestager.

Germany and France are using these key state aid projects – known as Important Projects of Common European Interest (IPCEI) – as vehicles to push industrial ambitions in strategic sectors.

“The Commission’s review has halved the potential aid that could be granted under this IPCEI,” Vestager said. This includes projects which the Commission has asked countries to withdraw from IPCEI – because they have not reached the required level of innovation, for example – or projects which have been selected but whose authorized aid has been scaled down.

Today’s EU approval is the fourth in a growing list. To date, the Commission has authorized one PIIEC in microelectronics and two in batteries. Other projects involving cloud computing, microchips, health and raw materials are in the pipeline.

Germany led the push for the pan-European hydrogen initiative, with a manifesto signed by 22 countries in the final days of its 2020 EU presidency. Announcing 62 projects for state support estimated at 11 billion euros in May 2021, Berlin has declared that it wants to be the world’s number one in hydrogen. (France too).

More money, more problems

But big injections of cash come with big controversy – and voices are already complaining that the EU is putting the industrial cart before the environmental horse.

The RePowerEU strategy calls on the bloc to produce 10 million tonnes of renewable hydrogen by 2030 | Image via iStock

Since the EU launched its hydrogen strategy in July 2020, critics have warned that industry hype over clean-burning gas – which releases oxygen and water when burned – could lead to over-investment with no guarantee that the projects will contribute to the climate.

The EU hopes that hydrogen can replace natural gas in highly polluting sectors such as steel to help achieve net zero greenhouse gas emissions by 2050. The Commission’s RePowerEU strategy asks the EU to EU to produce 10 million tonnes of renewable hydrogen by 2030.

But while some hydrogen is made from green energy like wind and solar power, many projects produce so-called blue hydrogen by chemically extracting natural gas, a fossil fuel.

In this process, escaping emissions are partially captured, but studies warn that the environmental footprint is worse than originally claimed.

The Commission today only announced the aggregate amounts in cash, countries and companies. It will likely be years before the public knows which specific projects have received state support and how much – the 2019 battery decision, for example, was not released until Friday.

“We won’t know the key details of these projects until it’s too late – including how many of them involve rare and valuable ‘green’ hydrogen, and how many involve the big bad blue hydrogen, which can be as or more carbon-intensive than burning fossil gas, oil or coal,” said Thomas Burman, an energy lawyer with the legal charity ClientEarth.

The money is also allocated before major climate restrictions are finalized by the Commission to define what will be legally considered clean hydrogen. Environmental groups warn that continued lobbying for exceptions and loopholes will lead to a decade of greenwashing, as the first wave of hydrogen projects get a temporary pass.

Draft EU rules published in May on hydrogen production require proof that electrolyzers – the machines powering the process – would either be directly connected to a wind or solar farm, or could show that new renewables have were added to the local electricity supply and were generating green energy while the electrolysers were plugged in and running.

But those restrictions would only apply from 2027, in a waiver added late in the drafting process.

The NGO Global Witness, through a Freedom of Information request to the Commission shared with POLITICO, obtained information showing that the French Engie had pressured Brussels two weeks before the publication of the project, complaining that immediate compliance with green rules “would mean that HyNetherlands’ costs would increase by 2 to 4 times and reduce the production result by a third… Engie therefore asked that projects like these be exempted from the scope of application of the delegated act until 2030 or that they benefit from at least some flexibility.

Engie did not immediately respond to a request for comment on the meeting minutes.

“It is worrying that a company can brazenly tell the EU that it needs watered down rules just for its own financial gain and then, two weeks later, for that to be exactly what happens,” he said. Dominic Eagleton, Gas Campaigner at Global Witness.

This week, 18 industry associations, including Hydrogen Europe, are now calling for this exception to be extended “until at least 2030”.

The Commission’s State aid assessment is broadly limited to verifying whether the project involves at least four EU countries, has positive knock-on effects for the EU economy as a whole and does not wouldn’t have been possible with private money alone – but a November 2021 update to the IPCEI rules allows the EU executive to carry out a green check to ensure the project is not causing harm important to the environment.

“But there is currently no legal framework at EU level on how to properly judge the sustainability of hydrogen – and that will only be complete long after these projects have received funding,” Burman said. .

This article has been updated following the publication of the PIIEC battery decision on Friday.

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