The European Commission published its “European Green Energy Deal (EGD)” in December 2019 with the aim of reducing its CO₂-emissions by 50-55 percent (instead of its previous goal of 40%) by 2030. The 27 EU member states have agreed to the EGD, a new climate law (codifying the new emission goal for 2030) and its “next generation fund”, which includes a €750bn economic recovery programme in the wake of the 2020 Covid-19 pandemic .

In July 2020, the European Commission published the EU hydrogen strategy. It was designed with a phased approach and its goal is to increase hydrogen shares from less than 2 percent today up to 13-14 percent by 2050.

Figure 1: The EU’s 3-Phase Hydrogen Strategy

Source: European Commission 2020

The EU considers hydrogen as a central element of its EGD and its new “Energy System Integration Strategy”. The priority is to develop clean, renewable hydrogen with cumulative investments between €180 and €470bn in Europe by 2050. Brussels hopes that a green hydrogen economy will create 1 million new jobs for highly qualified personnel in the EU by 2030 and up to 5.4 million by 2050.

The April 2020 “2x40 GW Green Hydrogen Initiative” of “Hydrogen Europe” promotes the growth of 40GW (4.4mt or 173TWh) green hydrogen production in the EU and cheaper projects of 40GW (3mt or 118TWh) in Ukraine (10GW) and North Africa (30GW). The total investments have been estimated at €430bn, with €145bn in support between grants and subsidies.

Germany’s June 2020 national hydrogen strategy envisages funding of green hydrogen projects of up to €9 billion . €7bn are invested on its own national market while an additional €2bn have been arranged for hydrogen projects in Ukraine and North Africa (Morocco), in an attempt to forge partnerships as future green hydrogen production might be more cost-efficient outside of Europe than in Germany itself. Up to 5GW of electrolyser capacity have planned for 2030 in Germany. However, it is still the most expensive option. Some experts still conceive green hydrogen from intermittent renewable sources as a fundamentally inefficient, uneconomic illusion.

 

Geopolitical Challenges of the EU’s Hydrogen-Strategy

The electrolysis of hydrogen conversion requires sufficient water, clean electricity supply, and enough space for the large-scale expansion of renewable energy, such as solar and wind power. Both the EU’s and Germany’s hydrogen strategies have already acknowledged they won’t be able to supply sufficient hydrogen for their energy transformations, because there is not enough space given Europe’s high population density, though Spain and a few other EU countries may become net hydrogen exporters. Germany’s total hydrogen consumption, for instance, could climb up from its current 50TWh to 90-110TWh by 2030, and to 1,800-2,500TWh by 2050. The chemical sector alone accounts for some 600TWh of hydrogen demand. Nonetheless, Germany’s total electricity production in 2019 accounted for just 511TWh, while its share of renewables was only 243TWh. The Federation of the German Industry (BDI) forecasts a hydrogen import demand of 340TWh. Other research predicts an even higher import demand.

Figure 2: Hydrogen Export Champions and Resource Endowment

Source: GIS 2020

An expansion of European and hydrogen production worldwide will create new value and supply chains as well as transport routes in addition to Europe’s ambitious battery production and increasing import dependence on critical raw materials. It will therefore establish new geopolitical winners and losers and it will result in new challenges for energy supply security, such as rising dependencies on new unstable hydrogen producers. Thus, the geopolitical implications for a green or blue hydrogen future are different for hydrogen net-importers and exporters.

• Coping with a blue, turquoise, and grey hydrogen world: Fuel costs of hydrogen production are the largest cost factor. They account for 45-75 percent of the entire production costs. Low gas prices in the Middle East, Russia, and the U.S. could make these countries the winners, whereas Japan, China, and India — with higher gas (LNG) import prices — could turn into the losers. However, this depends on future declining production costs driven by technology innovation, political support, the diversification of worldwide supply, and constraining geopolitical factors. Turquoise hydrogen with gas pyrolysis might prove a cost-effective option as it does not require CCUS (as ‘blue hydrogen’ does). However, this technology is still in its early stages.

Figure 3: The Global Renewable Hydrogen World

Source: GIS 2020

• A Renewable Hydrogen Future: In a “green” hydrogen future, Russia might be a loser of worldwide decarbonisation efforts. In comparison with Australia, Africa, and the MENA region, Russia has no comparably cheap and abundant solar resources nor corresponding wind power capacities. Given the country’s huge territory, hydrogen exports would require far more costly investments in energy infrastructures than in smaller countries. The larger the country, the more costly it is to build the necessary infra­structure. But renewable hydrogen is also constrained by the available space for RES-based electricity generation and by a country’s population density (as in Germany).

Another factor is sufficient water supply, which is often scarce across Africa, the Middle East, South America, and Asia (including China). Other countries are also unable to build the required infrastructure for the production, transmission, and distribution of RES.

A U.S. study has identified the U.S., Australia, Morocco, and Norway as future export championsand the real geo-economic and geopolitical winners. The EU might become a leading technology supplier with a high infrastructure potential, but it will be constrained by expanding renewables due to its limited space, high population density, and water scarcity in some member states.

• Other Geopolitical Factors: The EU actively seeks to enhance an “open strategic auto­no­my” for alternatives, more competition, and to avoid “unwanted dependencies both economically and geo­po­litically” from authoritarian countries (such as Russia, and China, among others). Hydrogen offers new possibilities for cooperation between democratic G20 countries such as Australia, which has unique conditions to become a renewable energy and hydrogen superpower. However, the long maritime transport routes for hydrogen exports to Europe might prove costly and come with maritime security risks, such as blockades of choke points as recently experienced in the Suez Canal. While Mali in Africa can produce natural hydrogen (white hydrogen), widespread political instabilities have hampered any larger foreign investments over the last few years. Morocco has been identified by the EU and Germany as one of the most important hydrogen partner countries given its ambitious plans for solar plants and its potential yield of PV being twice as high. Nevertheless, present bilateral diplomatic relations between Morocco and Germany have dramatically deteriorated to different positions regarding the West-Sahara and perceived new nationalistic policies in Morocco.

Can Germany and the EU really expect any larger hydrogen exports from African countries as long as part of their population still has no access to electricity and the share of renewables in their energy mix is much lower than in Europe? It would make their energy transition and decarbonization even more unrealistic. Even Europe will have larger excess capacity for green hydrogen in the mid-term perspective due to the s ambitious EU’s decarbonization targets of its EGD for 2030.

 

Strategic Perspectives

The future of hydrogen will not merely encompass energy and economic dimensions, but rather it will also include wide-ranging foreign and security policy implications. Global competition for technologies, control of value and supply chains (of batteries and critical raw materials) as well as supply security concerns will rise within a “hydrogen world” while determining future cooperation and geopolitical rivalries.

The abovementioned German and EU net import dependency on hydrogen supplies also raise crucial questions about whether any excess capacities of renewable-based electricity production for electro­lysis will realistically be available in the EU and in potential hydrogen partner countries. The question of new depen­den­cies and supply risks of large-scale green hydrogen imports is much more complicated than currently discussed. The current European and worldwide hydrogen hype ought to be downgraded to a more realistic perspective. In order to diversify its future hydrogen imports and enhance their resilience and sustainability, the EU must define sustainability criteria which are not based on environmental and climate policy objectives alone, but also on its foreign policy as well as geopolitical interests.