July was an unusual month for the European hydrogen sector with as many as six hydrogen projects reaching a final investment decision (FID). 

In mid-July, German utility EWE received the funding decisions from the German government for its four sub-projects under the €800 million, large-scale Clean Hydrogen Coastline project. Weeks before this, the company had already taken the FID on the project, subject to the funding decisions.

“With substantial public co-financing of around €500 million from the federal ministry for economic affairs and energy and the states of Lower Saxony and Bremen, EWE has now begun detailed planning of the individual projects,” a company spokesperson tells Kallanish.

The four sub-projects include a 320-megawatt and 50-MW hydrogen production facilities in Emden and Bremen, respectively; the conversion of a natural gas storage facility in Huntorf for hydrogen storage; and the construction of a hydrogen pipeline for green hydrogen transport in the Weser-Ems region.

Of this, the Emden project is one of the largest hydrogen production plants in Europe. Set to be operational in 2027, the plant is expected to produce 26,000 tonnes/year of green hydrogen.

Meanwhile, in late July, British oil giant Shell announced an FID on its 100-MW Refhyne II project in Germany. Located at the Shell Energy and Chemicals Park Rheinland, the project is expected to produce 44 tonnes/day of green hydrogen. This too, is set to be operational in 2027.

Shortly after, Shell’s rival bp took an FID on its HyVal green hydrogen project at its Castellon refinery in Spain. While the project was announced with an initial capacity of 200 MW last February, a bp spokesperson says that the current FID is only for an initial stage of 25 MW. The company has not disclosed when the initial stage will come online and how much it will cost.

Earlier in the month, a joint venture between bp and Aberdeen City Council also announced an FID on a 300-tonne-per-year green hydrogen project in north-east Scotland. The so-called Aberdeen Hydrogen Hub is slated to start construction later this year, with first production expected in 2026.

Late July saw French oil major TotalEnergies secure a 50% stake in RWE’s 795-MW OranjeWind offshore wind farm in the Netherlands to power 350 MW of electrolyser projects, producing 40,000 t/y of green hydrogen. The companies also announced the investment decision for the wind farm, whose construction is scheduled to start in 2026, with commissioning expected in early 2028. TotalEnergies plans to use the hydrogen to decarbonise its refineries in Northern Europe.

Around the same time, Virya Energy, HyoffGreen and Messer reached an FID on a 25-MW green hydrogen plant in Zeebrugge, Belgium. With the first production expected in 2026, the project has the potential to expand to 100 MW in the future.

“The recent wave of final investment decisions in the European hydrogen sector is a promising sign that the global industry is gaining significant momentum and indicative of the growing confidence among investors and stakeholders in the vital role hydrogen will play in the future energy landscape,” Clare Jackson, ceo of trade body Hydrogen UK tells Kallanish.

Daniel Fraile, chief policy officer of the European association Hydrogen Europe echoes: “It is an encouraging sign to see three major FIDs in the European hydrogen sector in such quick succession.” 

While the European hydrogen sector seems to be making progress amid a wave of greenlights in July, in the same month the European Court of Auditors (ECA) called for a “reality check” for the EU’s industrial policy on renewable hydrogen. The auditors said the EU’s goals for renewable hydrogen production and demand are “overly ambitious” and driven by “political will,” not a “robust analysis.”

The auditors also warn that the EU is unlikely to meet its 2030 target of producing and importing 10 million tonnes each of renewable hydrogen.

“It is difficult to assess and draw conclusions on the activity that took place over the last month,” an ECA spokesperson says.

The Delegated Act on the rules defining renewable hydrogen was only published last June. The lack of these rules delayed investment decisions, according to stakeholders surveyed by the ECA.

The prevailing “chicken-and-egg problem” of the nascent hydrogen market also led project developers to defer investment decisions. Other reasons include the lack of standards and certification, the difficulty in securing offtakers, lengthy permitting processes, and the difficulty in sourcing renewable energy, the report adds.

The market headwinds have also impacted electrolyser manufacturers like thyssenkrupp nucera. The German company last week said its growth momentum during the three months ended on 30 June 2024 had “significantly slowed” due to market uncertainties.

“Unresolved regulatory issues and a slow pace of funding commitments led to delays in the final investment decision of many potential customers regarding the necessary electrolysis capacities,” it said.

The ECA has called on the European Commission to update its hydrogen strategy addressing the following: how to calibrate market incentives; how to prioritise scarce funding; and which industries the EU wants to keep and at what price.

“The cost of RFNBO [renewable fuels of non-biological origin] remains high for most industrial uses; and so we do need less stringent rules under the RED3 Delegated Act such as on temporal correlation and the 2028 sunset clause,” notes Hydrogen Europe’s Fraile.

In the UK, the government must prioritise the approval of projects under Hydrogen Allocation Round 1 (HAR1) and Track-1 of the Cluster Sequencing process for projects to progress, says Jackson. While the first offers a strike price to selected hydrogen projects, the second supports carbon capture, usage and storage (CCUS) clusters.

“Successfully advancing HAR1 and Track 1 projects will send a powerful message that the UK is also open for investment, will enable the progression of broader projects, and position the UK as a leader in the global hydrogen economy,” she adds.

More FIDs to follow

Under the EU’s Additionality Delegated Act on RFNBO, producers must meet the “additionality” requirement for the hydrogen to be classified as renewable. This means the green hydrogen must be produced from new renewable projects and not existing clean power. However, green hydrogen projects that become operational before 1 January 2028 will be exempt from the rule until 1 January 2038. 

Hydrogen Europe thus expects to see more FIDs as projects “rush” to be commissioned before the 2028 deadline, Fraile unveils. 

With a wave of state aid measures approved last month under the Important Projects of Common European Interest (IPCEI) framework, more FIDs could follow suit. EWE’s investment decision came on the back of Germany approving €4.6 billion ($5 billion) in grants to 23 green hydrogen projects. RWE, Hamburger Energiewerke, Luxcara, bp, and Air Liquide are among the winners.

bp, in fact, already plans to sanction an IPCEI-recognised, 100-MW green hydrogen project at its Lingen refinery in Germany by the end of this year.

Similarly, the Italian government has announced €994m in subsidies for hydrogen projects previously approved by the EU under IPCEI. The Spanish government has also approved €794m in state aid for seven green hydrogen projects, which could also lead to more FIDs.

“Hydrogen Europe has always maintained that, once the regulations and funding instruments were in place, we would see an increase of FIDs,” Fraile notes. “While there is still a long way to go to match the volumes required by the targets in the Green Deal, the market is clearly growing in confidence.”

Hydrogen project FIDs announced in July

Source: company announcements