EVENT HIGHLIGHTS

What’s next for the EU hydrogen economy? (September 11)

Speakers: Jacek Truszczynski, Hildegard Bentele, Mettler Ann, Markus Wilthaner, Maeder Klaus
Moderator: Alice Hancock

On the 11th of September 2024, PubAffairs Bruxelles organised an afternoon debate on the necessary steps that the EU will have to take to foster the hydrogen economy during the next legislative term with Jacek Truszczynski, Deputy Head of the Unit for Net Zero Industry at the European Commission’s Directorate-General for Internal Market, Industry, Entrepreneurship and SMEs (DG GROW); Hildegard Bentele MEP (EPP/DE); Markus Wilthaner, Partner at McKinsey & Company, and Klaus Maeder, Chief Operating Officer (COO) of Bosch Mobility, who gave an introductory speech.

The debate was moderated by Alice Hancock, EU Correspondent at the Financial Times.

The moderator opened the event by welcoming the audience and by introducing the topics of discussion. She started by emphasising the relevance of the discussion to the future of the hydrogen economy following the European Commission’s State of the Energy Union Report, which had been presented on the same day, and the hydrogen recommendations outlined by Mario Draghi in the report on the future of European competitiveness, which had been presented on the 9th of September 2024.

After providing the audience with a brief overview, the moderator introduced the panellists and invited Klaus Maeder to give an introductory speech.

Klaus Maeder started his introductory speech by delivering a comprehensive description of Bosch’s overview, vision and its hydrogen portfolio. He underscored the company’s substantial investments in research, innovation and development, totalling 7.3 billion euros in 2023. Mr Maeder subsequently stressed Bosch’s unwavering commitment to climate protection and sustainability, pointing out that, in 2020, the company had reached Scope 1 and Scope 2 climate neutrality. Moreover, he explained how Bosch embarks upon a process of transformation in all its business divisions, making its products and services more sustainable.

He subsequently delved into Bosch’s long-standing involvement in electric mobility, highlighting the company’s 5 billion euro investment in this area over the past decade. The speaker also emphasised the importance of a multifaceted approach to achieve a successful and cost-efficient transition towards climate neutrality. In this respect, he highlighted the potential of hydrogen technology in reducing CO2 emissions, enhancing European energy independence, mitigating the challenges posed by the intermittency of renewable energies, and increasing Europe’s global competitiveness.

The speaker also elaborated on Bosch’s efforts to establish a robust European hydrogen value chain and to become a leader in hydrogen technologies by investing in, among others, technology for water treatment, hydrogen production, compression, storage, and hydrogen application in different sectors, such as fuel cells, the hydrogen engine and electrolyzer stacks.

He underscored the importance of the launch of the production of mobile fuel-cell system in Germany and in China in 2023. Further, Bosch aims at becoming a system supplier for hydrogen engine technology. The speaker subsequently touched upon the significant growth in hydrogen electrolysis capacity worldwide, which is projected to grow up to 170 GW by 2030. He also announced that Bosch’s electrolysis stack is on course for market entry next year, while acknowledging that a substantial portion of the demand for hydrogen technology comes from non-European markets, such as China and India. He also added that China will likely be the leading market for mobile fuel cells, while India has shown growing interest in the hydrogen-based engine.

Mr Maeder then compared the regulatory and policy frameworks of China and the US to those of the EU and noted the strong support that is being provided by the Chinese and the US governments through both conducive regulations and massive financing, which has contributed to their leadership in hydrogen electrolyser manufacturing. Consequently, he highlighted the need for a more predictive, reliable and innovation-friendly policy framework in Europe in order to encourage investments in hydrogen. Indeed, while acknowledging the EU’s efforts under the European Green Deal and the Fit-for-55 package, he also expressed the opinion that EU initiatives are not always in line with their goals, as he considered that the restrictive criteria for the production of green hydrogen and renewable fuels of non-biological origin (RFNBO) could hinder the growth of the European hydrogen market.

In conclusion, Mr Maeder emphasised the urgency of taking concrete steps to achieve the EU’s hydrogen production targets. He called for greater collaboration between political decision makers and industry stakeholders to find ways to secure the availability of green and low-carbon hydrogen at competitive prices, to build a cross-border infrastructure for transport and to foster a global hydrogen market. By addressing these challenges, the EU can position itself as a leader in the hydrogen economy and contribute significantly to a more sustainable future.

The moderator then posed the first question to Jacek Truszczynski, asking for his perspective on the European Commission’s vision for the hydrogen economy. She also enquired about the foreseen developments of the hydrogen economy in the new legislative term.

Jacek Truszczynski started his reply by highlighting some upcoming European Commission initiatives, such as the Clean Industrial Deal and the Industrial Decarbonisation Accelerator Act that may include hydrogen as a key component of the future EU policymaking on energy and industry. However, given the fact that the European Union is at the beginning of a new legislative mandate, he remarked upon the possible uncertainties surrounding future proposals. He also emphasised the progress made on the regulatory framework for hydrogen, notably with regard to the Delegated Act on Low-Carbon Hydrogen, and the important role of stakeholders’ input to further refine the legislative framework in the future if needed, and once relevant evidence is available.

Regarding financing, Mr Truszczynski touched upon the 18 billion euros committed under the framework of the Important Projects of Common European Interest (IPCEIs), which are expected to generate 27 billion euros in investments. He then emphasised the importance of channelling financing, while stating that investments will be attracted through policy implementation. He also highlighted the successful performance of the European Hydrogen Bank and discussed the potential of replicating this model using Emission Trading System (ETS) revenues, whilst acknowledging the challenges in convincing EU Member States to do so.

Mr Truszczynski also noted that only 5% of the projects developed under the European Clean Hydrogen Alliance have reached final investment decisions, emphasising the need for improved stakeholder engagement and project advancement. He also recognised the long-term challenges associated with hydrogen production and remarked that, just like the solar and wind industry, the roll-out of a nascent technology will lead to a cost reduction in the mid-term.

For these reasons, he stated, the EU needs to continue to support the development of new technologies and he concluded by suggesting to replicate successful initiatives such as the European Hydrogen Bank, whilst focusing on the implementation of existing legislation, which will require working closely with industrial actors, investors and EU Member States in order to bridge the investment gap and advance in the implementation of hydrogen-related projects.

The moderator addressed Hildegard Bentele MEP, asking her for her evaluation of the past five years and for her outlook for the future.

Whilst acknowledging the necessity of bearing in mind a long-term perspective, as previously pointed out by Mr Truszczynski, Hildegard Bentele emphasised the importance of taking into account the needs of producers and project developers, with special regard to their demand for more flexibility. She then recalled some restrictive criteria adopted for a nascent industrial sector and advocated for a looser policy approach.

Whilst agreeing with Mr Truszczynski’s stance on the importance of policy implementation, she underscored that overregulation should be avoided and emphasised the need to consider the limitations of the current infrastructure. Subsequently, she argued for a broader focus on the use of hydrogen, including storage options to address energy imbalances and the integration with electricity generation. Regarding mobility, the MEP supported a more open approach to different technologies, including e-fuels for aviation and maritime, emphasising the importance of avoiding overly ambitious goals and focusing on concrete initiatives such as the Important Projects of Common European Interest (IPCEIs).

Finally, she acknowledged the potential for hydrogen imports as a result of competitive production costs in other regions of the world and highlighted the need to develop an adequate hydrogen transportation infrastructure with the lowest CO2 footprint possible. In addition, whilst advocating for domestic production and for keeping the EU’s current manufacturing edge, she expressed support for imports from reliable partners as a means to foster progress in the hydrogen economy. The MEP concluded by stating that the EU should focus on infrastructure development and should encourage both domestic and international production.

Building on Ms Bentele MEP’s perspective on technological openness, the moderator asked Markus Wilthaner about the importance of technology openness.

Markus Wilthaner highlighted the importance of avoiding “tech tunnel vision” and taking a systemic approach to the energy transition. Taking Germany’s power section plan as an example, he remarked upon the over-emphasis of building out renewables without sufficient attention to providing flexibility and grid stability. He explained that this approach would lead to a need for very large grid investments and unnecessarily high costs related to power curtailment.

Mr Wilthaner also acknowledged that openness to technology can be challenging, as, according to him, different technologies are at different readiness levels and in different development trajectories, and hence require different approaches and incentives. Against this backdrop, he emphasised the importance of tailored incentives to address cost disparities between technologies. By referring to the US Inflation Reduction Act (IRA), he highlighted the effectiveness of subsidies for hydrogen producers, but cautioned against the absence of market-creating policies and demand for hydrogen.

Keeping the focus on the state of the EU hydrogen sector, the moderator addressed Klaus Maeder. Alice Hancock enquired about both the necessary steps to better attract final investment decisions (FIDs) and the actions needed from policymakers and investors to maintain momentum.

Klaus Maeder firstly replied by questioning whether Europe has yet created the necessary conditions to accelerate hydrogen adoption. Subsequently, he pointed to China and India as examples of countries that have successfully accelerated hydrogen production by prioritising infrastructure development and ecosystem creation. Mr Maeder also explained that the aforementioned countries plan to transition to 100% green hydrogen through a gradual approach, which includes creating the conditions to make hydrogen successful and fostering the benefits for end-consumers.

He then compared the European regulatory landscape to the regulatory landscapes adopted in other regions, concluding that Europe’s more stringent regulations create significant hurdles and he emphasised the need for a more pragmatic approach and an increased focus on the most urgent issues to tackle. Subsequently, he highlighted the advantages of hydrogen for energy independence and its contribution in meeting Europe’s CO2 neutrality targets. In this connection, he remarked upon Europe’s valuable potential to develop hydrogen-based solutions.

The speaker finally argued that a shift towards identifying opportunities and accelerating hydrogen production are urgently needed and he concluded by emphasising that a non-flexible approach which would demand 100% renewable hydrogen from the outset could jeopardise Europe’s ability to take a leading position in the hydrogen economy.

Following up on the assessment that the current regulatory environment can be burdensome, the moderator addressed Jacek Truszczynski to solicit his viewpoint on this subject.

Jacek Truszczynski acknowledged the industry’s partial dissatisfaction with the negotiated outcomes of the Renewable Energy Directive (RED) and its delegated acts. He then compared the EU’s approach to the United States’ IRA, noting that, while the IRA has not yet yielded significant results for hydrogen, it offers valuable insights into how Europe can simplify investment support. He also emphasised the importance of operating expense (OpEx) support for the sector and highlighted the EU’s plans to implement similar measures through the European Hydrogen Bank. Mr Truszczynski also acknowledged the positive aspects of the EU’s regulatory framework, including the binding targets for hydrogen use, with special regard to hard-to-abate industries and transport. He then expressed confidence in the notion that these targets would deliver results over time and he added that, with targeted adjustments to the whole framework, the hydrogen sector shall be able to develop faster.

The speaker also added a comment on the question of competitiveness, highlighting Europe’s potential to achieve a cost-effective green hydrogen production by 2030. He also stated that some EU Member States, such as Sweden and Spain, are already among the world’s cheapest producers. However, he also warned that Europe’s current price advantage could erode as hydrogen deployment increases. He concluded by recommending to focus more on financing during this transitional period towards an established hydrogen-based economy.

Following up on Mr Truszczynski’s remarks, the moderator directed her attention to Markus Wilthaner, seeking his assessment of the opinions expressed by the European Commission’s representative.

Markus Wilthaner echoed Mr Truszczynski’s observation regarding the differences in hydrogen production costs across Europe. He stated that producing green hydrogen in certain areas could cost as much as 10-12 euros per kilogram, while, for example, blue hydrogen in the south of the US is available for only a little bit more than 1 euro per kilogram. For green hydrogen, production in Europe’s most competitive regions in 2030 would still remain at around 3-4 euros per kilogram.

Subsequently, Mr Wilthaner highlighted another significant challenge in Europe, namely the disparity in national policy implementation due to the leeway that EU Member States enjoy. He specified that, while the third revision of the Renewable Energy Directive (RED III) sets minimum standards, EU countries enjoy flexibility in their respective policy implementation, creating complexity that is difficult to navigate for investors and industry. He also remarked that an EU-wide approach could be more cost-effective than each individual country trying to achieve set targets.

Returning to Mr Truszczynski’s point on competitive hydrogen production regions, he stressed the importance of collaborating on both soft (e.g. tradability, markets…) and hard (e.g. pipelines, ports…) infrastructure to allow for trade across Europe. Otherwise, the EU would fragment the market and eventually create a system that is far costlier than it could be.

Following the previous discussion, the moderator addressed Hildegard Bentele MEP, asking for her opinion on the balance between the Member States’ leeway and the European Commission’s targets. She specifically asked if Hildegard Bentele MEP  believed that this approach is hindering the EU’s ability to address the question of climate change at a European level.

The speaker argued that an EU-wide approach would be more beneficial than a fragmented one, as the latter would not be attractive for investors. She explained that an integrated common approach would also reduce the leverage of Member States to adapt the EU policy framework, whilst stating that cross-border collaboration would be further promoted. She subsequently reiterated the importance of embracing a European-level approach by advocating for greater coordination and trust across EU Member States for both competitiveness and sustainability reasons. Ms Bentele MEP concluded by pointing at the lack of EU funding for further integration efforts as a significant obstacle not only for the hydrogen sector, but for both the clean-tech industry as a whole and the fight against climate change.

Referring to the presentation of Mario Draghi’s report, the moderator highlighted the need for a Europe-wide infrastructure to support a coordinated approach. She then turned to Klaus Maeder, enquiring about the most critical technical gaps hindering the development of a Europe-wide infrastructure that would support a successful hydrogen economy.

Klaus Maeder started his reply by elaborating on the state of hydrogen infrastructure in Europe, as well as on Europe’s competitiveness in general. He firstly highlighted the technological synergies with the automotive and aerospace sectors concerning the existing technologies for electrolysers and fuel cells that render the European economy globally competitive.

He then emphasised how important leveraging value chains and cutting-edge and precision technology to accelerate innovation processes is for both EU competitiveness and the hydrogen economy. Indeed, Mr Maeder took the example of starting to invest in fuel-cell and electrolyser technology to demonstrate how this would help Europe’s future advancements and enable an effective roll-out of hydrogen production. In this respect, he underlined the importance of using the capabilities that Europe currently has, mentioning high-precision stamping parts for fuel-cell technology as another example. He also warned about the need to accelerate the build-up of a reliable and capable ecosystem for the hydrogen value chain.

On the question of workers’ skills and entrepreneurs’ capabilities, Mr Maeder stressed Europe’s know-how in hydrogen technology. He also highlighted the expertise of mid-sized European enterprises in producing high-precision parts, adding that these assets of the EU economy could be easily applied to successfully develop a European hydrogen economy. In this respect, whilst stressing the need to invest in research and development, Mr Maeder pointed out how Europe already has all the instruments at its disposal to succeed.

Following Mr Maeder’s comments, the moderator turned her attention to Jacek Truszczynski, asking for his assessment with regard to the topics of competitiveness and infrastructure development.

In Jacek Truszczynski’s opinion, infrastructure is a fundamental question for the EU. He remarked upon the importance of an EU-wide approach by emphasising that fragmentation within the single market does not facilitate the race against global competitors. He then highlighted the current EU Member States’ approach with regard to mandatory transportation targets, pointing out that some are establishing their own certification and support schemes, a process which he did not consider to be optimal, including from a financing perspective. Continuing on the same note, he referred to the phenomenon of EU companies seeking the highest level of subsidies across Europe, a process which, in the speaker’s opinion, further highlights the need for EU-level coordination through pan-European financial instruments and certifications.

Regarding the very question of hydrogen infrastructure, he echoed the widespread opinion which foresees that the EU should be focusing on few industrial clusters within the EU and should be providing them with essential infrastructures they need in terms of hydrogen, electricity and CO2 networks. He finally acknowledged the need for further work to operationalise and make these efforts tangible.

The moderator turned to Hildegard Bentele MEP first, enquiring as to whether current targets of production and imports (the so-called “10 plus 10 million targets”) are realistic. She also asked her to share her perspective on the EU’s competitive position in the global hydrogen market and on its ability to achieve its objectives.

Hildegard Bentele expressed general scepticism about setting targets which are too ambitious, arguing that they could sometimes create unrealistic expectations. She also emphasised the changes of the geopolitical landscape that began during the last legislative term, as well as the current need for caution in setting over-ambitious goals, as Europe does not enjoy the global stability it used to benefit from. Notwithstanding these concerns, she advocated for accelerating the implementation of the REPowerEU plan, as well as all others EU initiatives in favour of the energy transition, whilst remarking upon the change of setting created by the consequences of the war in Ukraine.

Ms Bentele MEP also acknowledged that it is essential to move forward, speed up and scale up the hydrogen production process. She also emphasised the need for more policy flexibility, and subsequently stressed the importance of an EU-wide approach to transition to a low-carbon economy, whilst being careful to avoid disruptions. She also emphasised the need to shorten the transition as much as possible by focusing on implementation and policy adjustments.

Klaus Maeder stepped in to clarify that ambitious targets are essential to achieving overall decarbonisation goals. However, he also remarked upon current limitations on potential solutions, whilst reiterating the importance of maintaining a flexible approach in pursuing the targets the EU has set.

Markus Wilthaner agreed on the opinion that target setting is important and that targets have signal value. However, he also highlighted that targets alone do not trigger investment. As an example, he pointed out that the EU is likely to miss the “10 plus 10 million target” for 2030 since binding policies like RED III, depending on implementation by Member States, would support only about a quarter of the target.

Markus Wilthaner also pointed out that investors prioritise the most straightforward business cases and stated that a lack of funding is not the primary obstacle, but rather the lack of bankable projects is. He argued that policies should be designed to provide reliable price and volume signals that enable bankability, in order to attract private investment into the energy transition.

Pursuing the topic of financial considerations, the moderator emphasised the success of the European Hydrogen Bank. She then turned to Jacek Truszczynski, asking for clarifications with regard to the European Commission’s initiatives to stimulate investment in the hydrogen ecosystem.

Jacek Truszczynski defined the European Hydrogen Bank as a model that should be followed. He also highlighted the auction-as-a-service concept that could allow EU Member States to contribute to a pre-defined financial product. The speaker also stated that some measures to aggregate demand were already put in place for the gas market, but also specified that the gas market is not a nascent market like the hydrogen one, and remarked that the financial gap, as per any nascent market, must be also filled by public institutions. He then highlighted the crucial role of the Hydrogen Bank in bridging the current financial gap.

Mr Truszczynski also identified land access for renewables as an area where regulatory interventions could accelerate progress in producing green hydrogen. He then acknowledged the high need for renewable energy and the time-consuming nature of the permitting process across Europe, whilst highlighting that the European Commission has already tabled a proposal to speed it up. He concluded by stressing the importance for EU Member States to swiftly implement the new permitting rules, once they are adopted.

Shifting the focus to the practical applications of hydrogen, the moderator turned to Hildegard Bentele MEP, seeking her perspective on whether a more defined vision of hydrogen has been developed over time.

Hildegard Bentele answered by stating that the increase in usages will generate additional occasions for the development of hydrogen production. While she viewed this positively from a technological perspective, she raised concerns about the implementation of the technological and infrastructural needs of the hydrogen ecosystem. She also emphasised the need for continued research to find the optimal hydrogen applications in this domain.

Following the MEP’s comments, the moderator asked Klaus Maeder how Europe can strike a balance between domestic production and import.

Klaus Maeder emphasised that, given the current production capacity limitations, hydrogen imports have turned into a necessary component of the European energy transition. He also argued that accelerating the adoption of hydrogen-based solutions in all sectors of the economy requires a large degree of openness, including international cooperation and hydrogen imports. These processes, the speaker continued, are in fact also helpful to fostering the hydrogen ecosystem in Europe. Mr Maeder also emphasised the widespread application of hydrogen use cases beyond mobility. He then highlighted the numerous opportunities to reduce CO2 emissions and eventually reach carbon neutrality through hydrogen utilisation. He subsequently stressed again the importance of accelerating action, warning that delaying progress could compromise the achievement of both EU climate targets and Europe’s global competitiveness.

Having been invited by the moderator to comment on the matter, Markus Wilthaner expressed a degree of scepticism with regard to the effectiveness of top-down regulation for hydrogen usage. Indeed, he argued that, as there are many applications and circumstances, market forces will actually drive hydrogen allocation most effectively. He also emphasised that demand from multiple applications, rather than focusing hydrogen on a few select uses, would create the critical mass for market development. He mentioned that use in refineries, as an example, would reduce costs and facilitate hydrogen adoption in other sectors.

Whilst acknowledging the potential success of the IRA in the US, the moderator suggested that the EU’s more set criteria could also yield positive results and asked Jacek Truszczynski if he anticipated US companies entering the EU hydrogen market in order to make investments.

Jacek Truszczynski acknowledged the interest of some US companies in the European hydrogen market and noted that the IRA provides some specific criteria for hydrogen production which are justified by concerns that the hydrogen sector can hinder the build-up of renewables. He then remarked that accelerating renewable deployment is a key strategy to address some of the concerns emerging from the creation of a fully-fledged EU green hydrogen market.

The moderator referred to the Draghi Report and asked Hildegard Bentele MEP about its possible influence on the EU’s future policies, including with regard to hydrogen.

Hildegard Bentele highlighted the significant impact of the Letta and the Draghi reports, both of which were released before the actual start of the new mandate. She also emphasised the importance of a fresh start during this mandate, as, according to her, it is now time to actually implement the “deal” part of the European Green Deal. She also remarked that the focus on competitiveness over the last two years is also a consequence of the fact that EU institutions were willing to transform the green transition into a new model of growth.  

She subsequently praised the increased focus on an EU-level solution and encouraged the industry to advocate for greater resources to be allocated to the EU industrial policy. However, the MEP also stated that current geopolitical tensions have added a burden to the EU budget, as defence, security and migration, for example, have become pressing priorities as well.

Ms Bentele MEP subsequently underscored the importance of completing the Capital Markets Union project to attract investors. She then stated that public funds alone are insufficient and that private capital is essential to cope with the various challenges that the EU currently faces. Additionally, the MEP called upon EU and national leaders to swiftly deepen synergies with other countries such as the US, expressing her regrets with regard to the missed opportunities to establish a transatlantic trade pact.

The Q&A session covered the following issues: the question of investing in projects across Europe instead of focusing on areas with a high concentration of potential demand; the benefit of a broader approach involving multiple clusters across European regions; the difference between a traded hydrogen system and a non-traded hydrogen system; the EU industrial policy challenges due to EU Member States’ influence; the question of restructuring and clustering in Europe; the role which hydrogen could play in Europe’s future energy mix; the question of the technological mix in energy sources; the status of the Delegated Act on Low Carbon Hydrogen, as well as of the RFNBOs Delegated Act; the challenges faced by Eastern European countries in achieving renewable energy targets by 2030; the RED III targets and the reliability of medium-term cost projections, especially when compared to energy sources other than hydrogen; the extent to which the EU hydrogen sector should be protected in the current international context; the possibility of having a global carbon pricing and the role of international climate negotiations between large players. 

Do you wish to know more about the issues discussed in this debate? Then check out the selected sources provided below!

European Clean Hydrogen Alliance, European Commission

European Hydrogen Bank, European Commission

REPowerEU: Affordable, secure and sustainable energy for Europe, European Commission

Renewable Energy Directive, European Commission

Important Projects of Common European Interest (IPCEI), European Commission

State of the Energy Union Report 2024 shows EU progress to ensure secure, competitive and affordable energy for all, Press Release, European Commission

The future of European competitiveness: Report by Mario Draghi, European Commission

Auctions-as-a-Service for Member States, Concept Note, European Commission

Hydrogen and hydrogen derivatives. Helping realize the energy transition and decarbonisation of hard-to-abate sectors, McKinsey

Hydrogen Insights 2024, Hydrogen Council

Emerging trade corridors for hydrogen and its derivatives, Hydrogen Council – International Hydrogen Trade Forum joint initiative

Global Energy Perspective 2024 webinar, McKinsey