Hydrogen Ireland have welcomed a new research report by Aurora Energy Research, the leading European energy market analytics company, giving an analysis of the overall potential for low carbon hydrogen in Europe, while assessing the likely extent of market growth to 2050. Aurora’s analysis suggests that hydrogen demand could grow significantly from 327TWhs today to up 2,500 TWhs by 2050. The Aurora analysis suggests that there could be significant demand for low carbon hydrogen in industry, with this alone doubling current demand to up to 700 TWhs by 2050. In the 2030s and 2040s there is significant potential for hydrogen use in transportation (particularly in heavy duty vehicles such as buses, trucks, trains and potentially planes) and heating (replacing natural gas).

As well as establishing the likely scale of hydrogen demand, Aurora’s analysis identifies the most attractive markets for hydrogen market development across Europe – based on analysis of the policy, demand and supply drivers as well as availability of necessary infrastructure such as pipelines and hydrogen storage. This is drawn together in Aurora’s Hydrogen Market Attractiveness Rating (HyMAR), which ranks countries according to this cross-section of indicators on a biannual basis.

Aurora finds that Germany offers the most attractive market for hydrogen development at present.  Germany currently has the highest usage of hydrogen across Europe at more than 70TWhs (more than one fifth of the European total). Germany released an ambitious hydrogen strategy earlier in 2020, with planned incentives for hydrogen production and usage in industry and a focus on renewables-derived hydrogen. Germany also has access to significant salt cavern capacity, which can be used for hydrogen storage, and is already a cornerstone of the European gas grid. Future growth in green hydrogen production will be facilitated by strong growth in solar and wind capacity in the coming years. Although, until the coal phase out is completed in Germany (by 2038), it remains the case that hydrogen produced from grid electricity represents a relatively carbon intensive fuel, and there is a risk that rapid growth in hydrogen uptake in the short term could perversely increase emissions.

The Netherlands, UK and Norway are identified as strong markets for both green and blue hydrogen – taking a more technology-agnostic stance than Germany or the European Commission on how hydrogen should be produced. All three countries have a long history of natural gas production, whilst the UK and Netherlands have extensive usage of natural gas in heating – which could in the future be shifted towards hydrogen. All three countries have significant potential for carbon capture and storage (CCS), and a supportive policy environment towards this technology. The UK is yet to define a hydrogen strategy but has already consulted on possible business models and incentive schemes for CCS and hydrogen – and further details are expected to emerge in early 2021. Norway is furthest ahead within Europe in terms of the adoption of Fuel Cell Electric Vehicles, including Europe’s first fleet of hydrogen trucks.

France, Spain and Portugal look likely to emerge as leaders in green hydrogen production, facilitated by a rapid and extensive rollout of wind and solar generation capacity. Aurora expects solar capacity in Spain to increase more than five-fold between 2020 and 2040. This is likely to lead to longer periods of low power prices, which improves the economics of hydrogen production through electrolysis by lowering running costs. France is targeting 6.5GWs of electrolysers by 2030, with €7billion earmarked for green hydrogen projects, and is exploring hydrogen production from nuclear.

Anise Ganbold, Head of Global Commodities at Aurora Energy Research commented:

“In the last year and a half, the buzz around hydrogen has been picking up quickly. Hydrogen from low-carbon sources could play a key role in decarbonising Europe’s heaviest polluters, and some projects are already underway. However, there is huge potential for more investment – we estimate the market size of the hydrogen economy in Europe at up to EUR 120 billion by 2050.”

“Currently, the European market for hydrogen is small, and limited largely to oil refineries and ammonia for fertilisers. Aurora’s analysis suggests the market could grow eightfold by 2050, to 2,500TWh per year. At this size, the market value of hydrogen sales could reach EUR 120 billion by 2050.”

“Some projects are already underway to scale up hydrogen production, particularly for ‘green’ hydrogen production, which uses renewable electricity to split water. To decarbonise Europe by 2050, significantly more investment will be needed into all segments of the hydrogen supply chain. Aurora Energy Research in October launched its Hydrogen Market Attractiveness Rating (HyMAR), which assesses and ranks countries in Europe by their hydrogen investment potential. Our analysis concludes that Germany is now the leader in Europe, based on its developed policy, strong hydrogen demand outlook and significant growth in renewable electricity generation.”

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