Hydrogen will be a key enabler of climate neutrality in various sectors. In line with this insight, policy makers in Europe have been actively adopting hydrogen development strategies.
Unfortunately, as clearly acknowledged in the European Commission’s 2020 Hydrogen Strategy, renewable hydrogen production is economically uncompetitive today – even with record carbon certificate prices – and is expected to remain uncompetitive until the 2030s. To put it succinctly: there is currently no natural market demand for fully decarbonized hydrogen, nor is such demand anticipated to materialise prior to the end of this decade.
European industrial policy is required to fill this gap – and, in our view, action should be taken quickly (i.e. as part of the Fit-for-55 Package, and the revision of state aid guidelines).
To better understand hydrogen’s policy support needs and their effects, Agora Energiewende and Guidehouse have examined the policy instruments most promising for bridging the cost gap between renewable hydrogen and its fossil counterparts. Based on our findings, in this study we present a policy instrument mix and roadmap designed to catalyse the renewable hydrogen ramp-up.