Hydrogen is what states make out of it
26 April, 2021
On 8 July 2020, the European Commission adopted its new Hydrogen Strategy. The strategy supports deploying 40 GW of electrolyser capacity by 2030, fostering the decarbonization of hard-to-abate sectors such as international shipping or steel and cement production. In this sense, and due to its versatility, hydrogen could become a pillar of the European Green Deal (EGD). However, as European Commissioner for the Green Deal Frans Timmermans has stated, hydrogen should not be treated as a “silver bullet”—despite its potentially pivotal role in the transition.
Discussions on the role that hydrogen could play in the following years remains heated, as European Union (EU) member states envision different trajectories for this energy carrier. The different national trajectories mostly depend on the local availability of natural resources, such as natural gas, as well as on the willingness to trade with EU neighbour states. Countries like Germany or France support the decarbonization of hard-to-abate industries through both the production and import of green hydrogen, produced from renewable sources, while Norway projects a future for blue hydrogen, produced from local natural gas with the inclusion of carbon capture and sequestration technologies in the process.
Nevertheless, the colour of hydrogen and other technical considerations should not be treated as if in a bubble. In reality, almost all decisions regarding the value chain of hydrogen include questions with a strong geopolitical substratum. For example, Germany’s decision to only accept green hydrogen, even if lacking the capacity to produce it locally, has led to discussions with representatives of Russia’s Gazprom (the largest publicly-listed natural gas company worldwide and in Russia) to repurpose the controversial Nord Stream 2 pipeline for transporting green hydrogen instead of natural gas. Such decisions are likely to be perceived as threats to national energy security in regions such as Eastern Europe, as transforming Russia into a global player in the new market for hydrogen would re-empower a potentially threatening external actor.
Ambitious and cohesive climate policy needs to be implemented across the entire European Union, and not only in richer Western states such as Germany. Nevertheless, expecting states from the economic periphery of the EU to accept a common trajectory for the green transition is misguided. If the transition is to succeed, the local characteristics of each EU member state must be augmented—and not embedded in a generalist plan. In this sense, policymakers in Brussels need to understand that for many states, the energy transition will need to be designed to account for the technological possibilities of each country in a way that also reflects the dire need to act before we reach more tipping points in the Earth’s climate system. The form the energy transition will take in each country will depend, primarily, on the geopolitical implications of the different policy options.
While this point is relevant in every discussion at the European level, it’s nowhere near as central as in the debate on the future of hydrogen as a tool of deep decarbonization. This article briefly explains why hydrogen is particularly important for the EU’s green ambition and why geopolitical considerations need to be accounted for in order to build cohesion between EU member states.
A trade-off we don’t talk about
Hydrogen remains a contested instrument. While some energy experts condone its use, many fear that the high costs of generating clean hydrogen will only make this technology feasible in the presence of significant subsidies. This point has been raised both by market liberals that oppose policy regimes that cannot sustain themselves in the long-run, and by green activists that believe hydrogen is only a façade for the resurgence of the natural gas industry.
These speculations have been fed by numerous recent discussions that call for a mixture of hydrogen and gas to be used in the short-term, until the value chains for clean hydrogen are developed enough. Consequently, avoiding the political implications of fostering a hydrogen revolution in the EU is no longer possible. Although it is clear that some companies will benefit from the support clean hydrogen will receive, companies that have focused on other solutions for the decarbonisation of hard-to-abate sectors will incur losses. The distribution of these companies remains unknown as no institution has initiated a study on the trade-offs emerging alongside green hydrogen.
However, given that the majority of countries that have produced ambitious clean hydrogen strategies tend to be located in the Western part of the EU, it is safe to assume that, at this stage, Eastern Europe would have to finance, indirectly, the development of the hydrogen sector in countries like Germany, Belgium or the Netherlands. This would not only be politically unacceptable given the existing economic discrepancies, but also contrary to the paramount values of the green and just transition. That is not to say that smaller countries like Bulgaria or Croatia could not ultimately become net-producers of clean hydrogen; however, it is clear that the first wave of the transition—which will provide the largest cash transfers for the players in the market—will not include such countries.
What about Russia?
Additionally, Eastern Europe has been cautious about adopting hydrogen strategies as Russia has been at the forefront of the negotiations regarding the future of this technology in Europe. Recognizing that to propel the authoritarian Putin regime forward, Gazprom will need to diversify its portfolio and Russian policymakers have already started working on a national hydrogen strategy. The openness of Germany towards negotiating with Russia, even if this would mean supporting the income streams that have propelled the Putin regime, has raised a series of red flags. This, once again, comes in complete opposition to the official narrative promoted by the EU, which described clean hydrogen as a technology that every state could produce, further democratizing the global energy market and eliminating dominant actors from imposing their will.
Russia will finalise its national hydrogen strategy by the end of 2021 and is expected to start negotiating for the future of its energy exports even before that. This does not come as a surprise; the European Green Deal presents a significant long-term barrier for Russia’s dominant position and clean hydrogen might be a solution to this challenge. While Gazprom has avoided any discussion on the capacity of Russian firms to produce green hydrogen, the company has managed to shift the discussion towards other types of hydrogen, such as hydrogen produced from natural gas by using nuclear energy. This is possible mostly because the current EU strategy does not properly consider how the transition to green hydrogen could actually be implemented—leaving room for the need of imports in the short- and medium-term. While in theory imports could come from multiple sources, such as the MENA (Middle East and North Africa) region, countries in the East recognise that Russia’s movements clearly signal the intention of capturing this potential market.
While it would be absurd to expect that Russia would not be interested in the EU clean hydrogen market, or that the Putin regime would easily concede its strong position in the Eastern parts of the EU, it is nonetheless interesting to see how advanced talks have been with certain states (e.g. Germany) and how open policymakers have been to this idea. As recently as December 2020, Gazprom has already proposed to Germany the construction of Russian hydrogen production facilities in Germany, along with, of course, the conversion of Nord Stream 2 to serve in the clean transition. These discussions have taken place bilaterally, even if the green transition is by design a collective European arrangement.
Looking at the future
Hydrogen has the potential to decarbonize hard-to-abate sectors. Nevertheless, for this policy option to be successful, the European Union needs to orchestrate a strategy that accounts not only for the needs to combat climate change, but also acknowledges the importance of some states’ geopolitical interests. In this sense, decision-makers in Brussels should stop focusing only on the technological trajectory of generating sufficient green hydrogen (or whichever colours are being agreed to), and start looking more into how to convince states of the benevolent intentions of developing a hydrogen strategy. Without a proper communication strategy, hydrogen will not develop into the energy carrier that many expect it to be.
Furthermore, member states need to have an honest discussion regarding the Russian position. While it is likely inevitable for Russia to be part of the clean hydrogen value chain, Europe should act in concert when creating the roadmap. When countries like Germany include hydrogen in already controversial and geopolitically-sensitive projects (e.g. Nord Stream 2), unanimity will not be achieved in the EU.
The discussions on the future of hydrogen are multifaceted. Hydrogen is a chemical molecule. It is an energy carrier. It is a climate policy tool. It is a geopolitical threat. It is a point of contention, or a point of cohesion. Hydrogen is what states make out of it.