June2024OIESENERGYCOMMENT2024StateoftheEuropeanHydrogenMarketReportMartinLambert,AlexBarnes,AndreiMarcu,OlivierImbaultAdithyaBhashyam,MartinTengler,ChiaraCavallera,GabrieleRomeo2Thecontentsofthispaperaretheauthors’soleresponsibility.TheydonotnecessarilyrepresenttheviewsoftheOxfordInstituteforEnergyStudiesoranyofitsMembers.KeyTakeaways•Developingahydrogeneconomyisoneofthecriticalrequirementsfortheachievementofthe2050NetZerotargetaswellasintheconsiderationoftheinterim2040target.•LikemanyoftheEUclimatepolicies,hydrogenpolicyiscurrentlyoverlyregulatoryinnature,ratherthanamoremarketdrivenapproachwithtechnologicalneutrality.•In2023,importantprogresshasbeenmadeincompletingtheregulatoryframeworkonthelow-carbonhydrogenmarketintheEUandUK.However,someimportantpartsofthepoliciesarestillmissing,particularlyintheEU.•TheEUandUKregulatoryapproachesaredifferent:(1)theUKistechnologyneutral,aslongasitissustainable,thatis,aslongasthehydrogen’scarbonintensityislowerthan20gCO2e/MJ,whiletheEUrequirestechnologytobeonlyrenewable(inaccordancewithREDIIdefinition);(2)theUKframeworkincludesasetofimplementingactsandaproductionsupportapproach,whiletheEUreliesonMemberStatedecisions,inparticularonimplementationoftargetsandquotas.•However,itistooearlytosaywhichisthewinningapproach,astheEUandtheUKhavenotmadesignificantprogressonthelow-carbonhydrogenmarketdeploymentin2023anditismostunlikelythattheEUandUKtargetsfor2030,intermsoflow-carbonhydrogenproduction,willbeachieved.•ThelagginggrowthoftheEUandUKlow-carbonhydrogenmarkethasanegativeimpactontheenvironmentaldeliverywhichremainsmainlydependentonchangestocurrenthydrogenproductionandincreasedefficiency.Thisisdemonstratedbytheverylowlevelofcommittedsupplycomparedtobothannouncedprojectsandambitioustargetswhichhavebeenset.•Europeangovernmentshavemadelowtomoderateprogressonninekeyperformanceindicators(KPIs)forlow-carbonhydrogen.MoreambitiouspolicyimplementationisneededtokickstartaEuropeanhydrogenmarket.•Governmentfundingandlocalcontentrequirementsinhydrogenprojectshaveshownthemostprogress.Europehasannouncedoneofthelargestbudgetsforlow-carbonhydrogenwhichissettoleadtomorefinalinvestmentdecisionsoncefundingisallocated.However,furtherworkisrequiredtotranslatethatwillingnessintoactualprojectcommitments.DomesticelectrolysermanufacturerscurrentlydominatesalestoEuropeanhydrogenprojects,accountingfor80-90%ofsalessince2022,farexceedingtheNetZeroIndustryActtargetof40%.However,thefundingseemsconcentratedinlimitednumberofcountriesinEU.•Moreprogressisneededonimplementingquotasforhydrogenuseandexpandingdomesticelectrolysermanufacturing.EUquotasforhydrogenusecouldcreate2-3.8millionmetrictons(Mt)ofdemandby2030,farbelowtheREPowerEUtargettouse20Mt.Theslowimplementationofquotasonanationalleveliscreatingfurtheruncertaintyforprojectdevelopers,leadingtodelaysininvestments.•Progressonraisingdomesticsupplyanddemandislackingasmostprojectsarefailingtomakeitoutofplanningstages.Just3.6%ofsupplyplannedforcommissioningby2030ispastfinalinvestmentdecisionoroperational.Only4.5%ofsupplyneededtomeettheREPowerEUdemandtargethassignedabindingofftakeagreement.Thereisnotyetsufficientincentiveforpotentialofftakerstocommittopurchasequantitiesoflow-carbonhydrogentosupportthetargets.Theenduseformuchproposedhydrogensupplyisunclear.•Overthenext12months,keythingstolookforwhichcouldindicatesignif...
