Recently, the European Council and the European Parliament reached a temporary agreement on the use of hydrogen in certain industries, proposing that renewable energy accounts for 42.5% of all energy consumption by 2030. This interim agreement is one of the updated contents of the EU’s Renewable Energy Directive, and its objectives are binding on member states.
This temporary agreement has a significant impact on hydrogen demand in Europe. In the transportation industry, 5.5% of the total consumption target comes from advanced biofuels made from non food raw materials and non biological renewable fuels (RFNBO), mainly including renewable hydrogen. The temporary agreement proposes that by 2030, RFNBO should account for more than 1% of the renewable energy supply to the transportation industry.
At the Reuters 2023 Hydrogen Event Conference, Jorgo Chatzimarkarkis, CEO of European hydrogen companies, stated that he is concerned that sharing renewable energy consumption targets between biofuels and RFNBO will reduce overall demand for hydrogen. He stated that in the initial stage, biofuels may have a price advantage, so market participants will choose to reduce their use of hydrogen.
The temporary agreement also stipulates the proportion of renewable energy consumption in the industrial sector, with the goal of 42% of hydrogen in the industrial sector coming from RFNBO by 2030; By 2035, 60% will come from RFNBO. However, if a member state can meet its contribution requirements to the overall EU goals, or if the proportion of gray hydrogen in hydrogen consumption does not exceed 23% by 2030 and 20% by 2035, the RFNBO consumption target for that member state can be reduced to 20%. This temporary agreement will be submitted to the parliament for approval after being approved by the member states of the Permanent Representative Committee of the Council, and will come into effect after it is officially approved.
Before formulating the interim agreement, the European Council also reached agreement on two proposals. These two proposals establish common market rules for renewable natural gas and hydrogen. The council explained that in these two proposals, the tax rate for renewable gases transported through natural gas pipelines was reduced by 100%, and the tax rate for low-carbon gases transported through natural gas pipelines was reduced by 75%. At the same time, the EU allows the addition of 2% hydrogen by volume into natural gas as a universal transportation method to ensure stable and consistent natural gas quality. The proposal also proposes that member states will maintain the existing energy industry ownership split business model.
The EU’s goal is to achieve a hydrogen economy of 20 million tons per year by 2030, including 10 million tons per year of renewable hydrogen production and 10 million tons per year of renewable hydrogen imports.