As the global focus shifts towards clean energy, hydrogen has gained an increased attention and emerges as a frontrunner in the race to decarbonize the EU economy. Acting as a versatile energy carrier, hydrogen has the potential to accelerate energy transformation in various sectors including transport, and energy storage. Most importantly, hydrogen combustion does not emit CO2 and renewable energy can be used for its production (1). With its ability to deliver high energy output with minimal environmental impact, hydrogen is considered by the EU an essential and high strategy to reach carbon neutrality by 2050.
The EU Framework: RePowerEU, RED III, and Hydrogen Strategy
The European Union (EU) has been at the forefront of what has been called the hydrogen revolution. For the EU there are two main pressing points: phase out Europe’s dependency on Russian fossil fuels (2) and address the climate crisis while meeting the goals for its own European Green Deal.
- EU Hydrogen Strategy: Adopted in 2020, the Hydrogen Strategy provides a comprehensive roadmap for the mass rollout of large-scale electrolysers and the integration of hydrogen into existing energy systems. (2)
- RePowerEU Plan: Published in 2022, it outlines a hydrogen accelerator to scale up renewable hydrogen Beyond merely targeting 10 million tonnes of domestic and imported renewable hydrogen by 2030, the RePowerEU Plan aligns state aid rules to facilitate energy infrastructure investments. (3)
- Renewable Energy Directive (RED III): This directive was adopted by the Council on 9 October 2023 after two years of intense negotiations. RED III establishes the EU commitment to ensuring that at least 42% of hydrogen in the industry is derived from renewable fuels of non-biological origin (RFNBOs) by 2030.(4)
The Belgian Hydrogen Strategy and the Recent Hydrogen Act Approved by the Belgian Parliament
Belgium’s Hydrogen Strategy (5), inspired by its European equivalent and reflecting the nation’s commitment to innovation and environmental responsibility, rests on Four Pillars:
- Positioning Belgium as an Import and Transit Hub for Renewable Molecules in Europe: Belgium is striving to become a crucial hub for renewable hydrogen in Western Europe. This strategy identifies three key import routes – the North Sea route, the Southern route, and shipping route.
- Expanding Belgian Leadership in Hydrogen Technologies: Belgium is focusing on maintaining its leading position in hydrogen technologies. This involves adjustments in existing R&D instruments and investments in new ones, including a test facility for scaling up hydrogen technologies.
- Establishing a Robust Hydrogen Market: The third pillar centers on the creation of a hydrogen transport network, the acceleration of hydrogen interconnection with Germany, and support for European initiatives concerning standardization and certification for green hydrogen.
- Investing in Cooperation as a Key Success Factor: Collaboration among regional governments, European and international partners is emphasized as a vital component of success. Supporting initiatives like the creation of a Belgian Hydrogen Council reflects this collaborative approach.
Alongside this, the Draft Law approved on 6 July 2023 has taken Belgium a step further in implementing its Hydrogen Strategy. The so-called Hydrogen Act establishes a regulatory framework for hydrogen pipeline networks, designating the tendering rules to choose the single Hydrogen Network Operator (HNO) for the entire country. The HNO will oversee infrastructure operation, development, and quality control, and ensure nondiscriminatory access. Transitional measures for existing hydrogen networks operators and provisions for subsidies are included. The deployment of the Act will be overseen by the Belgian Federal Commission for Electricity and Gas Regulation (CREG).
Final remarks
The developments in the EU and Belgium are not merely policy decisions; they represent a pivotal moment in the energy transition which demands strategic alignment from all stakeholders.Hydrogen is considered a vital energy carrier able to realize net zero carbon emissions. EU net zero targets for 2050 requires that companies both acknowledge the requirements for energy transformation but proactively adapt and transform. Repercussion for inaction can be associated with higher exposure to the increasing demands on carbon taxes.
For instance, companies that do not switch to renewable and low-emission energy sources should be more exposed to carbon taxation stemming from the parallel phase out of EU ETS free allowances and the phase in of the Carbon Border Adjustment Mechanism (CBAM). Early action to transform the business model can be crucial, for instance, to access the limited grant and incentives opportunities provided by the EU Innovation Fund and the Hydrogen Bank (6).
At PwC, we stand ready to assist you in navigating these challenges. Whether it’s understanding the nuanced Belgian Hydrogen Act, aligning with RED III, assessing CBAM and EU ETS impact on your business or positioning yourself in the race for public grants and incentives, we have the expertise to guide you.
Please reach out to Alexis De Méyère (alexis.de.meyere@pwc.com), Bart Wyns (bart.wyns@pwc.com), Willem Gruyters (willem.gruyters@pwc.com) and Caroline Schmidt (caroline.schmidt@pwc.com) for further insights.
This article is made available by PwC for educational purposes only as well as to give you general information and a general understanding of these matters. Any content of this article should not be used as a substitute for competent professional advice.
References:
- Although at present most hydrogen placed on the EU market is produced from fossil sources, the EU aims to move to production of “green hydrogen” from renewable sources whose direct CO2 emissions would be near zero.
- EU commission – IP
- EU Green Deal
- Revision of the Renewable Energy Directive
- Belgian federal Hydrogen Strategy
- Commission outlines European Hydrogen Bank to boost renewable hydrogen
