The challenges that Spain must tackle to be a leader in the production and storage of green hydrogen in Europe, which everyone foresees

Spain - 

Spain must resolutely tackle technological, production-related and transportation challenges, as well as deep changes in industry and the need to implement a legal and financing framework that is safe and scalable.

Developing green hydrogen as the main energy carrier at the global level has been placed on the agenda of both the European Union (EU) and the governments of its individual member states, as well as on the agenda of governments around the world, as one of the great priorities for the next two decades.

In Europe, the initiative is based on two key objectives: (i) to help decarbonize the EU in a profitable manner and (ii) to reduce our dependence on imported fossil fuels. 

To give us an idea of the challenge facing this industry in numbers, according to a report by the Hydrogen Europe Association, approximately 1.4 tonnes of hydrogen were produced in Europe in 2020, of which only 2% was green hydrogen, i.e. 28,000 tonnes. The plan establishes that for the coming year, 1 million tonnes of green hydrogen should be produced and for 2030, 10 million tonnes. And, if we look to 2050, the hydrogen production target is between 80 and 120 million tonnes.

The EU’s strategy on hydrogen and the REPowerEU plan presented in 2022 established five critical areas for action: (a) support for investments; (b) support for production and demand; (c) creation of a hydrogen market and infrastructure; (d) research and (e) international cooperation.

All the analysts see Spain as one of the countries best positioned to lead Europe in the production of green hydrogen, but, to do so, we will need to resolutely take on the major challenges in the way.

This is how Gonzalo Valencia, partner in Garrigues’ Corporate/Commercial Department, put it in a new edition of The Garrigues Sustainable Dialogs. On this occasion, the central theme of the debate was The great challenges facing green hydrogen, with a round table of top experts, moderated by Gonzalo Valencia and by Sofía Lazcano, partner in charge of G-advisory, Garrigues’ consulting arm offering technical, economic and strategic advice on energy and ESG matters.

The development of different renewable energy production technologies that are efficient, scalable and cost-effective is crucial in order to come closer to meeting the objectives set out in the ambitious and increasingly necessary process of decarbonizing industry. The aim is to achieve a climate-neutral economy in Europe by 2050 and to speed up measures that can result in greater energy independence for EU Member States. All of this was discussed by the speakers at the round table, who noted some key issues when it comes to achieving the objectives set.

Most pressing measures

The experts agreed on the importance of matching supply and demand for green hydrogen and explained the numerous projects that are already being worked on in this area. They also noted the main needs that should be met to achieve greater implementation of this green energy.

As María Sicilia, president of European Hydrogen Backbone, explained, an EU regulation on green hydrogen is needed, one which enables cooperation among countries, with a systematic outlook. In the opinion of María Sicilia, the key to the proper development and implementation of this industry is the fostering of green hydrogen generation and consumption at the European level, coupled with investment in and the development of a transmission infrastructure for this gas. As regards certificates of origin, she noted that a first step had been taken with the approval of Royal Decree 376/2022, of May 17, but there is still a long way to go, particularly in light of the two delegated acts approved on February 13, 2023 by the European Commission and which precisely define when electricity that is used to produce liquid and gaseous transport fuel of non-biological origin is considered to be from a non-renewable source. 

For his part, Millán García-Tola, global director of green hydrogen at Iberdrola,underscored that consumers are the ones who should put pressure on the market by demanding products with the smallest carbon footprint possible, highlighting the value of the decarbonization solutions offered by renewable energy and green hydrogen. “Without this partnership, it will not be achieved,” he asserted. He also proposed that, in an initial phase of implementation, it would surely be more efficient to transmit electrical energy by taking advantage of and strengthening existing grids, and producing hydrogen close to where consumers are.

Javier Brey, president of the Spanish Hydrogen Association and CTO of H2B2, explained that in Spain we do very good R&D, but the problem is that the resulting technology is not transferred to companies: “It is very important for this transfer to take place.” On the other hand, he noted that the big bottle neck that needs to be addressed as soon as possible is the matter of vocational training. A highly significant number of workers qualified in this technology are going to be required in the coming years and governments and private enterprises need to make a firm commitment to this type of training. Lastly, he recalled that the first green hydrogen plant in Spain and the second in Europe has been operating in Spain, in Huelva, since 1992, so we are not newcomers to this technology.

Finally, Benoît Felix, Global Head of Structured Finance at Santander Corporate and Investment Banking, explained that, in addition to a stable regulatory framework, it is necessary to ensure that the first projects that we undertake are economically viable. To this end, he emphasized the important role that end consumers can play if the visibility is sufficient, supplementing the government assistance that will be necessary in these first initiatives. The impact that the use of hydrogen has on the final price of certain products is limited, and there is a growing percentage of the population that is willing to bear the price if visibility is sufficient (e.g. cars manufactured with green steel). Benoît Felix trusts that Spain is capable of repeating the success won in developing renewable energy, where we were pioneers, although to do so we must also learn from the mistakes made and avoid repeating them (e.g. regulatory stability). In his opinion, while governments are still seeking agreement on the regulatory framework for hydrogen, companies are already starting to feel pressure from investors to start decarbonizing with concrete steps. To wrap up, Benoît Felix recalled that financial institutions are already willing to finance these types of projects, provided that they are proposed with a suitable structure, at the level of both contracts (manufacturing of equipment, construction, operation and maintenance of the plant; offtake; hydrogen transmission, etc.) and compensation, which must be robust enough to bear the risks associated with these first initiatives.