The path to sustainable European competitiveness for clean tech
Beginning in 2019, the European Commission, led by Ursula von der Leyen, rallied around a European Green Deal as a policy priority. The new Commission would design a growth strategy to ensure Europe remained “a prime destination for investments that bring stable, future-proof quality jobs with a strong industrial base.” Regulatory bottlenecks, uncertain investment environments, and international supply chain issues should not be ignored if this priority is to become a reality.
The events in Ukraine sparked a transformation in Europe, later reinforced by the announcement of the US Inflation Reduction Act, leading the Commission to complement the green transition agenda with initiatives such as the Net-Zero Industry and the Critical Raw Materials Acts, the extension of the state aid framework, and the introduction of the Hydrogen Bank and others.
With clean hydrogen, Europe has a chance to secure a leading role in a multi-billion-euro global industry and all the benefits that come with it.
Despite some important steps forward in recent years, particularly in clean tech, Europe continues to be hamstrung on the issue of international competitiveness. Without a viable mission to confront the continent’s economic ambitions, no Commission will maintain a strong industrial base full of future-proof jobs in Europe while transitioning to net zero. However, with clean hydrogen, Europe has a chance to secure a leading role in a multi-billion-euro global industry and all the benefits that come with it.
Addressing supply chain uncertainties, increasing financial support for key sectors, and decreasing regulatory burdens on new technologies would be a great start.
Supply chains
At the end of April 2024, the European Parliament agreed on the highly anticipated Net-Zero Industry Act (NZIA) that, along with the Critical Raw Materials Act, represents two of the pillars to protect, expand, and enhance supply chains and domestic capabilities for key European industrial sectors, including hydrogen.
The NZIA aims to ensure that the Union’s net zero technologies manufacturing capacity meets at least 40% of annual deployment needs by 2030. Europe remains competitive in hydrogen technologies, particularly electrolyzers, and can meet these targets. However, most European support mechanisms (e.g. Hydrogen Bank), still prioritize price-only competition, potentially undermining European companies’ global prospects. In contrast, other regions are adopting measures like local content requirements to strengthen their domestic supply chains.
To promote strategic autonomy, we must consider safety, performance, resilience, and social benefits before accessing European funding.
Financial support
The first results from the Hydrogen Bank pilot auction were encouraging. The seven winning projects all came in under €0.5 per kilogram of hydrogen produced (kg/H2), far below the €4.5 per kg/H2 ceiling price. In all beginnings there dwells a magic: the hydrogen sector is present and has proven that it can deliver.
While the pilot was a success, the Commission should ensure that the 2024 auction is bold enough to further reduce the price gap, especially considering the most affected and hard-to-decarbonize economic activities across Europe. The budget of €800 million and the massive oversubscription left most projects unsupported, while the winning ones are still at risk of not reaching cost-parity with grey hydrogen by the time the subsidies reach project promoters.
To promote strategic autonomy, we must consider safety, performance, resilience, and social benefits before accessing European funding.
The next auction should be more flexible, such as in terms of cumulation with state aid (for the same costs) and time of delivery. Furthermore, a greater ambition for the overall budget and the introduction of strong resilience criteria are sought to be competitive in the global market.
Other forms of support for green hydrogen are available, but despite the funding envelopes, these programs share a common bottleneck: burdensome processes subsequently delaying the allocation of funds.
Speeding up procedures
In Hydrogen Europe’s manifesto and the Letta report, speed of delivery is paramount. Both highlight the need to significantly reduce the time required for cleantech companies in Europe to access incentives and for these companies to bring their technologies to market. This means speeding up not only permitting procedures, which in Europe harms every clean technology to some extent but funding access too.
The timeline of the Hydrogen Bank, from its first announcement in 2022 to its first auction less than 18 months later, is a virtuous example. We should make this exception the norm to enable Europe to become the global home for clean tech. Hydrogen technologies should be at the forefront, paving the way for a more sustainable, decarbonized, and resilient future for everyone.