The Italian Government recently committed to allocate over €994 million in subsidies towards Hy2Infra projects designated under the EU’s Important Projects of Common European Interest (IPCEI) list.

This substantial investment represents the initial phase of projects within the European Union’s Green Deal initiative.

The European Commission approved the Hy2Infra IPCEI in February 2024, marking a significant milestone for the development of the European hydrogen infrastructure. This project established a substantial investment from seven European nations: France, Germany, Italy, the Netherlands, Poland, Portugal, and Slovakia, collectively contributing up to €6.9 billion from public funds. It is an enormous public investment, that is anticipated to leverage a minimum of €5.4 billion in private funding, resulting in a total commitment of €12.3 billion to the initiative.

These projects involve various elements, such as installing 3.2GW of large-scale electrolysers for renewable hydrogen production, scheduled to set forth between 2027 and 2029, deploying 2700km of hydrogen transmission and distribution pipelines, establishing hydrogen storage facilities with capacity of at least 370 GWh, and constructing handling facilities for 6,000 tons of hydrogen annually using Liquid Organic Hydrogen Carriers.

The Hy2Infra IPCEI is built upon two prior hydrogen-focused initiatives: Hy2Tech, announced in July 2022, focused on development of novel technologies for hydrogen production, and Hy2Use, announced in September 2023, which complements Hy2Tech and focuses on boosting the supply of renewable and low-carbon hydrogen. Together, these initiatives aim to mobilize over €38 billion from combined public and private sources to support more than 109 projects across 80 European companies.

But the European Union is facing another problem, which will keep policymakers and stakeholders busy for the next few years: hydrogen costs.

While Europe is investing billions in production facilities, only 20% of the 38 billion investments will be allocated for transport and storage facilities for consumers, and end users are still not convinced to invest in hydrogen technology.

The current market prices for clean hydrogen (10-14 EUR/kg) are prohibitively high and fluctuate too much for consumers to consider it a viable option. Focusing investment solely on production is also not enough to establish hydrogen as a feasible energy source for industries facing problems in decarbonization, such as heavy-duty transport.

To effectively drive down hydrogen costs, we need to consider the entire value chain, from production to consumption.

In 2019, researchers at Argonne National Laboratory found that the cost of producing hydrogen only represents about 15% of its total cost when it reaches the consumer. The substantial “hidden” costs, making up the other 85%, are often ignored. These expenses are crucial and must be reduced if hydrogen-fueled energy supplies become competitively priced against diesel alternatives.

The European Commission currently promotes and finances mainly the production part. But if we want hydrogen to become the fuel of the future, we need heavy investment in storage and transportation.

Luckily, there are clear opportunities for cost reduction in hydrogen refuelling station technologies. Compressors and dispensers could become less expensive if produced in higher volumes. However, the EU’s Renewable Energy Directive, which established standards required to use hydrogen compressors safely, did not create any framework to encourage production.

If Europe wants to boost its hydrogen production and encourage consumers to use it, the goal for the next five years is to create a framework that will incentivize investment (both public and private), cut the red tape, and allow companies to innovate and experiment.

The risk is that, like many other technologies in the past, the United States and China will soon overcome European innovation and innovators, making European companies lose market share and competitiveness. Will the next Commission and Parliament be able to prevent this?

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