Green hydrogen: let's go from the muses to the theater

Energy has become the central theme of the political, economic and social agenda in the European Union. Never before have our present and our future been so linked to the functioning of the energy system and the need to find new sources of clean energy and to have greater autonomy.

The evident social concern for the cost and availability of energy that is palpable in the streets requires solid and long-term responses from the public and private sectors. The challenge is enormous: ensuring energy security and independence while accelerating the fight against climate change.

But with great difficulties, great opportunities. Green hydrogen, as was seen a few weeks ago at the Euro-Mediterranean summit in Alicante, is in turn a great solution and a great opportunity for Europe. As the President of the European Commission, Ursula von der Leyen, pointed out at the summit, it is a new energy vector that is going to change the history of this continent by forming a crucial part of our energy system.

And in this new energy system, Spain has a fundamental role to play. Thanks to its abundance of sun, wind and space, it has the key elements for the production of green hydrogen, a clean energy source that optimally responds to the decarbonization challenges of industry and heavy transport.

Spain is the fifth country in the world in wind energy, the eighth in renewable generation and, of all green hydrogen projects worldwide, 20% are Spanish. For this reason, I dare to say that Spain could become the new Persian Gulfof green hydrogen, with the possibility of attracting new industries in search of clean and cheap energy and with the capacity to export to the rest of the continent, which would transform its traditional energy balance of payments.

But developing this new hydrogen market requires us to move quickly from announcements to facts. In Spain, more than 80% of hydrogen projects are in very preliminary phases (either in a feasibility study or in the phase of obtaining permits). We have to be nimble because others are moving very fast and it is a global race, with many geostrategic interests at stake. In the case of the US, the recently approved Inflation Reduction Act, together with the Bipartisan Infrastructure Act, will provide more than 20,000 million dollars of support to the green hydrogen industry, with an important componentMade in America. To succeed in this new global market for renewable hydrogen, here are the top five areas we should be working on:

1. Hydrogenize the energy demand, substituting in the short term the use of gray hydrogen by green one in refining and fertilizer production activities and stimulating demand in industry, heavy transport and maritime. For this, it is necessary for green hydrogen to be competitive, for example, favoring measures that reduce the cost of renewable electricity, which is 80% of the cost of hydrogen. The financing plans enabled within the framework of the Recovery Funds and other EU mechanisms such as Projects of Special Interest (IPCEI) go in the right direction, but they run the risk of falling short when compared to the measures put in place across the Atlantic. Other measures could include trade policies that address carbon leakage in certain industries (such as the border carbon fee currently being debated), quotas and mandates for the use of green hydrogen specifically in transportation, alignment with the financing of the Industrial R&D and, finally, public procurement or eco-labeling of green materials produced with renewable hydrogen.

2. Promote strong, specific and long-term policies and regulations to facilitate the execution of projects for hydrogen producers. In order to allow them access to sufficient and competitive renewable electricity, it is necessary to expedite the granting of permits, facilitating the administrative processes for hydrogen production facilities, and very urgently, for solar and wind renewable generation plants. It is also necessary to adopt a series of transversal regulations for the certification that green hydrogen is, indeed, green. The recently passed legislation on guarantees of origin is a positive step in this direction.

3. Strengthen interconnections. It is necessary to guarantee the timely start-up of infrastructures, including electricity transmission facilities. It is necessary to continue working with all stakeholders in the planning of the electricity network and governance of future hydrogen networks. In this sense, the announcement of the construction of a new pipeline between Barcelona and Marseille is great news in the long term. In the short term it will be necessary to promote marine corridors. With all this, we will see the so-called hydrogen diplomacy being promoted in the coming years, in which collaboration between the countries around us will be intensified.

4. Favor volume to create economies of scale. The more and larger projects, the better. To do this, we must promote collaboration and attract investment. We need large conglomerates, SMEs, component manufacturers, engineering, universities, researchers and service providers. But, above all, it is necessary for Spanish entrepreneurs to take a step forward to lead this industry. Its activity will be key to developing the entire value chain, generating a new comprehensive market.

5. Facilitate project financing and support investment and R&D and innovation efforts. The aid should be directed to subsidize not so much the purchase of equipment, but the costs of hydrogen production, as well as tax aid. To win this hydrogen race, it is important to promote collaboration between all the actors, entrepreneurs, companies and local, national and European administrations.

These are far-reaching, complex measures that require a great collective effort, but we are talking about something that can transform the European economy and society in the coming decades. We are talking about attracting and developing a new industry, promoting sustainable transport by land, sea and air, creating quality employment. In short, we are talking about turning Spain into a power exporter of energy and a global benchmark for the energy transition.

Maarten Wetselaar He is CEO of Cepsa.