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EU Plans for Hourly Matching May Increase Green Hydrogen Costs by Over 25%, Study Shows

10 Sept 2023

A recent scientific study has found that the European Union's (EU) plans to introduce hourly matching of green hydrogen production with variable renewables generation from 2030 could significantly increase the cost of green hydrogen, without necessarily reducing overall power sector emissions. The study, conducted by researchers in the United States and Germany, raises questions about the economic and environmental implications of strict hourly matching requirements for green hydrogen production.

EU Delegated Acts and Green Hydrogen

The EU recently passed Delegated Acts on Renewable Fuels of Non-Biological Origin (RFNBOs), which include green hydrogen and its derivatives. These acts initially allow for monthly matching of green hydrogen production with renewables generation, but from 2030, they mandate hour-by-hour temporal correlation. This means that producers of green hydrogen must demonstrate every hour that their electrolysers consumed only renewable energy generated within that same hour.

Furthermore, an "additionality" clause in the Delegated Acts stipulates that all electricity consumed for green hydrogen production must originate from renewables projects specifically built to supply power for this purpose. This provision aims to prevent green hydrogen production from consuming clean electricity that would otherwise have been used by the grid, potentially leading to increased emissions from fossil-fuel power plants.

Impact on Green Hydrogen Costs

The study's findings reveal that the shift from monthly to hourly correlation, along with the additionality requirement, could increase the cost of green hydrogen production by a significant 27.5%. Under the hourly simultaneity scenario, the levelized cost of green hydrogen (LCOH) is estimated to average €4.58 per kilogram, based on 2017-20 wind-power prices in Germany. In contrast, under a more flexible annual simultaneity scenario, the LCOH would be lower, at just €3.32 per kilogram.

The researchers also emphasize that the complex hourly matching definitions may lead to conflicts across different jurisdictions, potentially hindering the international standardization of hydrogen production, which is essential for global trading.

Limited Evidence for Emission Reduction

Contrary to expectations, the study found "little evidence" to support the idea that requiring hourly simultaneity would significantly reduce power sector emissions. In fact, the research suggests a slight reduction in power sector emissions across most scenarios. This is due to ongoing trends in the energy transition, which are likely to lower the risk of increasing emissions in the power sector.

A Call for Flexibility

In response to these findings, the authors of the study recommend a more flexible approach to defining green hydrogen production. They propose an annual additionality criterion, eliminating the need for strict hourly simultaneity. Under this approach, producers would only need to demonstrate on an annual basis that they have purchased an amount of renewable energy equivalent to the electricity consumed, rather than proving it every hour.

Such flexibility, they argue, would allow green hydrogen projects to better respond to the availability of dedicated renewable production, market prices, and hydrogen demand patterns, while maintaining environmental sustainability.

Future Uncertainty

While the EU's plans for hourly matching are currently set to begin in 2030, there is room for reconsideration. A review is scheduled for 2028, which may recommend adjustments or alternatives to the strict hourly requirements. This uncertainty offers hope for stakeholders, including trade bodies like Hydrogen Europe, that have expressed concerns about the potential economic and expansion limitations of these rules.

In conclusion, the study underscores the complex relationship between green hydrogen production requirements and their impact on cost, emissions, and international harmonization. As the EU and other regions continue to pursue green hydrogen as a key component of their energy strategies, finding the right balance between environmental goals and economic feasibility remains a crucial challenge.

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