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France Commits €4 Billion for Low-Carbon Hydrogen Projects to Support Decarbonization Efforts

4 Sept 2023

Paris - The French government is taking significant steps to advance its low-carbon hydrogen initiatives by allocating €4 billion in subsidies through public-private contracts. This funding will drive the development of low-carbon hydrogen projects, aligning with France's updated national hydrogen strategy and contributing to the country's efforts to combat carbon emissions.

The European Union (EU) has set ambitious goals, aiming to produce 10 million tonnes of green hydrogen annually by 2030 and import a similar quantity as part of its REPowerEU plan. This strategy aims to reduce Europe's reliance on Russian fossil fuels while promoting clean energy alternatives.

Each EU member state is devising its own approach to meet these targets. France is focusing on domestic hydrogen production, while Germany leans towards hydrogen imports. France has unveiled its strategy, with the government's recent announcement highlighting its commitment to the cause.

France's Ambitious Hydrogen Strategy

The French government intends to adopt a decree in the coming weeks, unlocking €4 billion in funding to support low-carbon hydrogen production capacity. This funding is part of the €9 billion in public support announced at the end of 2020 and underscores France's dedication to hydrogen as a clean energy solution.

The decree will bolster several projects with a total capacity of 1 gigawatt (GW), equivalent to approximately 140,000 tonnes of annual hydrogen production. The first electrolyser is anticipated to be operational by 2026.

Addressing Price Challenges

To facilitate the growth of low-carbon hydrogen projects, France plans to provide 15-year public support in the form of subsidies. These subsidies aim to bridge the price gap between carbon-free hydrogen and fossil-based hydrogen, which currently ranges from two to four times the cost, depending on the technology employed.

In essence, the government's support will ensure that producers receive compensation for the price disparity, helping to stabilize the market, similar to contracts for difference (CfDs) used in renewable energy development.

However, the extent to which the government can close the price gap remains uncertain. Reducing this gap may involve achieving industrial economies of scale in electrolyser manufacturing, controlling the cost of delivering carbon-free electricity, or ending free quotas for fossil hydrogen production plants. The ongoing reform of the European electricity market may also play a role in addressing price discrepancies through long-term power purchase agreements.

Despite these challenges, France's commitment to subsidizing low-carbon hydrogen projects signifies a substantial step towards achieving its decarbonization goals and contributing to Europe's green hydrogen targets.

EU-Backed Hydrogen Projects

France's recent decree aligns with its national hydrogen strategy unveiled in September 2020. The country is actively participating in Important Projects of Common European Interest (IPCEIs), benefiting from looser EU state aid rules when projects offer EU-wide advantages.

These projects are set to receive over €10 billion in EU funding, complemented by more than €15 billion in private investments. Currently, there are over 80 hydrogen projects spread across the EU, encompassing two IPCEIs.

French Energy Minister Agnès Pannier-Runacher's visit to the Haut-Rhin region in eastern France on Wednesday included an inspection of a 1GW electrolyser production plant, highlighting the nation's dedication to low-carbon hydrogen as a key contributor to its decarbonization journey.

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