The regulation of green hydrogen that Spain needs

Experts in the energy sector point to Spain as one of the areas in Europe with the most potential to produce green hydrogen. The transition to a sustainable economic model, if carried out on solid foundations, could be the engine for the country to achieve a leading position.

Renewable hydrogen is not yet as competitive as other low-emission technologies, but there are exceptions depending on location and other factors. Some examples are in forklifts or vehicles used in mining. Places endowed with rich renewable energy conditions with wind and sun, such as Spain, can offer a much more favorable environment for this technology.

To achieve this, it will be key to clearly define the regulatory framework for renewable hydrogen, which will play an important role in the decarbonization of sectors of difficult electrification, where there are no efficient or technically viable solutions.

The objective set by the Government, in its roadmap, marks 4 gigawatts (GW) of installed capacity of electrolyzers through renewable energy sources for 2030. To achieve this, the Council of Ministers has already approved the proposal of the Ministry for the Ecological Transition and the Demographic Challenge: the Strategic Project for the Recovery and Economic Transformation (PERTE) of Renewable Energies, Renewable Hydrogen and Storage (ERHA) that will mobilize an investment of more than 16,300 million euros.

In this sense, during this coming year 2022, Spain will play a decisive role in its commitment to this technology. In fact, on December 24, the regulatory bases for the granting of aid to the incentive program for the innovative value chain and knowledge of renewable hydrogen for 250 million euros and incentives for pioneering green hydrogen projects with commercial viability were published, for their production and local consumption in sectors of difficult decarbonization, for 150 million.

The grants will be granted on a competitive basis and will be managed by the Institute for the Diversification and Saving of Energy (IDEA).

The keys to success

One of the major obstacles to renewable hydrogen is its current cost. Antonio Hernández, partner of regulated sectors and economic analysis at EY, points out that one of the great challenges to achieve the deployment of this technology is to promote its competitiveness in costs, which in part can be solved by the public aid that is about to be distributed. According to the Hydrogen Council or IRENA, its current price is around 3.5 euros per kg, compared to 1.5 euros / kg of gray hydrogen, if the short-term increase in the cost of natural gas is not taken into account.

Public financing, which is already advancing, together with the reduction of electricity prices in the medium term thanks to the deployment of renewables, as well as the signals provided by green taxation and the price of CO₂ “will allow the price of green hydrogen to fall by around 2.5 euros/kg by 2030 and 1.5 euros/kg by 2050”.

The expert also points to the approval of the system of guarantees of origin for renewable gases, which is already in draft, as one of the keys for Spain to advance in this matter. These guarantees will certify the volume of gas and its quality, since it will differentiate between green hydrogen, biomethane, biogas or other gases, and will cover any renewable gas produced and consumed, whether on site, self-consumed, and injected or not into the gas pipeline network.

Third, Hernández highlights the importance of simplifying administrative procedures for the operation and execution of green hydrogen production facilities. In this line, homogenization of the administrative procedures of the different Autonomous Communities will also be one of the great challenges that our country will have to overcome.

Another key point is to have decarbonization strategies in sectors of difficult electrification, based on green hydrogen and other technologies. On December 28, the Ministry for the Ecological Transition brought to public consultation the terms for the award of 1,200 megawatts (MW) of cogeneration in the next three years.

Among the requirements established, it stands out that the candidates for these auctions will have to guarantee a minimum consumption of green hydrogen of 10% in their facilities, which will be able to operate with natural gas or biomass. In addition, the facilities of the successful tenderers may allocate more than 30% of the electricity production to self-consumption (unless they have signed a long-term sales contract).

In its analysis, the EY partner also highlights the simplification and facilitation of the development of direct power lines of this production, “which generates a certain relationship in the planning of gas and electricity networks”.

Reaching the Paris Agreement’s goal of zero emissions by 2050 involves incorporating green hydrogen as part of the solution. The public and private sectors are increasingly aware of the need to accelerate efforts for their production and use.

Source: The Economist