Of the seven countries that contain bidding zones at or above the 90% share of renewables, ICIS data shows that this quartet are all projected to have hydrogen supply in excess of demand by 2030.

On February 13, the European Commission published its long-awaited final delegated act for the production of renewable fuels of non-biological origin (RFNBO), which by proxy are the rules for producing renewable hydrogen. 

The criteria within the delegated act mean that project developers can move forward with their plans to create hydrogen plants in the knowledge that they will be able to produce what will be classed as renewable hydrogen. Further, as the delegated act applies to hydrogen produced in Europe and for imported hydrogen into the EU, it is likely to be one of the most influential policy documents for hydrogen projects globally. 

The delegated act provides not just one rule for producing renewable hydrogen, but a balance of different scenarios where hydrogen production can be deemed “renewable”.

The act makes clear there are instances where additionality does not apply. These are when a grid’s renewable share exceeds 90%, and when the carbon content of a grid is equal to or below 18gCO2e/megajoule (MJ). 

Of the two scenarios, a high renewable share provides the greatest freedom to hydrogen producers, as they avoid additionality, temporal and geographical correlation, according to the research conducted by Jake Stones – Hydrogen Editor, ICIS. In essence, a hydrogen producer can purchase power from the spot market to run its electrolyser. 

A low-carbon grid, namely a grid where the average emissions per megajoule are below 18gCO2e, also means market participants face fewer restrictions as additionality need not be met. A hydrogen plant would still need to secure a renewable power purchase agreement, and abide by temporal and geographical correlation, but the age of the renewable asset does not need to be considered. 

ICIS has therefore mapped which countries, according to its long-term power model, have the highest shares of renewable power, and which countries avoid the principle of additionality due to high concentrations of low-carbon electricity supply. 

ICIS launched the first hydrogen price assessments to reflect the market value of renewable electricity last September.

Norway and Sweden lead the way

Currently Norway and Sweden are the only two countries in Europe that have bidding zones which could support renewable, grid-based production due to high proportions of renewable energy accounting for their power mix. These two countries meet the 90% share of renewables for total generation required for additionality and temporal correlation-free generation. 

Between 2030-2040, a further five countries reach or exceed the 90% mark, bringing the total to 12, including Germany which passes the threshold in 2033 and Spain which reaches it in 2035. 

By 2050, 16 of a possible 28 countries have grid shares where there is sufficient renewable generation to operate an electrolyser using spot power market supply.

Although the flexibility of producing renewable hydrogen from high-renewable share grids is limited to around a dozen nations by 2040, there is a clear pathway to additionality-free hydrogen production by 2030 for a large share of key energy markets in Europe, the ICIS research concludes. 

This means that with the principle of additionality applying from January 2028, there could be a potential drop in the development of hydrogen projects during the 2028-2030 window. 

What is also evident is that countries with high shares of nuclear generation still stand to benefit from the 18gCO2e/MJ, as the high level of low-carbon power reduces the need for additionality despite the fact that renewable generation is not likely to occur free of temporal correlation. 

“Overall, a tradable spot hydrogen market is more likely to develop towards the end of the 2020s or into the 2030s, as most renewable hydrogen projects would require a renewable power purchase agreement. Under such circumstances, a hydrogen producer is likely to secure a long-term offtake agreement for its renewable molecules to support project financing,” it concludes.

“Once initial capacities for renewable hydrogen production are deployed, potentially towards the end of the 2020s or early 2030s, there is a greater chance for utilisation of periods of imbalance, where hydrogen project owners can utilise unsold capacity from long-term agreements to generate additional renewable hydrogen to avoid redispatch.”