EU taxonomy shutting the door to grid-powered hydrogen, critics say

A coalition of industrialists and electricity companies have expressed concerns about a draft emission threshold below which hydrogen would be considered “green” under the EU’s sustainable finance taxonomy.

As it stands, the draft threshold is so low that it would shut the door to hydrogen produced from the power grid, even in places like France and the Nordic countries which have a low-carbon electricity mix, the coalition says.

Their worries are expressed in a letter sent on Thursday (11 March) to EU climate chief Frans Timmermans and other officials in the European Commission in charge of the internal market, financial services, and energy.

“The signatories are concerned that the currently proposed criterion of 2.256 kgCO2eq/kgH2 largely pre-empts the regulatory debate to take place with respect to the EU hydrogen framework and undermines the EU leadership ambition whilst unnecessarily limiting business options compatible with Paris-aligned business trajectories,” they write.

The letter was sent by France Hydrogène, an industry association. It was signed by the CEOs of 16 energy companies and industrial groups that are potential users of hydrogen, including ABB, ArcelorMittal, EDF, Engie, Fortum, MVM, Uniper, and UPM.

According to the signatories, the threshold in the taxonomy is also at odds with the European Commission’s own hydrogen strategy unveiled last year, which aims to rapidly scale up the production of hydrogen in Europe, using renewables and other low-carbon sources of electricity.

“Many industrial sectors are seeing the hydrogen economy as an essential way to reduce their greenhouse gas emissions. This is why, in our view, the threshold should be adjusted so we can trust that there will be enough supply,” said Stefan Sundman, vice president for public affairs at UPM, a Finnish forest industry company providing feedstocks to the chemical sector.

“From an industrial point of view, hydrogen needs to be available constantly,” he told EURACTIV in a briefing call. And for that to happen, he says hydrogen needs to come from the widest possible variety of low-carbon sources, especially at the early stages of development.

“If you look at the CO2 emissions of the lowest emitting electricity mixes in Europe, like in France or the Nordic countries, you end up with around 3kg of CO2 per kilo of hydrogen produced,” says Marion Labatut, head of EU office for EDF, the state-owned French electricity group.

This, she says, represents a 70% reduction in greenhouse gas emissions compared to the average fossil fuel benchmark. Setting an emissions threshold below that level means no EU country will be able to meet the benchmark using power from the grid, she told EURACTIV.

In fact, the benchmark set in the taxonomy is so low that even solar power would fail to meet the requirement, Labatut says. “If you look at how much it emits to produce hydrogen with solar PV, taking a proper lifecycle assessment, it’s also around 3 or 3.2 kgCO2/kgH2,” she explained, still higher than the taxonomy’s draft 2.256 kg threshold.

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Gniewomir Flis, a researcher at think-tank Agora Energiewende, says signatories of the letter “have a point”. According to him, the 2.256kgCO2/kgH2 threshold would in practice “limit the definition of low carbon hydrogen to include only electrolysis powered exclusively with renewables”.

“Under the criterion, grid connected electrolysis is excluded, even with grid carbon intensities as low as 100g/kWh,” he told EURACTIV, saying “this is problematic, since a grid with such carbon intensity, or lower, would be running mostly on renewables”.

According to Flis, the European Commission needs to clarify whether the emission standard in the taxonomy is related to process or lifecycle emissions.

“From a climate perspective, it would of course make more sense to have a criterion that encompasses the entire lifecycle,” he said. Assuming this is the case, “then 2.256kgCO2/kgH2 does indeed unnecessarily restrict business options, implicitly excluding blue hydrogen and grid connected electrolysis,” he told EURACTIV.

For Labatut, the Commission can still decide to push up the threshold during the starting phase of the EU hydrogen market, and gradually tighten the screw over time as the market grows and production volumes increase.

“As EDF we’re not against a threshold that decreases over time, such review processes along the way are envisaged in the taxonomy, why not envisage something like this for hydrogen?,” she said.

“We think it would be a missed opportunity to close the door to projects which could be developed with a slightly higher threshold”.

> Read the full letter below or download here.

[Edited by Josie Le Blond]

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