Hydrogen Energy: Europe risks losing green hydrogen funding

Europe risks losing green hydrogen funding to US, as industry leader says ‘Clean’ fuel investors will favour  Biden plan unless Brussels improves incentives, Fortescue chief claims

Fortescue Future Industries chief Mark Hutchinson is critical of the EU: ‘All the green capital is going to be flowing into the US and you’re just going to miss out’

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Europe will struggle to meet its ambitious targets for green hydrogen and reduce its dependence on Russian gas unless it can match the lead of the US set by its new climate subsidies package, says the executive leading the clean energy business of Australian billionaire Andrew Forrest.

Mark Hutchinson, the recently-appointed head of Fortescue Future Industries and former head of GE Europe, said the funds to finance large-scale green hydrogen projects could bypass Europe and flow to the US to take advantage of the tax credits offered in Joe Biden’s flagship climate, tax and healthcare bill, known as the Inflation Reduction Act.

In his first interview since starting in July, Hutchinson said that if Brussels was serious about replacing Russian gas it would need to improve its incentives. “Otherwise, what’s going to happen? All the green capital is going to be flowing into the US and you’re just going to miss out,” he said.

Green hydrogen uses renewable energy to separate oxygen and hydrogen atoms from water, using electrolysers. It is a key plank of the EU’s plan to reduce its reliance on Russian gas but has yet to be produced anywhere at large scale due to the cost of production and transportation issues.

Fortescue struck a non-binding agreement in March to provide Germany with enough green hydrogen to replace about a third of its gas imports from Russia, or 5mn tonnes a year by 2030. Fulfilling that agreement involving Germany energy company E. ON is a priority after first cracking the task of making green hydrogen at scale, Hutchinson said.

Under its new energy blueprint, dubbed RepowerEU, Brussels plans to use 20mn tonnes of the clean burning fuel by 2030. That will be split between 10mn tonnes of domestic production and 10mn tonnes of imports from countries with the potential to produce cheap renewable power such as Australia, the Democratic Republic of Congo and Brazil.

While there are many large hydrogen projects planned for Europe, final investment decisions have been taken on only a few. In part, that is a reflection of a need for greater clarity on regulation and subsidies to make green hydrogen cost competitive, as well as a lack of committed customers.

Although the EU has announced plans for a green hydrogen subsidy based on contracts for difference — a mechanism that has been used to support renewable energy generation by guaranteeing a minimum price — it has yet to outline all the details.

Unlike Washington’s concession to the oil and gas industry that will allow for hydrogen to be produced using fossil fuel sources of energy for the hydrolysis, Brussels favours renewable energy.

Under its so-called Delegated Acts, by 2026 it will only be permissible to use electricity from new wind and solar plants to generate green hydrogen.