Following the unprecedented Covid-19 outbreak currently unfolding, Hydrogen Europe has today released its latest paper on Post COVID-19 and the Hydrogen Sector – A Hydrogen Europe Analysis. This outlines the need for and rationale behind rapid action as a result of the Covid-19 impact.
In the longer term the climate and environmental challenges from global warming remains the major threat to us all. Recent analysis by the found that one third of humans face living in barely survivable temperatures by 2070. Jens-Christian Svenning from Aarhus University in Denmark, co-author of this ‘Future of the Human Climate Niche’ research warned that “large areas of the planet would heat to barely survivable levels and wouldn’t cool down again” unless global warming is stopped, and “This would bring 3.5 billion people into near-unlivable conditions.”
This Hydrogen Europe document outlines the need for, and rationale behind, the rapid actions now required as a result of the Covid-19. It describes why the current pandemic will significantly jeopardise the hydrogen sector if no action is taken, and underlines the importance of the hydrogen sector to decarbonisation efforts as well as its long-term potential to support sustainable economic growth. It then outlines potential options for supporting the industry, starting from most obvious monetary support, but including also no less important policy actions that can be taken to restore investors’ confidence. It estimates the level of monetary support needed in order to retain the high skilled workforce and the sector’s investment portfolio, followed by an estimation of what will be the positive economic impacts of the action.
The clean hydrogen sector has finally reached the pre-commercialisation phase and is ready to play its essential role in decarbonising our economies. The economic crisis following the COVID-19 pandemic may cause a significant delay in the adoption and commercial roll-out of clean hydrogen. It may even permanently endanger the capacity of the clean hydrogen sector to take-up its role as the missing link in the energy transition. As a result, the clean hydrogen sector faces three major risks:
1. In the short term the small but innovative companies which form the backbone of the hydrogen & fuel cell technology providers are likely to suffer a major shortage of liquidity due to a steep drop in revenues which will result in staff cuts or even bankruptcy;
2. Any signals that climate and environmental policy commitments will take a backseat in economic recovery plans in Europe and elsewhere could result in large companies which were planning major investments in clean technology to abandon or severely scale-down these plans;
3. investors may, for the reasons as presented above, then be less inclined to finance the planned growth of the sector.
The economic crisis following the Covid-19 pandemic could then cause a significant delay to the adoption and commercial roll-out of clean hydrogen. It may even permanently endanger the capacity of the clean hydrogen sector to take-up its role as the missing link in the energy transition.
The report estimates the value of lost revenues by industrial actors active in the hydrogen sector due to Covid-19. The lost revenues have been estimated using both a top-down approach based on a survey conducted among companies active in the hydrogen sector during the first week of April 2020, and a bottom-up approach based on the estimated negative impact that the economic slowdown will have on the revenues of companies active in the hydrogen sector. Extrapolating the survey results to the whole sector, the total financial support needed to preserve the workplaces in the hydrogen sector is around €450 million. However, monetary support was not the only measure requested by the sample respondents in order to maintain the current operations and planned projects. Regulatory measures were also requested, such as significantly more funding for research, innovation and demonstrators, postponing deadlines for submission of research projects, extending the duration of all European funded projects, and to continue with the scheduled launch the of the EU Innovation Fund in June as planned, along with IPCEI mechanisms and other similar strategic initiatives.
This report recommends that swift, decisive, and coordinated action is necessary. This will address the risks and reduce the negative impact that Covid-19 may have on the deployment of clean hydrogen technologies, and on our transition to a low carbon economy. To stave off the three main risks presented above, this report calls upon the European Commission, together with other relevant governments and policy actors to:
- Provide clear and immediate signals that, despite the current crisis, the European climate and environmental objectives will be maintained and even raised. In addition, provide clear policy support signals for the hydrogen industry. The impact of this cannot be overstated and its cost is low.
- Link bailouts/financial support provided in the sectors of energy, transport, energy intensive industries and heating and cooling to strong commitments in terms of decarbonisation in the short and medium term (5-10 years).
- For the European Commission to directly support the hydrogen value chain by compensating for short term revenue loss in value of €450-500 million.
- Provide certainty on the continuation of the European research and innovation partnership on clean hydrogen with increased budget and scope.
- Immediately unlock first commercial markets for green hydrogen through market incentives (e.g. increase renewable energy share quotas in the Renewable Energy Directive (RED II), implement quota for clean/green aviation fuels, etc.), regulation (e.g. enable green power supply through grids) and public funding (e.g. ETS Innovation Fund, Important Projects of Common European Interest (IPCEI), Carbon Contracts for Difference, etc.).
Prompt support actions would help protect thousands of highly skilled jobs, and will enable the hydrogen sector throughout Europe to realise the economic benefits from the planned portfolio of investment projects, which have been estimated to be at least €15 billion and as high as €130 billion by 2030. Swift, decisive and coordinated action is necessary to address the risks from Covid-19 and reduce the negative impact this may have on the deployment of clean hydrogen technologies and the transition to a net zero economy.
Link to report: https://hydrogeneurope.eu/
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