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The Truth Behind European Big Oil’s Bet On Hydrogen
By Alex
Kimani -
Jan 15, 2023
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European governments are betting increasing amounts of cash on a
hydrogen revolution.
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Report: Of the refining
sector’s €39 billion in planned investments in alternative fuels
till 2030, nearly 75% will go towards increasing biofuels
production.
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The lion’s share of big
oil’s green investments in downstream is focusing on bringing down
carbon-intensity of their refinery operations.
Back in 2020, the European Union set out its new
hydrogen strategy as
part of its goal to achieve carbon neutrality for all its industries
by 2050. The regional bloc outlined an extremely ambitious target to
build out at least 40 gigawatts of electrolyzers within its borders by
2030, or 160x the current global capacity of 250MW. The EU also plans
to support the development of another 40 gigawatts of green hydrogen
in nearby countries that can export to the region by the same date.
The EU also aims to have at least 6 gigawatts of clean hydrogen
electrolyzers installed by 2024. But
it appears European oil majors are only willing to dance to their own
tune. A new
study on
behalf of Transport & Environment (T&E) has revealed that whereas Shell
Plc (NYSE:
SHEL), BP
Plc (NYSE:
BP), TotalEnergies
SE (NYSE:
TTE), ENI
S.p.A (NYSE:
E) and Repsol
SA (OTCQX:
REPYY) are actively investing in hydrogen, the lion’s share of their
green investments are aimed at lowering the carbon intensity of their
refinery operations rather than developing green transport fuels.
Related: Freeport LNG Denies Reuters Report Claiming Further Restart
Delay
Indeed, the study has found that of the refining sector’s €39 billion
in planned investments in alternative fuels till 2030, nearly 75% will
go towards increasing biofuels production. New advanced biofuels (HVO)
plants will receive €2 to €3 billion in investments, doubling
production capacity to 10 megatonnes by 2030, with the T&E analysis
saying that’s 4 times higher than what can be sustainably sourced in
the EU.
“Oil producers are promoting hydrogen as their big bet for the future,
but in reality their investments in green hydrogen are pitiful.
Instead they are focusing their new refining capacity on biofuels
which cannot sustainably supply the world’s transport needs. This is
not an industry pushing the boundaries of clean technology,” Geert
Decock, electricity and energy manager at T&E, has said.
The oil refining industry is one of the key consumers of hydrogen
right now, but most refineries are using “gray hydrogen”--derived from
fossil fuels, rather than clean, green hydrogen. The T&E study says
that oil companies plan to invest around €6.5bn in so-called ‘low
carbon’ blue hydrogen to clean up their production processes, double
what they are spending on the production of green hydrogen and
e-fuels.
“Where
oil producers are investing in hydrogen, most is going towards
replacing dirty gray hydrogen operations with blue hydrogen, which
still uses polluting fossil gas. Instead of wasting their time on
easy, short-term solutions, oil refiners should switch to producing
green hydrogen and e-fuels for ships and planes today,” Geert
Decock has concluded.
Betting On Hydrogen
Still, European governments are betting increasing amounts of cash on
a hydrogen revolution in a bid to reduce carbon emissions and meet its
industrial ambitions. European Commission President Ursula von der
Leyen recently promised a €3 billion investment vehicle, dubbed a hydrogen
bank,
that will “help
guarantee the purchase of hydrogen”
by spurring demand using money from the EU Innovation Fund.
The continent has already seen €13 billion in state aid approvals for
national and cross-border projects so far. These include €5.4 billion
for Hy2Tech,
a cross-border initiative that aims to perfect hydrogen technology;
€5.2 billion for Hy2Use which
will invest in applications in hard-to-decarbonize sectors such as
cement, steel and glass; more than €2 billion for German projects in
steel; €220 million for a Spanish plant and €194 million for a
Romanian plant. The EU
hydrogen strategy comes
with a hefty price tag estimated at $430B. The European Commission has
set a target to boost hydrogen’s share to 14 percent of the EU’s final
energy demand by 2050. Last year hydrogen accounted for a mere 2.5
percent of the world’s final energy demand.
Good news for natural gas companies: Although Brussels clearly favors
“green” hydrogen produced by renewable energy, it has signaled that it
will also encourage the development of "blue" hydrogen that is
produced from natural gas paired with carbon
capture and storage (CCS). The
EU has said that hydrogen will play a key role in helping decarbonize
manufacturing industries and the transport sector. The organization
says it will support blue hydrogen during a "transition phase,"
although it has not mentioned it in its topline targets. The bloc
plans to invest €18 billion in blue hydrogen projects.
The decision by European policymakers to support blue hydrogen came
after years
of hard lobbying by
more than 30 energy companies including ExxonMobil, ENI, Shell, Total,
Equinor ASA (NYSE:
EQNR) and other European natural gas companies which called for a
‘‘technology-neutral strategy’’ arguing that renewables such as wind
and solar cannot grow fast enough to power the “clean hydrogen” sector
to meet decarbonization goals. The signatories have claimed the green
hydrogen industry is currently too small to spark the growth of a
large-scale European hydrogen economy in the space of just a decade.
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