From Policy to Practice: Upper Bound Cost Estimates of Europes Green Hydrogen Ambitions

TL;DR

This paper evaluates the cost implications of EU criteria for renewable hydrogen production, revealing an 82 billion euro increase in system costs by 2048 and highlighting the impact of additionality requirements on renewable energy adoption.

Contribution

It provides a comprehensive simulation of the European energy market up to 2048, assessing how EU hydrogen criteria influence costs and technology deployment.

Findings

Meeting criteria increases system costs by 82 billion euro (2024-2048).

Additionality requirement is the most expensive but accelerates renewable energy use.

Rapid shift from fossil fuels to renewables impacts overall energy costs.

Abstract

As the European countries strive to meet their ambitious climate goals, renewable hydrogen has emerged to aid in decarbonizing energy-intensive sectors and support the overall energy transition. To ensure that hydrogen production aligns with these goals, the European Commission has introduced criteria for additionality, temporal correlation, and geographical correlation. These criteria are designed to ensure that hydrogen production from renewable sources supports the growth of renewable energy. This study assesses the impact of these criteria on green hydrogen production, focusing on production costs and technology impacts. The European energy market is simulated up to 2048 using stochastic programming, applying these requirements exclusively to green hydrogen production without the phased-in compliance period outlined in the EU regulations. The findings show that meeting the criteria will increase expected system costs by 82 billion euro from 2024 to 2048, largely due to the rapid shift from fossil fuels to renewable energy. The additionality requirement, which mandates the use of new renewable energy installations for electrolysis, proves to be the most expensive, but also the most effective in accelerating renewable energy adoption.