The transition to a climate-neutral energy system by 2050 requires phasing out the use of grey hydrogen and building up the use of green hydrogen. Despite many plans and policy measures, the use of green hydrogen is not taking off effectively. This study highlights the bottlenecks and challenges that prevent the market from taking off and suggests policy adjustments that could help kickstart the production and use of green hydrogen.
The Climate Act stipulates that the Netherlands must be climate-neutral by 2050. To achieve this, the use of fossil energy carriers - including grey hydrogen - must be minimized. Green hydrogen can play a crucial role in this. This is elaborated in the National Energy System Plan (NPE) of the national government. Based on the NPE, short-term targets of 4 and 8 gigawatts of electrolysis capacity have been set for 2030 and 2032, respectively. In addition to domestic production, the government is also focusing on importing green hydrogen (carriers) from other countries. However, all announced plans for investments and imports have so far resulted in only one investment decision and one supply contract.
The reason for the hesitant attitude - or sometimes even withdrawal - of initiators is that there are bottlenecks in several parts of the green hydrogen chain. For example, the size of the demand that will result from annual obligations for the industry and transport sector is still very uncertain, the national hydrogen network that should connect industrial clusters with each other, with storage capacity, and with foreign countries is years delayed, and there is uncertainty about the availability of renewable electricity (especially from offshore wind). Additionally, the estimated production costs of green hydrogen have increased in recent years due to rising investment and network costs, whereas until recently it was expected that these would decrease due to learning effects and economies of scale. Importing green hydrogen is also not taking off due to uncertainty about costs, demand, and delayed pipeline construction. The figure below schematically shows the bottlenecks in the development of the intended hydrogen chain.
The current situation, where necessary developments are (sometimes severely) delayed and everyone seems to be waiting for everyone else, can only be broken through interventions by the national government and the European Commission. For this, adjustments are needed in almost all areas - demand, production costs, availability of renewable electricity, infrastructure and subsidies, and sufficient protection against foreign competition. The report makes several suggestions to the national government to improve the action perspective of the parties involved. The suggestions are:
- Advocate adjustments to the blending obligation of green hydrogen in the industry with the European Commission;
- Provide investment certainty for green hydrogen production in the refining sector and reconsider the correction factor for the refining route in this light;
- Ensure that the onshore infrastructure for hydrogen and ammonia is built as quickly as possible;
- Find ways to reduce production costs for green hydrogen related to government regulation;
- Consider subsidizing the production of a limited share of low-carbon hydrogen in the SDE++ subsidy scheme for green hydrogen;
- Advocate with the European Commission for adjustments to the methodology for allocating subsidies from the European Hydrogen Bank;
- Also focus on other technologies than electrolysers for grid balancing;
- Consider allowing more time to achieve the targets for electrolysers for 2030 and 2032 and ensure accelerated scaling thereafter;
- Ensure that blue hydrogen plants are phased out or climate-neutral after 2050.