From Policy to Practice: The Cost of Europe's Green Hydrogen Ambitions (2406.07149v1)

Abstract: The European Commission's new definition of green hydrogen provides clear guidelines and legal certainty for producers and consumers. However, the strict criteria for electrolysis production, requiring additionality, temporal correlation, and geographical correlation, could increase hydrogen costs, affecting its competitiveness as an energy carrier. This study examines the impact of these European regulations using a stochastic capacity expansion model for the European energy market up to 2048. We analyze how these requirements influence costs and investment decisions. Our results show that green hydrogen production requirements will raise system costs by 82 Euro billion from 2024 to 2048, driven mainly by a rapid transition from fossil fuels to renewable energy. The additionality requirement, which mandates the use of new renewable energy installations for electrolysis, emerges as the most expensive to comply with but also the most effective in accelerating the transition to renewable power, particularly before 2030.