Little to lose: the case for a robust European green hydrogen strategy (2412.07464v2)

Abstract: The EU targets 10 Mt of green hydrogen production by 2030, but has not committed to targets for 2040. Green hydrogen competes with carbon capture and storage, biomass and imports in reaching emissions reductions; earlier studies have demonstrated the great uncertainty in future cost-optimal development of green hydrogen. In spite of this, we show that Europe risks little by setting green hydrogen production targets at around 25 Mt by 2040. Employing an extensive scenario analysis combined with novel near-optimal techniques, we find that this target results in systems that are within 10% of cost-optimal in most considered scenarios. Setting concrete targets is important in order to resolve significant uncertainty which hampers investments. Targeting green hydrogen reduces the dependence on carbon capture and storage and green fuel imports, making for a more robust European climate strategy.

• The paper introduces a novel multi-horizon near-optimal modeling approach to identify feasible green hydrogen production pathways within specified cost slacks.
• Results show that a 25 Mt/a target by 2040 is near-optimal in 90% of 72 scenarios, balancing uncertainties in CCS capacity and green fuel imports.
• The findings underscore a low-regret strategy that mitigates investment risks and bolsters Europe’s resilience in achieving net-zero emissions.

This paper, titled "Little to lose: the case for a robust European green hydrogen strategy" (2412.07464), analyzes the future role of green hydrogen in Europe's energy transition towards net-zero emissions by 2050. It addresses the significant uncertainty surrounding green hydrogen's optimal scale, particularly beyond the EU's 2030 target, and its competition with alternatives like carbon capture and storage (CCS) and green fuel imports. The core argument is that, despite this uncertainty, Europe would benefit from setting a concrete green hydrogen production target, as it represents a robust "low-regret" option that enhances the resilience of the climate strategy against uncertainties in other technologies.

To explore this, the authors employ a sophisticated energy system model, PyPSA-Eur, which covers electricity, heat, transportation, and industry sectors across most of the EU, UK, Switzerland, and Norway. The model simulates the energy system's evolution from 2025 to 2050 in 5-year steps, incorporating gradually tightening $\text{CO}_2$ emissions caps aligned with EU policy (90% reduction by 2040, net zero by 2050). The modeling uses a high spatial (60 nodes) and temporal resolution (1500 aggregated time steps per year).

A key contribution is the development and application of a novel multi-horizon near-optimal modeling technique. Standard energy system models typically find the single, cost-optimal pathway. This paper, however, identifies a range of "near-optimal" pathways—those whose total system cost is within a specified percentage ($\varepsilon$, e.g., 2%, 5%, 10%) of the cost-optimal solution. By minimizing and maximizing green hydrogen production at each 5-year step within this cost slack, while carrying over capacities from the previous step's max/min solution, the authors map out potential upper and lower bounds for green hydrogen production over time across different scenarios.

The analysis considers 72 distinct scenarios, systematically varying key uncertain parameters:

1. CCS Potential: Low, Medium, High sequestration limits, cost, and capture capital cost.
2. Biomass Potential: Low, Medium, High availability based on ENSPRESCO database.
3. Green Fuel Imports: Restricted (total imports $\leq$ domestic green hydrogen) or Unrestricted.
4. Electrolyser Capital Costs: Pessimistic (+50%) or Optimistic (-50%).
5. Weather Year: A "difficult" (1987) and an "easy" (2020) year.

Key Findings and Practical Implications:

• Wide Range of Outcomes: Cost-optimal green hydrogen production by 2040 varies significantly across scenarios, from 0 to 43 Mt/a. Allowing a 10% cost increase expands this range dramatically, potentially reaching up to 100 Mt/a in some scenarios.
• Sensitivity to CCS and Imports: Green hydrogen production levels are most sensitive to assumptions about CCS availability (particularly $\text{CO}_2$ sequestration limits) and green fuel import potential. More optimistic assumptions for CCS or imports reduce the necessity and hence the cost-optimal level of domestic green hydrogen production.
• Necessity under Uncertainty: Scenarios with both pessimistic CCS and restricted green fuel imports make significant green hydrogen production necessary to meet climate targets.
• Robust Corridor: A central finding is the identification of a "robust corridor" for green hydrogen production. The paper shows that a target of approximately 25 Mt/a by 2040 (specifically, between 23 and 34 Mt/a with medium biomass assumption) is feasible and near-optimal (within 10% of cost-optimal, and within 5% for 90% of scenarios) across all considered scenarios with medium biomass availability. Including scenarios with low and high biomass still shows this target is near-optimal in 90% of all 72 scenarios.
• Low-Regret Option: Setting a target around 25 Mt/a by 2040 is a "low-regret" strategy. If CCS and imports scale up rapidly, exceeding this target incurs minimal additional system costs (estimated at around 13 bn EUR on average per 10 Mt increase above optimal), while achieving the target hedges against the risk of delays or insufficient scale-up of alternatives.
• System-Wide Impacts: High green hydrogen production pathways lead to significant build-out of renewable electricity (median ~1500 GW solar, ~1000 GW wind by 2040), massive electrolyser capacity (~750-1000 GW for 80 Mt/a H2), and substantial demand for synthetic fuels (especially synthetic oil for transport) and carbon sources (biomass, DAC). Counter-intuitively, maximizing green hydrogen can sometimes increase natural gas use in the short term by displacing oil and slowing the shift away from gas heating.
• Need for Carbon Capture: Even in high green hydrogen scenarios, substantial carbon capture (from biomass, industrial processes, and DAC) is needed to meet the 90% emissions reduction target by 2040, highlighting the interconnectedness of decarbonization strategies.
• Policy Implication: A clear green hydrogen target can resolve uncertainty and de-risk investments. While financial incentives might be needed to reach 25 Mt/a (as the median cost-optimal is around 17 Mt/a in 2040), the analysis suggests the economic impact would be relatively small compared to total system costs. Moreover, domestic green hydrogen increases energy independence compared to relying heavily on imports.

Implementation Considerations:

• The results are based on a complex linear programming model (PyPSA-Eur) requiring significant computational resources. The authors note modifications for efficiency, such as aggregating components by build year.
• The model makes several assumptions regarding technology costs, efficiencies, and future demand patterns (e.g., transport fuel mixes, industrial demand), which are fixed exogenously in most cases.
• The near-optimal approach explores a subspace of solutions, but not necessarily the absolute minimum and maximum possible green hydrogen production levels within the given cost slack at each step.
• The paper highlights the importance of further research into the feasible minimum scaling rates of CCS and green fuel imports, as these significantly influence the optimal green hydrogen target.

The paper provides a robust, data-driven case for Europe to set a concrete, moderate green hydrogen production target for 2040 (around 25 Mt/a) as a way to build a resilient energy system strategy, arguing that the potential benefits in hedging against uncertainty and increasing energy independence outweigh the relatively small potential cost increase compared to a purely cost-optimal pathway. The code and data used for the paper are open-source and publicly available, allowing for reproducibility and further analysis.