How REDII paves the way for green hydrogen

And why we should not rule out grey hydrogen in mobility just yet

26-09-2018

This summer, the recast of the EU’s Renewable Energy Directive (REDII) was adopted by key EU institutions. An important milestone, as it provides a solid base for policy and thereby a clear outlook on how the EU will approach renewable energies in the period of 2021-2030. The REDII is very important to PitPoint as it provides steer to EU member states on what polices they are to put in place regarding the use of renewable energy in mobility.
To us, one of the key highlights is the fact that hydrogen is incorporated in this  key piece of EU policy. It reinforces our believe that the momentum for hydrogen that we’ve seen in recent years is now solidified and integrated in the EU’s long-term path towards 2030 climate targets.

green hydrogen

A pivotal change in REDII is the statement that EU member states need to extend existing Guarantees of Origin (GoOs) schemes to include renewable gases (recital 47). This is the ticket to ride for green H2. We have seen how GoO schemes helped increase installed capacity and competitiveness of renewable electricity generation from, for example, wind, solar and hydropower. A GoO scheme is fundamental as it allows for creating a price on the ‘renewable’ part of energy and it allows for producing green energy at one place but selling it at a premium to customers who are located elsewhere. In line with this, we see that GoO schemes provide the transparency and flexibility required to facilitate a well-performing demand and supply market. PitPoint experiences firsthand how the presence of a GoO scheme allows our customers to opt for green CNG (biomethane) as compared to grey CNG.

Market development

We see similar benefits for green hydrogen. The presence of a GoO scheme puts a value on green hydrogen produced from renewable electricity as compared to grey hydrogen produced form natural gas. We believe that it will act as a slingshot to develop the market for two key reasons.
First of all, a transparent market value of the GoO supports getting to a financially sound business case for new production capacity as you can include the premium into your expected revenue stream.
Secondly, it will support the cross-border trade of green H2. This increases the market and competitiveness, thereby pushing green hydrogen to a lower price and larger scale quickly. We consider this to be a very positive development as it will eventually lead to green hydrogen becoming broadly available and affordable.

But grey h2 still has a role to play

But we are not there yet. We see many projects that aspire to produce green hydrogen but run into the challenge of offloading their premium priced product. To solve this issue, more and stable demand needs to be created for H2 in markets where there is willingness to pay for the price premium. This is where ‘cheaper’ grey hydrogen still has a role to play.

PitPoint believes that on the back of competitive grey hydrogen, we can increase the end-use application of hydrogen in the mobility sector. For many years, mobility has been a sector that pays a relatively high price for the energy content that is actually used. In this market, the value of ‘driving on green hydrogen’ is relatively quick to materialize due to marketing value, corporate sustainability targets and/or ambitious sustainability targets imposed by governments on corporations.

This will not go overnight. Therefore we envision a transition path from grey to green. In other words; while green hydrogen is the future, we need grey H2 to pave the way. REDII helps us paint this hydrogen transition path and provides an outlook to  achieving 100% clean mobility for our customers in 2030.