Hydrogen demand is expected to increase five-fold by 2060, and half of e-fuel demand will be met by domestic production in Europe, according to Aurora predictions. At the same time, the EU’s objectives will be challenging to achieve, while Romania has some potential in this area, depending on the business model taken into consideration, said Dr. Evangelos Gazis, Head of SEE, Aurora Energy Research.

Aurora Energy Research provides market leading forecasts & data-driven intelligence for the global energy transition. The company has more than 500 experts working in 12 offices in Oxford, Berlin, Madrid, Athens, Paris, Sydney, Austin, Oakland, Rome, Stockholm, Tokyo, and São Paulo.

“We think is quite ambitious (EU’s objectives – editor note). We do see a large growth of hydrogen demand mainly driven by industrial, transport and heat sectors but this will not reach the levels that Europe is expecting”, according to Gazis.

Romania has a high electricity price, alongside Poland and Italy, and this makes the production of hydrogen uncompetitive. At this moment, Romania does not offer the best conditions for an affordable hydrogen production. The main reasons are the low share of renewable power – lower than the required 90%. In fact, renewables does not exceed ~80% due to high nuclear production in the region. What would help would be high onshore wind and solar plants. Also, using the funds available through various financing schemes, Romania could have 2 or 4 electrolyzers in place between 2027 and 2030.

“We will see that certain business models are better than others. We’re trying to visualize what the best option in 15 countries is and we see that in countries like Norway or Sweden, where the electricity is quite green in terms of carbon intensity, flexible assets which use electricity from the grid are the best and actually quite cheap. In other regions, like Romania for example, where the renewable resource is quite high collocated assets that are not connected to grid are the best options”, said Gazis.

The company’s main scenario is a more conservative uptake of hydrogen and e-fuels in Europe compared to the European Union targets, but this would still increase demand five-fold by 2060.

While the EU’s REPower strategy targets a demand of 20 million tons of hydrogen by 2030, Aurora’s expectation is that this objective will be challenging to achieve given the current market status. Due to the large market size of aviation and maritime markets, e-fuels contribute with around 30% of the total hydrogen demand by 2060.

Grey hydrogen will supply over 50% of total demand by 2030 but is anticipated to be almost phased out in Europe by 2040. However, residual capacity is expected to persist in regions characterized by high demand and insufficient domestic low-carbon hydrogen production.

The share of hydrogen from electrolyzers will grow over time, ultimately satisfying nearly half of Europe’s demand by 2060 and due to its cost-effectiveness, hydrogen imports via pipeline and international shipping are projected to contribute just over a third of the total supply by 2050, mostly originating from North Africa and the eastern corridor.

“We’re seeing the large industrial demand in countries such Germany, Netherlands, Spain, Italy, France, and Poland”, Gazis added.

Industry and transport will make up the dominant share of the total hydrogen demand, with a fairly limited role of hydrogen for heating in buildings.

The total demand across Europe will be a combination of hydrogen and its derivatives, which includes a range of e-fuels produced with low-carbon hydrogen, but the share of hydrogen derivatives will depend mostly on the size of the maritime and aviation sectors.

“Ammonia, methanol and synthetic fuels such as e-kerosene or e-diesel will play an important role decarbonizing these sectors”, according to the company.

In order to be deemed as producing renewable hydrogen, the electrolyser must fulfill three criteria.

First one is that there must be a newly-built renewable asset that comes into operation at maximum 36 months before the electrolyser. Also, the renewable asset must not have received subsidies. Subsequent PPAs are allowed.

The second criteria is that the renewable asset and the electrolyser should be geographically correlated. The renewable asset and electrolyser should be within the same bidding zone or neighboring ones.

The third obligation is that the power generation and hydrogen production must match in a certain timeframe. This is monthly until January 1st 2030, and hourly afterwards (can be shifted with a new storage asset).

Temporal correlation is compiled in an hourly period when the clearing price is higher than 20 €/MWh or 0.36 times the price allowance to emit one ton of CO2 equivalent at the time of hydrogen production.

Aurora expects a continuous drop of the price of hydrogen starting from 2025 to 2060 as the price of gas goes down. Also, from 2025 to 2060, the price of hydrogen will be relatively stable as it will be set by imports via ships and a North African pipeline connection.

The price of hydrogen is influenced by the price of natural gas, carbon and electricity. The cost of gas is expected to go up and the price of carbon will increase significantly by 30%.

Aurora has redacted a study which compares the costs of importing hydrogen via different transport technologies and carriers compared to the domestic production costs in Germany. The conclusion are that pipeline imports from Spain and Morocco stand out as the only options to deliver significant cost reductions.

However, a pipeline network connecting Germany with Spain or Morocco might not be available until at least the 2030s. In this situation, imports of liquid hydrogen from Spain and Morocco could be considered, as they offer the next most economical option, closely followed from imports from Australia and Chile.

Dr. Evangelos Gazis, Head of SEE, Aurora Energy Research, presented his thoughts on the green hydrogen market in Romania and Europe at the latest edition of Energy Week Black Sea conference held in Bucharest by Invest In Network. Energynomics was a partner of this event and the chief editor Gabriel Avăcăriței moderated the panel dedicated to hydrogen.