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HYDROGEN IN AND The underestimated powerhouse of the European economy?

March 2021 Hydrogen in Spain and Portugal

HYDROGEN IN PORTUGAL AND SPAIN The underestimated powerhouse of the European ?

Published: March 2021, Warsaw

Authors: Maciej Giers, Maciej Lipiński, Karol Bijoś

(www.esperis.pl)

Copyright: Esperis LTD [email protected]

www.esperis.pl | 1 Hydrogen in Spain and Portugal PORTUGAL – HYDROGEN PRESIDENCY IN EU?

On January 1, 2021, Portugal took over the cember, just before the presidency takeo- Presidency of the Council of the European ver. Portuguese Minister of Environment and Union from . In June 2020 the Trio Climate Action, Matos Fernandes, wrote a (also including Slovenia) published the ac- letter to three EU commissioners. In the let- tion plan presenting the strategic assump- ter, he pointed out the significant weakness tions of the presidency. While hydrogen did of the EU strategy - no inter-state subsidies. not appear explicitly in the document, the According to the minister, the Commission current Troika expressed a desire to support provided the support for hydrogen projects the development of alternative fuels and only at the national level, with no possibility generation. It is worth of mutual subsidization of hydrogen produc- noting, however, that at the time of publish- tion. In Fernandes' view, this may lead to a ing of the action plan, both Portugal and situation in which the producer country in- Germany already had their national hydro- curs a cost to the importer. It would also gen strategies, published on May 21 and hinder the creation of a truly integrated Eu- June 10, respectively. A month later, the EU ropean market and support only local pro- hydrogen strategy was published by the jects. European Commission (for deeper insight on In return for the subsidies, minister pro- the compatibility between EU and German posed that the subsidising state should strategies, see Esperis report: "Germany and be able to include electricity used to - hydrogen strategies of the future"). produce green hydrogen in another So far, the German presidency worked ef- country in its own green energy con- fectively in favour of hydrogen technolo- sumption statistics. gies. João Galamba, Secretary of State for Ener- Portugal, with precise, ambitious plans for gy, also revealed that Portugal's preferred hydrogen exports, could follow in Ger- method of subsidising would be an auction man footsteps, promoting the hydrogen system for individual projects. Portuguese economy during the presidency and try- media quoted Christian Weinberger, an of- ing to steer EU hydrogen policy to support ficial from the Directorate-General for the Portuguese ambitions. Internal Market, who encouraged Portugal For a relatively small country like Portugal, to increase its ambition to produce green the presidency of the Council is a unique hydrogen at the Sines export terminal. Ma- opportunity to shape the agenda. Two re- tos Fernandes stressed that Portugal was to searchers of the Portuguese Institute of In- need this support if the entire European Un- ternational Affairs - Terxeira and Hemre- ion wanted to benefit from cheap green negildo – argued that it may be easier for hydrogen from Portugal. It's no secret that Portugal to reach a consensus between this solution would mostly benefit the Portu- member states, especially "EU powers", be- guese-Dutch project to export green hy- cause it is not perceived as having its own drogen from Portugal to the port of Rotter- strong agenda. dam. Interestingly, Portugal signed a hydro- gen deal with Morocco as well, but there is The first signs of how Portugal could shape little detail available. the EU's hydrogen policy appeared in De-

www.esperis.pl | 2 Hydrogen in Spain and Portugal PORTUGAL – EXPORT AND FUNDING STRATEGY

On May 21, 2020, the Portuguese govern- 2050. Thus, taking into account the goals ment published a draft national hydrogen of the EU strategy (2x40GW in 2030), Portu- strategy - A Estratégia Nacional para o gal in 2030 would ensure 5% of the total

Hidrogénio (EN-H2) The strategy presents electrolyser capacity installed in the Euro- targets on the share of hydrogen in indi- pean Union. Alternative scenarios present vidual branches of the economy. Portu- different possible dynamics of the hydro- guese government assumes that hydrogen gen market development (see below). It would play the greatest role in the decar- should be noted that each of the present- bonisation of the gas network. It is predict- ed scenarios predicts a surplus of Portu- ed that hydrogen could appear in the guese production over domestic con- network already in 2025 in a proportion of sumption. Thus, Portugal could become an 1-5%. exporter of green hydrogen. It is also worth emphasizing that green is the only 'colour By 2050 hydrogen should reach as much as 80% of the gas blend in the network. of hydrogen' that Portugal intends to pro- Taking into account the physical proper- duce and support. To secure its objectives, ties of hydrogen, increasing its share in EN-H2 proposes the total budget of 7 billion the gas network will have a significant EUR in direct investments and 900 million impact on its functioning. Since Portugal EUR in financial support for investors. A has an integrated gas market with Spain, question arises as to the potential sources any blending efforts would need to be coordinated. of funding. One of the possible solutions are the tax reliefs. Portugal has already It should be noted that both EN-H2 and taken the first legislative steps in this direc- other Portuguese strategic documents tion. The revised table of gas network ac- concerning energy and climate policy cess fees (transmission and distribution) attach great importance to reducing the provides an exemption for hydrogen country's dependence on energy imports, transport. Furthermore, state budget for given that almost all the gas consumed in 2021 provides an exemption from hydro- the Iberian Peninsula is imported. Thus, in- carbon and energy product tax for green vestments in the decarbonisation of the hydrogen. Another pillar of the financing gas network are also an investment in the scheme would be the subsidised auction country's energy independence, as hy- system, which would ensure competitive- drogen would be produced locally. Portu- ness of the green hydrogen. Auctions gal has relatively new gas grid, which would be subsidised from the state envi- makes it more easily convertible to hydro- ronmental fund. The third pillar would be gen. As for now there are no specified the direct grants from national and EU fi- plans to build dedicated H2 pipelines. In nancing mechanisms. including POSEUR other sectors of the economy (industry, (Programme for Sustainable and Effective transport, energy production), the share of Use of Resources , which is co-financed hydrogen in 2030 is expected to fluctuate from both the Union’s Cohesion Fund and around 5%, and in 2050 - 20-25%. national programme “Portugal 2030”. The Currently, Portugal consumes around overall amount of grants is expected to 180,000. tons of hydrogen per year. How- reach 400 mln EUR. ever, it is planned to increase the produc- tion capacity of green hydrogen to 500MW in 2025, 2GW in 2030 and 5GW in

| www.esperis.pl | 3 Hydrogen in Spain and Portugal PORTUGAL –FUNDING STRATEGY &PROJECTS

Portugal has already taken the first steps to most important project from the point of obtain EU funding. In June 2020, a month- view of the EU hydrogen market is the Por- long procedure of preliminary collection of tuguese hydrogen cluster project submit- applications to the European Commission ted by an international consortium. began. Some of these would be for the It is worth noting that hydrogen technolo- status of IPCEI (Important Project of Com- gies are already being developed in Por- mon European Interest). However, the tugal: procedure was only preliminary and did  CaetanoBus – Portuguese manufactur- not yet guarantee receiving any funding. er of busses owned by Toyota In mid-July, Portuguese government re- Caetano Portugal joint venture (TCAP) vealed that it had received 74 applica- supposed to have a capacity of 100 H2 tions for a total value of EUR 16 billion. It is buses/y; worth noting that this sum accounts for  The first hydrogen refuelling station is to approx. 7.5% of Portugal's GDP. 37 projects be built in Ovar at the local vehicle received a positive opinion from the pro- factory. Until now, according to one of ject committee. The spectrum of adopted the Portuguese manufacturers the only projects covers almost the entire value option to refuel its buses was to use HRS chain of . Among in Spain; them there were: development of floating  Hydrogen blending in the gas network offshore wind farms for hydrogen produc- is being tested in Leiria. By 2030 the EN tion, development of solutions for hydro- H2 declares 10% to 15% injection of gen-powered railways, battery develop- green hydrogen into the natural gas ment or projects for the decarbonisation networks; of the chemical industry. However, the .

HYDROGEN PRODUCTION IN IN PORTUGAL (BASE SCENARIO EN H2)

2400

2200 Gasification 2000

1800 Thermochemical 1600

1400 Electrolysis 1200

in K tones in 1000 Steam methane reforming 800

600

400

200

0 2020 2025 2030 2040 2050

Source: EN-H2 Figure 29

www.esperis.pl | 4 Hydrogen in Spain and Portugal PORTUGAL – EXPORT BASE IN SINES

In addition to the scattered hydrogen It is worth noting, however, that the CHP production infrastructure in Portugal, there plant was closed on January 15, 2021, long would also be one central point for hydro- before the closure originally scheduled for gen production. It would be one of the 2023. Thus, there is only one coal-fired industrial centres of the country – Sines, power plant left in Portugal, the closure of located about 120 km south of the capital. which is also scheduled for November Located there are, among others: LNG 2021. Considering that any hydrogen pro- terminal, refinery, chemical plants and duction in Sines could only start in 2022 (a coal terminal. Giving up on the latter is pilot project is planned in the initial phase - supposed to spur the development of the installation with a capacity of 10MW), this green hydrogen. means that there is a potential gap that Green hydrogen production plants with could lead to the loss of human capital an installed capacity of 1 GW would be and experience. built on the premises of the coal termi- nal, which would enable the production The aim of the installation in Sines is to of up to approx. 175 thousand tons of supply hydrogen for internal use in the hydrogen per year by 2030. Sines would first years by pressing it into transmission also become a hydrogen technology installations and transporting it by tanks. cluster, focusing in particular on Portu- Only then, approximately half of the guese electrolysers. produced hydrogen is expected to be exported by sea to the port of Rotter- In this field, Portugal can already claim its dam. first successes - the Ultimate Power com- According to João Galamba, Portugal is pany, founded by Portuguese engineers, also to hold talks on hydrogen with Ger- produces electrolysers, and even exports many, Canada and Japan. This raises the them abroad. The partnership of large en- question of the economic efficiency of ergy consortia and small companies may exporting hydrogen by sea. Despite the potentially compensate for the former’s first signs of development of this sector lack of experience in the production of (more: Esperis report "The Game for Hy- green hydrogen. However, for the creation drogen"), no commercial supply of hydro- of a large hydrogen production complex, gen by sea is currently performed, apart both high-and low-qualified workforce is from a few pilot programs. The cost- required. According to EN-H2, the employ- effectiveness of this solution is also differ- ees of the coal terminal and the Sines CHP ent. Taking into consideration possibilities plant could be partially reintegrated in of hydrogen transport (1500-3000 km) the hydrogen venture. This would additionally Iberian Peninsula seems to be on the allow for the just transformation of the re- verge of an alleged break-even point for gion. exports to northern European ports

TIMELINE OF PORTUGESE HYDROGEN PRODUCTION

www.esperis.pl | 5 Hydrogen in Spain and Portugal PORTUGAL - HYDROGEN PRICE COMPETITIVENESS

The key factor determining the competi- ter archipelago can be as high as 3000 tiveness of green hydrogen produced in W/m². As indicated above, wind energy is Portugal is its energy system. According to much more developed in Portugal, so the data for 2020, Portugal reached the level scale effect works to the advantage of its of 61.7% of electricity production from re- competitiveness. However, the relative newable energy sources. In 2018, this level backwardness in the field of PV to date is was 51%, which indicates a sharp increase compensated by huge interest in this en- in RES penetration in this country. Hydroe- ergy source, which is also reflected in the lectric plants (28%) and wind farms (24.4%) recent auctions. The 700 MW auction con- had the largest share. Another thing that ducted in August 2020 resulted in a record draws attention is the very low share of low price of 11 EUR/MWh negotiated by solar energy - 2.6%. one of the projects. The starting price for It is interesting because Portugal has one the Dutch-type auction was 41 EUR/MWh. of the best solar conditions in Europe. Solar Thus, the auction record from 2019 was radiation there ranges from 1500 to1900 broken, when the price of14 EUR/MWh was kWh/m² (for Poland this value is approx. reached. Considering that up to 75% of 800-1200 kWh/m²). Portugal has also good, green hydrogen production costs are but not best possible conditions for the electricity costs, this could place Portugal development of offshore wind energy. At among the most competitive producers, the height of Sines, the energy density at and Portuguese green hydrogen could sea according to the Global Wind Atlas is become cheaper than hydrogen approximately 420 W/m². This is about two in very short term. times higher than the average value on Thanks to the increased penetration of land, but also twice less than the wind en- sources, Portugal has ergy density in the North Sea or the Baltic also managed to reduce its dependence Sea. Yet, it should be noted, that Portugal on imported energy. Historically, Portugal's has very short and steep continental plat- dependence in this regard has fluctuated form, which causes numerous problems even within 88%. Since 2005, this depend- with installation of offshore wind. It should ence has been systematically decreasing also be taken into account that the territo- until it reached 77.9% in 2018. It is estimat- ry of Portugal is also made up of two island ed that dependence may drop to 65% by autonomous regions situated in the Atlan- 2030. The measures taken in the field of the tic Ocean - Madeira and the Azores; an renewable gas market, e.g. hydrogen, are exemplary wind energy density for the lat- also to contribute to this.

TRANSPORT IN PORTUGAL PROSPECTS OF DEVELOPMENT ACCORDING TO EN H2

Portuguese EN-H2 defines several goals for next decade in terms of transportation:

2025 2030

HRS 10-25 50-100

Busses 25-50 200-350

Trucks 25-50 250-400

Cars 400-500 750-1000

www.esperis.pl | 6 Hydrogen in Spain and Portugal PORTUGAL AND SPAIN – STRATEGIC LOCATION

Portugal’s and Spain’s distinguishing fea- • high degree of integration of the ener- tures in the context of building a hydrogen gy market of both countries; economy are the following : • location on the two TEN-T land corridors; • demand for cogeneration and distrib- • favourable geographic location for hy- uted generation drogen transit, supply and shipping; • high decarbonisation pressure on re- • good conditions for the development gional labour markets. of renewable energy sources (from so- lar and wind energy);

HYDROGEN TRANSPORT SYSTEM ON IBERIAN PENINSULA BY 2040

Source: Hydrogen Backbone, own research

www.esperis.pl | 7 Hydrogen in Spain and Portugal SPAIN –EXPORT POTENTIAL

The developed gas pipeline infrastructure beneficial, as the new connections could in Spain gives the country a decent be adapted to transport blend or pure H2. chance for modernizing the gas network However, the current Spanish regulations for hydrogen needs, but the costs might be do not allow for injection of a blend with steep. Existing connections with Portugal hydrogen content higher than 5% to the (Campo Maior and Valença do Mi- gas network. Meanwhile, in several EU nho)and Algeria should allow Spain to par- countries the allowed H2 content for blend ticipate in the transit from the Maghreb to reaches up to 10%. This issue will require EU- Europe, but an important missing piece in wide standardisation, but for now, Spanish the puzzle is the connection with . regulation seems to fall behind. While the interconnector with Algeria is be- ing expanded to a target capacity of 20 For now, Spain relies on its natural gas sup- bcm per year (from the initial 12 bcm) and ply system to develop its hydrogen econ- the gas import disputes between European omy, including 7 existing LNG terminals Commission and Algeria could leave that providing major import and bunkering ca- pipeline open to eventual hydrogen transit, pacity (195 operations in 2019). In the me- existing connections with France have a dium term, Spain has a chance to become capacity of only 2.5 bcm - according to an important blue H2 producer from gas

Hydrogen Backbone, a new H2 pipeline and the refuelling centre for fuel cell ships. could be built by 2040. Yet, the most recent In the long term it could also develop ca- attempt to increase capacity through the pacity for liquid hydrogen shipping. How- STEP gas pipeline has been rejected by ever, this requires both competitive pa- both the French and Spanish regulators. rameters of this technology and the crea- Currently, despite continuous EU support, tion of demand in Europe and overseas. the idea of expanding connections through Spain and Portugal have strongly inte- the Pyrenees remains in a vacuum, up- grated their electricity (MIBEL) and, to a holding the status of the Iberian Peninsula lesser extent, gas markets (MIBGAS). This as a de facto energy island. Germany and provided a well-developed market the already expect that they structure for the energy trade and can will not be able to build a sufficient RES po- facilitate further coordination between tential to meet the internal demand for the electricity and gas sectors in the fu- ture creation of a hydrogen value chain. green H2 and will have to import it. Spanish participation in the European Hydrogen The functioning of the integrated market Backbone gives this country a chance to has also had a positive effect on energy play a bigger role in the future common prices, especially in Portugal. The country, EU hydrogen market (Poland does not par- with significantly smaller generation ca- ticipate, but Czechia does). pacities, enjoys grid energy prices at the same level as the much larger Spain and On the other hand, the on-going blending has also gained additional opportunities to experiments in Spain, could provide a new stabilize the system. incentive for the Trans-Pyrenean pipeline connections - so the delay could even be

www.esperis.pl | 8 Hydrogen in Spain and Portugal

SPAIN – HYDROGEN DEMAND & ENERGY MIX

Spanish energy mix shows two promising from the economy. Nearly 75% of Spanish options for hydrogen – high demand for oil energy consumption still relies on fossil fuels replacement in transport and growing (see the Energy consumption by sources),

supply of cheap RES electricity. Green H2 mostly in road transport. However, there is could replace blue, but the first pilot pro- a significant share of RES in electricity gen- jects involving green H2 are just starting. eration, which is key for viable green H2 Companies like Bizcaya Energia and Norte production. Falling prices of energy from Gas already run smaller-scale projects, renewable sources, and reasonable de- mostly for ammonia production. mand for hydrogen in industry - 500,000 t/year (mainly refineries and production of Spain has approximately 61.2 GW of in- artificial fertilizers) further justify the devel- stalled RES capacity. By 2030, it plans to opment of this technology. double this capacity to over 120 GW. The first 2021RES auction showed at least one Hydrogen (especially green) could provide producer willing to sell energy below 28.90 more options for distributed generation in EUR/MWh, significantly below the European the Spanish islands. Currently, around 13 average. If the Spanish RES market man- distributed generation projects are being ages to consistently obtain such prices, it carried out in the country, , among others, could offer competitive green hydrogen by Endesa (see: Pilot projects). exports to the rest of Europe. However, the simplest method of transporting this hydro- The main obstacles to the development of gen would be to extend connections with hydrogen in Spain are: the regulatory bar- France, which has traditionally met re- riers, and the status of the peninsula as an sistance from regulators on both sides. energy island, which currently reduces the

chances for H2 transit. It should also be The decarbonisation pressure also encour- noted that, due to the specificity of the ages the development of Spanish hydro- Spanish local government, an important gen. After Poland, Spain is the second aspect of building a hydrogen economy country in Europe in terms of the number of will be the unification of standards between jobs threatened by the coal phase-out the autonomous regions.

ENERGY CONSUMPTION BY SOURCES in %

47,53 50 43,46 40 Total consumption 30 26,01 22,72 22,11 Electricity 20 16,97 consumption 9,11 10 6,03 3,67 2,39 0 Oil Gas RES Nuclear Coal Source: Our World in Data, IEA

| www.esperis.pl |9 Hydrogen in Spain and Portugal SPAIN – TRANSPORT

Spain currently has a well-developed net- regulations for hydrogen as a transport fuel work of refuelling stations for LNG and the are also key for successful energy transi- country’s location on the two important tion, as almost 26% of CO2 emissions in TEN-T corridors (Atlantic and Mediterrane- Spain come from the transport sector. an) offers the potential to sell hydrogen There are currently 6 hydrogen stations in fuel as well. Oil, as transport fuel, remains Spain, but only 3 (Albacete, Huesca, Puer- the largest obstacle for Spanish decarbon- tollano) seem actually operational, with isation effort, so this sector offers a lot of limited access for individual customers. room for hydrogen. At present, however, Thus, the government target of 20 stations due to regulatory barriers and the lack of a for 2020 (set in the 2016 National Frame- sufficient number of hydrogen vehicles, work for the Development of Alternative realisation of this potential seems distant. Energy in Transport) has not been met, In the transport sector, there are promising and the regulatory deficiencies (see be- conditions for the development of the hy- low) will continue to hinder their develop- drogen market: a large road transport sec- ment. Seemingly unfazed by this, Spanish tor generating 90% of domestic fuel de- authorities set a new ambitious target of at mand, significant passenger traffic in avia- least 100-150 public access hydroelectric tion - Spain ranks second in the EU in terms plants by 2030, with distance of no more of annual passenger numbers, and 5 than 250 km between each other. Yet, cur- Spanish airports are among the most busy rently only Naturgy's plan to build at least on the continent. In maritime transport, the 35 hydrogen stations by 2025, published in demand results from the strategic location of the Iberian Peninsula, the long coastline February 2021, seems advanced enough to meaningfully increase proliferation of H2 and numerous ports (Algeciras, Barcelona, Valencia in the top 10 in Europe).Friendly refuelling infrastructure.

SCENARIOS FOR HRS DEVELOPMENT IN SPAIN AND PORTUGAL BY 2030 WITH SPECIAL INDICATION OF NATURGY’ HRS DEVELOPMENT PLAN BY 2025

Source: Naturgy, European Commission

www.esperis.pl | 10 Hydrogen in Spain and Portugal SPAIN – TRANSPORT

Royal decree 639/2016 on alternative fuels lona). Moreover, vehicle inspection sta- requires hydrogen station operators only to tions and service points are in no way pre- comply with appropriate ISO standards pared to service hydrogen vehicles, either concerning hydrogen gas. There are no technically or procedurally. dedicated standards for the design, permit Spanish hydrogen roadmap aims for at procedures, construction and operation of least 5,000-7,500 light and heavy hydrogen stations. Potential barriers are exacerbat- fuel cell freight vehicles by 2030. Interest- ed by the high purity requirements for hy- ingly Spaniards seem willing to bet on light- drogen fuel imposed by the ISO 14687-2: duty H2 vehicles, which are generally dis- 2012 standard. favoured compared to EVs, due to eco- Yet, in Spain and most countries there is nomic reasons. For example, construction no laboratory with the qualifications and of EV recharging stations is cheaper than technical capacity to verify this stand- of their H2 equivalents. This also means that ard. On European level, MetroHyVe pro- future Spanish H2 stations will need to ser- ject seeks to address this problem. vice both heavy and light vehicles. The project is coordinated by the British National Physical Laboratory, with partici- In the light of relatively high ambitions with pation of Spanish entities (incl. the Founda- regard to light-duty H2 cars, the lack of tion for the Development of Hydrogen commitment in public transport seems Technologies from Huesca, Aragón). somewhat baffling. Spanish roadmap sets the goal of just 150-200 renewable hydro- Furthermore, current regulations do not gen fuel cell buses by 2030, distributed allow for the construction of fuel- throughout the national territory, with spe- generating stations on plots that do not cial participation in the urban bus fleets of have the status of industrial areas. Also, the cities with more than 100,000 inhabitants. Spanish environmental protection law More importantly, right now only the mu- does not distinguish between different nicipalities seem to be active in this area, types of hydrogen production, which re- with no major initiatives on the central lev- sults in the lack of specific incentives for el. low-emission forms of production. The only Barcelona was the first Spanish city to buy solution to this problem is the introduction hydrogen buses, having ordered 8 vehicles of dedicated regulations for hydrogen sta- from Portuguese Caetano Buses (despite tions and storage facilities. Spanish Solaris also offering such ma- chines) for 6,4 mln EUR. Barcelona is part of The lack of refuelling stations is a significant the Eurocities municipal alliance and the barrier to the development of the FCEV investment is part of the JIVE initiative road fleet, but additionally, vehicles of this (Joint Initiative for Hydrogen Vehicles type are not exempt from the traffic ban in across Europe). The buses will have maxi- periods of increased air pollution. Electric mum range of 300 km and should be de- cars, on the other hand, enjoy such an livered by November 2021 exemption in larger cities (Madrid, Barce-

www.esperis.pl | 11 Hydrogen in Spain and Portugal SPAIN - GOVERNMENT STRATEGY & BUSINESS POTENTIAL

With the national hydrogen roadmap al- In the first stage, Spain plans to switch from ready published in October 2020 (Hoja de grey hydrogen to green hydrogen and im- Ruta del Hidrógeno), the further legislative plement the latter across the road, rail, air plans of the Spanish Ministry of Energy Transi- and sea transport. The priority at this stage tion are: will be to reduce the price of green hydro- gen. The second stage assumes the dis-  2030 National Energy and Climate Plan: placement of grey H2 by green in industry concretisation of the roadmap goals and ensuring the security of supply of this 2050 Long Term Strategy for a modern,  fuel, including through the development of competitive and neutral economy: the storage network. Spain currently has 2.7 achieving a 100% share of renewable MW of electrolyser capacity. The govern- energy in the economy, using H2 in de- ment plans to install up to 4 GW of capacity carbonisation-resistant sectors for hydrogen electrolysis (10% of the EU's 40 Climate Change and Energy Transition  GW target) by 2030.By 2024, the country Act and Just Transition Strategy and plans to have 300-600 MW, against the EU Storage Strategy: providing regulatory overall target of 6 GW of the total installed instruments supporting green hydrogen capacity of electrolysers. The goal is to be Renewable technologies roadmaps:  achieved mainly with the use of large units RH2, Offshore Wind, Marine Energies, Bi- with a capacity of up to 100 MW. ogas

ELECTROLYZER POWER IN GW ON IBERIAN PENINSULA COMPARED WITH EU-TARGET in GW

2030 4 2 40 Spain

Portugal

2024 0,6 0,5 6 EU-Target

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Source: MITECO, European Commission

The government also plans to expand the trial use (125,000 tons out of 500,000 annual- green hydrogen road fleet: at least 150 ly) with green hydrogen and implement buses, 5,000 light and heavy-duty vehicles, FCEVs in road and rail transport. For com- two commercial railways and at least 100 parison - France may spend EUR 7 billion on refuelling stations, as well as expanding the hydrogen projects in the next decade, and hydro infrastructure in major ports. and at Germany up to 9 billion. Both countries ex- airports. The government plans to replace pect green hydrogen generation capacity 25% of grey hydrogen production for indus- of 6.5 and 5 GW, respectively, by 2030.

www.esperis.pl | 12 Hydrogen in Spain and Portugal SPAIN: PILOT PROJECTS

So far, some 200 demonstration projects able energy sources (13 such projects) and with a total value of EUR 594 million have the production of synthetic methane. been started in Spain. The government's There are currently about 196 entities de- goal is to expand the sector to net worth of veloping hydrogen technologies in the EUR 22 billion by 2030. Spanish entities also country, 45% of which are companies and participated in 22 out of 226 FCH JU (Fuel 22% technological centres and coopera- Cells and Hydrogen Joint Undertaking) Eu- tives. There are at least 850 experts in the ropean projects. domestic hydrogen industry, and the government hopes to increase employ- In 2010-2017, the Ministry of Energy funded 8 ment to as many as 227,000 people by projects of 18 M € value and 15 projects for the end of the decade. the use of CDTi (Common Rail Diesel Turbo 11 out of the country's 17 autonomous re- Injection) engines for a further EUR 12 million gions include hydrogen in their RIS3 (Re- by the end of 2020. The ministry of eco- gional Research and Innovation Strategy for logical transformation has announced a a Smart Specialization) strategic docu- competition for profitable hydrogen pro- ments. Dedicated financing for hydrogen, jects in Spain. however, is not available either at the local The Spanish advantage stems from active or central level - these funds come from the participation in European joint initiatives (H2 general pool for RES and energy transfor- Backbone, Green Spider, JIVE) and the fact mation. The Spanish authorities believe that that domestic companies have some expe- there is already a market in Spain that pro- rience and ready-made technological solu- vides all the elements of the hydrogen val- tions in the field of electrolysers, storage and ue chain: from research and development, fuel cells. There are also initiatives, e.g. the through the production and distribution of Ely4Off project, experimenting with solutions equipment, to specialized services. In prac- for distributed generation based on renew- tice, however, the market structure, distribu- tion channels and outlets do not yet exist.

MAIN PILOT PROJECTS IN SPAIN

Pariticipants Project Budget Purpose

 Enagas Power-to-RH2 10 million Providing 330 t/year capacity for renew-  Acciona EUR able hydrogen production to fuel  Cemex Mallorca (out of 50 transport, hotels and residential facilities  Instituto para la mln for the on Mallorca. Part of the comprehensive Diversificación y (part of Green entire energy transition plan for the island: Ahorro de la Hysland Initiat- Green Hys- Green Hysland initiative under the FCH JU Energía vie) land opera-  Hydrogenics tion on Mal- (Cummins Group) lorca)

www.esperis.pl | 13 Hydrogen in Spain and Portugal

Pariticipants Project Budget Purpose

 Enagas La Robla Hydro- Unknown 60 MW electrolyser with 400 MW RES  Naturgy gen plant (part power to produce 9000 t/year of green of Green Spider H2 to cover local demand and future Initiative) exports to North-Western Europe  Endesa 23 green hydro- 1.9 billion Galician power plant As Pontes will re- gen projects for EUR ceive a 100 MW electrolyser and six ded- total electrolyser icated wind farms with a total capacity of 611 MW (cost - EUR 738 million), Similar capacity of 340 installation will be built in Huelva. MW and 2 GW of RES power Smaller projects (up to 25 MW), planned in the Canary Islands and the Balearic Islands.

Goal to significantly reduce the cost of

producing green H2. The duration of the program has not been specified, but the As Pontes unit should be ready in two years.

 Iberdrola Iberlyzer 1,8 bln EUR The first initiative to expand large-scale  Nel Possibility for electrolysers in Spain. It includes electro-  Ingeteam additional lyser installations: 20 MW at the Puertolla-  Fertiberia 1,8 bln EUR no plant by 2021 and another with a ca- from Euro- pacity of as much as 200 MW at the pean Re- Fertiberia’s ammonia plant Palos de la covery Frontera by 2023. The latter project by Fund itself would guarantee 75% of the mini- mum governmental target for 2024 (300 MW). Plan to further increase the joint electro- lyser capacity up to 800 MW in 2027 (20% of the 2030 target - 4GW).  Repsol Synthetic fuel 60 mln EUR Production of synthetic fuels (including  Saudi Aramco production in aviation fuel) based on green hydrogen. Bilbao plant + Additional CO2 capture technology from CCS ambient air. Capacity: 3.6 million litres per year by 2024

www.esperis.pl | 14 Hydrogen in Spain and Portugal MAIN CONCLUSIONS

Spain is a strategically important communication link for mari- time and road transport. It has good access to cheap renewa- ble energy (both wind and solar), robust network of gas pipe- lines and LNG terminals, as well as complex solutions for energy market management. This combination of features gives Spain (along with Portugal)a natural advantage in developing the hydrogen economy. Strong geographic and infra- structural base While there is a little chance of using Iberian natural gas lique- faction facilities to liquefy hydrogen as well, a potential exten- sion of the existing LNG terminal infrastructure should shorten

the permitting processes and result in redirecting it for H2 pur- poses. An additional advantage lays in Portugal's international agreements with the Netherlands and the recent arrangement with Morocco. Both of them might facilitate applying for finan- cial supports for hydrogen-related projects - under the IPCEI programme framework among others.

Spanish government has ambitious plans for hydrogen. None- theless, similar to the Central and Eastern European countries, strong regulatory and bureaucratic barriers for hydrogen persist in Spain. Situation is further complicated by the decentralised Spanish regional governance, raising the risk of internal incom- patibilities. Out-dated law and lack of experience among the administrative personnel will hinder the realisation of ambitious goals set out in the governmental strategy.

Portugal seems to have developed better regulatory frame- Bureaucratic inertia work, having taken steps such as reform of the network access code. Additionally, throughout the 1H2021 Portugal will have an opportunity to actively use its presidency to influence the policymaking in the Council. On one hand, as a relatively small state Portugal can position itself as a mediator and a deal- broker in case of a controversy between the major EU powers. On the other, its administrative resources might be constrained by the requirements of the presidency, and it remains unclear how many resources Portuguese presidency will be able to dedicate to the cause of European hydrogen economy.

Spanish government can count on domestic energy sector, which not only has developed their own hydrogen technolo- gies, but seems willing to embark on ambitious pilot projects. Business strength and participa- Domestic and international activities of key Spanish companies tion in EU initiatives from the gas sector (Enagas), electricity sector (Endesa, Iberdrola) and oil sector (Repsol) combined with active acquisi- tion of EU funds could largely compensate for relative bureau- cratic passivity.

www.esperis.pl | 15 Hydrogen in Spain and Portugal Portuguese example shows, however, that lack of experience among large multi-energy companies might not necessarily be a threat. The presence of even a small consortium member with their own technology can positively influence hydrogen initiatives.

Spain’s favourable geography is further supplemented by its membership in hydrogen initiatives on the European level. Meanwhile, Poland remains on the fringes of the growing hy- drogen movement. European Hydrogen Backbone gathers the

H2 networks leading energy operators from all across Europe, including our three immediate neighbours Germany, Sweden and Czechia. – conclusions for Poland Yet, Poland remains absent from this initiative. On the municipal level, no Polish cities took part in JIVE projects, which are grow- ing quickly in the West. Poland must step up its international activity if it wants to take the place justified by its geography,

market size and potential for H2 production.

Both Iberian countries forecast a fairly large share of passenger vehicles in their plans for HRS rollout by 2030. This aspect distin- guishes the discussed strategies from the Polish vision of refuel- ling network, which does not anticipate a large market of pas-

senger H2 vehicles. In best case scenario, by 2030 the number of stations per million inhabitants is to be the highest in Portugal H2 in transport - 9.8, while in Spain it is estimated at 3,2 (in Poland it amounts to – conclusions for Poland 2.6).

If conducted as intended in the documents, the energy transi- tion in Iberian transport sector might constitute a particularly

interesting example for the further improvement of H2 network in Central Europe.

Portugal and Spain take steps to gradually increase the con- nectivity of Iberian energy grids with its neighbors. Potential for cooperation with Algeria (despite the current closure of gas transit), Portuguese-Moroccan bilateral deal and the planned development of hydrogen connectors with France point out to Transit perspectives a possible direction for improvement of the Polish gas transit capacity, with hydrogen in mind. – conclusions for Poland Though unlikely to become a major hub for maritime hydrogen, Poland also has decent geographic position for transit. The possibility of hydrogen transit from Ukraine to Germany is high. Thus, early and active engagement in cooperation with these countries is advised.

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