Green Hydrogen to Make A Move North From Sunny Spain

Abu Dhabi sovereign wealth fund and US private equity firm owned Spanish oil and gas firm, Cepsa, as well as the port of Rotterdam in the Netherlands have agreed to create a green hydrogen corridor to transport carbon-free fuel from the sunny reaches of Spain to the industrial core of northern Europe. “The agreement accelerates the decarbonization of heavy industry and maritime transport and supports Europe’s energy independence and security,” according to a joint statement. A memorandum of understanding (MoU) for the project has been signed by both sides.

CEO of Cepsa Maarten Wetselaar said last month's deal aimed to link the solar potential of southern Europe with the energy needs of northern Europe. Because of its ports, wind, and sun, southern Spain is a great place to manufacture green hydrogen for both domestic consumption and export. By 2030, the EU anticipates yearly usage of 20mn tonnes of green hydrogen under the REPowerEU program to reform the union's energy sector, of which it claims half should be generated within the bloc. That can only be done cost-effectively if the majority of production takes place in southern Europe, where renewable power is abundant and relatively inexpensive. Westelarr cites the first initiative to connect south Spain, a potential centre for inexpensive green hydrogen generation, with Rotterdam, a key industrial hub in northern Europe, as emblematic of the rapid progress the EU is making on its green agenda.

Westelaar has established a new plan to transition the Spanish conglomerate away from fossil fuels and toward renewable energy sources, and he has pledged to spend at least €5 billion (about 60% of the conglomerate's total capital expenditure) on low-carbon business initiatives by 2030. Andalusia, in southern Spain, is slated to become a major hub for Europe's generation of renewable hydrogen as part of this initiative. Cepsa wants to add another 7GW of solar and wind power to the grid in the area, bringing its total renewable electricity output capacity to 8GW.

Clean hydrogen is created by an electrolysis technique that uses renewable electricity to separate the hydrogen from the oxygen in water. Hydrogen, called a "versatile energy carrier" by the International Energy Agency, may be utilized in several areas and sectors. Burning the fuel releases energy but produces no carbon emissions, making it a promising candidate for decarbonizing the global energy system and facilitating the long-distance transmission of renewable electricity. However, even though dozens of projects are in the works all around the world, just a handful are now in operation, and some experts are still skeptical as to whether or not production can be made economically and at scale.

The European Commission supports the initiative and has called for the installation of 40 GW of renewable hydrogen electrolyzers in the EU by 2030. President Ursula von der Leyen of the Commission advocated for hydrogen use in her State of the Union address last month. Von der Leyen, in statements published on the website, suggested that hydrogen may be a turning point for Europe, and there is a need to expand the hydrogen economy beyond a small subset of the market. She called for a 2030 objective to create 10 million tons of renewable hydrogen in the EU, annually.

In order to close the investment gap and link future supply and demand, she argued, "we must develop a market maker for hydrogen." Because of this, von der Leyen has announced plans to create a European Hydrogen Bank. It is believed that this would allow investments of 3 billion euros (about $2.91 billion) to help the hydrogen industry develop in the future. According to one EC source, hydrogen wasn't really evaluated as a practical energy source until quite recently. It was too expensive, difficult to implement, and impractical to scale. Now it's an integral part of Europe's plan to become energy independent.

As of 2027, Cepsa expects to begin sending green hydrogen to Rotterdam from the Spanish port of Algeciras via a process of turning it into methanol or ammonia. Rotterdam, currently Europe's largest port for imports of crude oil, processed goods, and coal, representing 13% of the continent's energy consumption, plans to play the same role for renewable energy by using the hydrogen locally or piping it to industrial clusters. OCI, a Dutch chemical firm, is increasing the size of its ammonia import terminal in Rotterdam, while Shell is constructing Europe's largest hydrogen electrolyser within the same city. Companies such as BP and energy broker Gunvor have also expressed their intentions to build out the city's green hydrogen infrastructure.

By 2050, it is expected that 20 million tonnes of green hydrogen will flow through Rotterdam, of which 2 million tonnes could be produced locally. If all of Rotterdam's green hydrogen projects in development succeed, the city will produce 600,000 tonnes per year by 2030, and import 4 million tonnes, representing roughly 25 per cent of the EU's forecast demand. The port was seeking to attract infrastructure-supporting enterprises by leasing land for electrolysis, assisting with the installation of hydrogen pipelines and advocating for the establishment of the necessary government rules and subsidy programs.