Cost and competitiveness of green hydrogen and the effects of the European Union regulatory framework

Abstract

By passing the delegated acts supplementing the revised Renewable Energy Directive, the European Commission has recently set a regulatory benchmark for the classification of green hydrogen in the European Union. Controversial reactions to the restricted power purchase for electrolyser operation reflect the need for more clarity about the effects of the delegated acts on the cost and the renewable characteristics of green hydrogen. To resolve this controversy, we compare different power purchase scenarios, considering major uncertainty factors such as electricity prices and the availability of renewables in various European locations. We show that the permission for unrestricted electricity mix usage does not necessarily lead to an emission intensity increase, partially debilitating concerns by the European Commission, and could notably decrease green hydrogen production cost. Furthermore, our results indicate that the transitional regulations adopted to support a green hydrogen production ramp-up can result in similar cost reductions and ensure high renewable electricity usage. The European Commission has set a regulatory benchmark for classifying green hydrogen in the European Union. New research finds that by regulating the power purchase for electrolysers, emission savings from green hydrogen production is ensured, but cost is also affected.