Feature: Pipeline network crucial to Europe's bold 2030 hydrogen plans

The planned European Hydrogen Backbone pipeline system is becoming increasingly critical to the success of the continent's nascent clean hydrogen economy, with major production project developers orienting plans around the network and offtakers opening tenders seeking pipeline deliveries.

The Hydrogen Backbone is expected to reach 31,500 km by 2030, with 40 concrete projects managed by the EHB's transmission system operator members set to be commissioned this decade.

TSOs are anticipating a demand boom.

"There is no risk in my view of overbuild," Co-chair of the European Hydrogen Backbone Maria Sicilia told S&P Global Commodity Insights. "It is rather the opposite. The risk is to not build enough infrastructure to meet our decarbonization goals."

Two major European industrial companies have recently announced tenders to buy clean hydrogen to decarbonize operations, in addition to the numerous bilateral offtake discussions taking place for specific projects.

Oil and gas major TotalEnergies in September issued a tender to buy 500,000 mt/year of renewable hydrogen for its European refinery operations.

And Thyssenkrupp is preparing a tender to purchase up to 151,000 mt/year of renewable and low-carbon hydrogen under 10-year contracts, with lower volumes starting from 2028, for pipeline delivery to its Duisburg steelworks in Germany.

Meanwhile, hydrogen production project developers increasingly eye the planned pipeline infrastructure as critical to their success.

HH2E secured a connection earlier in January to the European Gas Pipeline Link for the 100-MW Lubmin plant it is developing on Germany's Baltic coast. The company is working on several 100-MW plants in the country, with plans to increase to the gigawatt-scale.

Also, Danish green hydrogen company Everfuel in 2023 refocused its strategy on developing large-scale production plants optimized for pipeline connection.

The company highlighted a planned hydrogen pipeline between Denmark and Germany as presenting opportunities for the sector, with an anticipated start date of 2028.

International pipeline trade

The first phase of the Hydrogen Backbone will comprise 52% repurposed natural gas pipelines, with the rest coming from newbuild dedicated hydrogen pipes.

The EHB anticipates the network expanding to 57,600 km by 2040, with 59% of this coming from converted infrastructure as the continent switches away from natural gas.

Germany has committed Eur20 billion ($21.7 billion) in funds to develop its 10,000-km core hydrogen network, and the Netherlands has broken ground on a first leg of what will become a national pipeline network with cross-border connections.

The EHB said its pipeline project could help lower clean hydrogen supply costs by Eur330 billion compared with a hydrogen hub model of localized regional supply and consumption.

Europe's 2030 clean hydrogen plans are heavily focused on coastal Northwest Europe, while the Iberian Peninsula also has vast renewable hydrogen potential.

Sicilia, who is also Strategy and Planning Director at Spanish gas transmission system operator Enagas, anticipated international pipeline hydrogen trade developing by 2030.

The EHB "can create the liquidity and, as a result of cross-border trade, the internal market," Sicilia said in an interview. This would create a "pan-European market for hydrogen where you can compare costs from different regions," with substantial regional variations in price, depending on availability of renewable power resources.

The pipeline network can connect low-cost production hubs with demand centers across the continent.

"It is going to be very different producing hydrogen from solar generation capacity in Spain or from offshore wind in the North Sea or imported from Algeria to Italy," she said.

Sicilia highlighted the need for price discovery and benchmarks.

"Ideally, we would need to have benchmarks and reference prices so as to make the supply cost-efficient, starting with the cheapest resources."

The Platts Hydrogen Price Wall shows European clean hydrogen production costs amongst the highest globally, without connections to low-cost renewables. Platts is part of S&P Global Commodity Insights.

Supply and demand

The EU is targeting 20 million mt/year of green hydrogen use, with half of this coming from imports. It could be a tall order, given the nascent nature of the market as it stands, and assumes sufficient offtake demand to underpin project finances, as well as sufficient availability of renewable power generation.

However, the EHB has conducted a bottom-up assessment, finding some 14.7 million mt of hydrogen will be produced in Europe by 2030. This is higher than the EU's REPowerEU target, though sees imports lower.

TSOs on average have around a seven-year lead time for projects, with many already underway. Final investment decisions would be needed around 2026-27 for commissioning in 2030, the EHB said.

The buildout of the nascent European hydrogen economy is not without its challenges, with recent supply-chain disruptions, inflation and higher costs of capital presenting obstacles.

The IEA issued a stark warning on global hydrogen developments in its Renewables 2023 report, expecting just 7% of projects targeting start dates this decade to be online by 2030 as a lack of offtakers hampers final investment decisions for project developers.

"We take this as a wake-up call," Sicilia said. "You can set goals, but you have to implement the policies and the funding in order to meet those goals."

The EU should incentivize hydrogen demand "if we want those projects to make FID in time for 2030," she added.

Just 5% of capacity targeting a start date within three years has reached FID, with many projects needing to secure an offtake in order to secure financing, S&P Global hydrogen analyst Matthew Hodgkinson said.

"While the commitment of public funding to revenue support schemes is encouraging for project developers, demand-side incentives are still required to facilitate uptake of hydrogen in new demand sectors," he said.

Europe's largest clean hydrogen projects

Source: S&P Global Commodity Insights