Norway has extremely favourable conditions for renewable and low-carbon hydrogen production and harbours ambitions of becoming a major exporter to the EU. But the country's hesitation to adopt EU laws could hamper the sector's development, an industry body has warned.
The country has ample potential for renewables including hydroelectricity, natural gas reserves and offshore CO2 storage opportunities. Nearly 60 hydrogen projects are planned with potential production capacity by 2030 reaching 6.6GW from electrolysis and the equivalent of 5.4GW from gas with carbon capture and storage (CCS), according to data from industry body Norsk Hydrogenforum (NHF) — although it remains to be seen how many projects will be built by then.
The potential for CCS-enabled hydrogen could even exceed current plans, and a proposed Norway-Germany hydrogen pipeline could eventually carry 4mn t/yr, according to a feasibility study last year, although infrastructure would be shared with other North Sea production sites.
But Oslo must implement certain EU rules to maintain free trade access to the single market for Norwegian companies as it is not a member of the bloc.
Almost 500 EU legal acts are waiting to be incorporated into Norway's European Economic Area (EEA) agreement with Brussels, including 65 related to energy, according to NHF secretary general Ingeborg Telnes Wilhelmsen.
Norway's obligation to EU energy rules has become a political debate in the country, pitting arguments about sovereignty against single market access and leaving the hydrogen sector in limbo.
"The hydrogen industry in Norway is highly international, and about two thirds of the turnover is export related," NHF has said. "Sharing the same regulatory framework as the rest of Europe is therefore important to ensure a level playing field for Norwegian companies".
NHF has urged Oslo to speed up implementation of the EU's revised renewable energy directive (RED III). RED III targets for 42pc of hydrogen used in industry to be renewable by 2030 are "very demanding", but achievable, according to the association. If Norway's renewable renewable hydrogen output gets anywhere near NHF's projections, the country should comfortably meet the target and still have spare supply for exports and other domestic offtaker sectors, such as transport. Norway consumes around 225,000 t/yr of fossil fuel-gas hydrogen, meaning the target would translate to just under 95,000 t/yr, NHF has said.
Certification worries
Norwegian hydrogen producers could face difficulties certifying their renewable hydrogen to EU standards unless the country adopts the bloc's legal texts, NHF has warned.
Compliance with Brussels' definition of renewable hydrogen should be relatively easy, because renewable power exceeds 90pc in four out of five of Norway's electricity bidding zones, thanks to the high penetration of hydropower. Producers would be free from rules on additionality, temporal and geographical correlation and would not need power purchase agreements.
But the delegated act has not yet been incorporated into the EEA agreement and this complicated matters for Norwegian participants in the recent European hydrogen bank pilot auction, NHF said. The EU could theoretically even exclude Norwegian companies from the scheme going forward, if legal texts are not adopted, NHF has warned.
That said, multiple Norwegian projects submitted eligible bids including developer Fuella which was among seven companies that won subsidies in the pilot.
Funding schemes: you win some you lose some
Access to the hydrogen bank looks particularly vital for Norwegian projects now that plans for a domestic contracts-for-difference (CfD) mechanism for renewable hydrogen have stalled.
The coalition government discussed a CfD scheme with other political parties during budget negotiations last year, but they could not agree on funding, Telnes Wilhelmsen said, although she noted that there still might be a way back. "We lost the first battle about CfDs but it doesn't mean we give up," she said.
Norwegian electrolysis projects can benefit from government-subsidised power prices, which has a "huge impact," one Norwegian hydrogen developer told Argus. Norway recently increased the budget for its so-called "CO2 compensation scheme," which trims power prices for its energy-intensive companies, to 7bn krone/yr ($646mn) and scrapped the price floor. The scheme aims to ensure that prices for clean Norwegian power are not unfairly driven higher by Brussels' emissions trading scheme (ETS), as Norway's electricity market is linked to the EU's.
Oslo has also announced several broader support schemes for clean energy including NKr5bn for high-risk loans and grants for green industry, NKr1.5bn to reduce emissions in energy-intensive industry, and NKr285mn for zero-emission trucks. But the relevance of these for the hydrogen sector is "still unclear," Telnes Wilhelmsen said.
