Industry body Hydrogen Europe has warned the European Commission that planned EU regulations could trigger a "mass exodus of companies towards the US market" attracted by the Inflation Reduction Act legislation.
In a letter to commission president Ursula von der Leyen, Hydrogen Europe called the Inflation Reduction Act "undoubtedly the most impressive incentive any policymaker has undertaken to encourage renewable hydrogen rollout". The bill includes a raft of measures intended to stimulate hydrogen production and use, including a production tax credit of up to $3/kg, which could make US hydrogen with no or minimal carbon emissions the cheapest in the world.
"Many companies and project developers are already conducting negotiations to benefit from the scheme," Hydrogen Europe said. Several companies in the hydrogen sector said recently they will increasingly focus on the US as a priority market thanks to the Inflation Reduction Act.
The bill's "rules are simple and conditions are extremely attractive", it said, and are the opposite of what project developers find in Europe. A European "regulatory framework has not been finalised", while "rules are overly complex" and incentives are neither concrete nor tangible, Hydrogen Europe said.
The EU is yet to finalise its legal definition of renewable hydrogen, having consulted on a draft earlier this summer. The regulations are overdue, given that under the EU's 2018 renewables directive the commission was required to publish the delegated act by 31 December 2021.
Hydrogen Europe is particularly concerned about the draft legislation's "additionality" clause, which specifies hydrogen would only be considered as renewable if it is produced from an electrolyser that runs on power from a new renewable facility. These rules are "disproportionate and will make European renewable hydrogen insufficient for the industry needs and non-competitive vis-à-vis non-European renewable hydrogen", the industry association said.
Hydrogen Europe called for this aspect of the delegated act to be amended, and for the commission to work towards increasing "strategic co-ordination" between member states. According to the association, "only a handful of member states would see large scale financially viable renewable hydrogen project go ahead under the current environment".
