At the last EU State of the Union on September 14, 2022, EU Commission president Ursula von der Leyen, to the surprise of many, announced the establishment of a European Hydrogen Bank. In order to bridge the investment gap and connect future supply and demand  of, interalia, the 20 mln tonnes  green hydrogen market by 2030 as annouced in the REPowerEU Action Plan presented on July 18, 2022. The bank will facilitate the purchase of hydrogen by using resources from the Innovation Fund and investing €3 bln to help building the future market for hydrogen. For this purpose the EU Commission is currently assessing the increasing hydrogen demand for industrial use in refineries, fertilizer and steel plants following the recent developments on the gas and electricity markets.

As the price of natural gas has exploded over the past year starting with the economic recovery after the COVID19 lockdowns and the recent reduced supplies of Russian gas to Europe amidst its invasion of Ukraine and the cost reductions of renewable energy and electrolysers, the levelized cost of green hydrogen produced with alkaline electrolysers, i.e., not including any subsidies, is already cheaper than LNG in countries including the UK, Sweden, Italy, Spain, France, Germany and Poland, according to a BloombergNEF study published last July. Sweden and Italy are  producing the cheapest hydrogen in Europe, while the cost of green hydrogen would be highest in Germany and Poland, reflecting relative renewable energy costs. Onshore wind is the cheapest source of electricity across Europe, while solar is the cheapest in Turkey and the United Arab Emirates (UAE), according to BloombergNEF. Green hydrogen is not yet cheaper than natural gas in China, the US, or the UAE where gas prices are still lower.

These differences in hydrogen source and costs have also been highlighted in the latest discussion paper on Trade Rules for Hydrogen and its Carriers of the International Partnershiop for the Hydrogen Economy,IPHE, that came out just before the invasion of the Ukraine in February 2022. The paper indicates  that how exactly the current global trade rules framework under the World Trade Organization (WTO) will affect hydrogen energy trade is not yet clear.. The IPHE paper is stating  that as  hydrogen,  unlike fossil fuels, has many different pathways to produce and transport it,  it will be challenging to apply the same trade rules and regulations fairly or easily under the current framework. In particular:
• If different hydrogen carriers were subject to different import tariffs, impacting the cost per unit of hydrogen energy, this could distort market behaviour.
• There are different trade rules for goods and services. Hydrogen production and distribution contains elements of both goods (e.g., a molecule) and services (e.g., operating a production facility) potentially leading to confusion into how to apply rules
• It is difficult to encourage and support environmental policies and mandates driving low carbon energy solutions within the context of a rigid trade system.
• Existing trade rules do not yet address export restrictions and investment protection well for hydrogen.

As the IPHE paper is concluding as well, the different pace in developments in technology, manufacturing capacity and experience will influence which regions will have a certain advantage in production and use, meaning that the areas of greatest surplus and deficit are currently unclear. THe IPHE Paper states:
• Policy uncertainty hinders international trade: hydrogen is a new area of energy policy, with fast-evolving regulations, legislation, and incentive instruments across jurisdictions. The complexity and current uncertainty around these changing regulatory and market frameworks
directly impact investment, which in turn affects international trade.
• Policy support should not conflict with trade rules: today’s low carbon hydrogen market requires supportive policy frameworks and financing mechanisms. Countries and institutions should ensure that these frameworks and mechanisms are managed within the context of trade arrangements, do not violate trade rules, and do not prejudice future investment and roll-out.
• There is a strong role for global collaboration: developing a future global market for the trade of low carbon hydrogen will require international dialogue and cooperation, across borders, regions, and the public and private sectors.

Phot0: courtesy of WTO Report on non tariff measures of green and brown energy products, 2022