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Hydrogen has been recognised in the country’s National Energy and Climate Plan (“NECP”) as having a key role in the Spanish energy transition. Due to the country’s significant renewable energy resources, most notably solar and wind, and its ambitious plans to decarbonise the power, transport and industry sectors over the next 10-20 years, the contribution of hydrogen to these sectors is likely to increase.
At present, Spain consumes approximately 500,000 tons of hydrogen a year, almost exclusively for industrial uses (70% in refineries and 25% in chemical industries) – all of which is from fossil fuels. If Spain were to shift this consumption to a low-carbon economy and also to zero emission transport and include the integration of hydrogen in the power grid as a storage medium to help the flexibility and resiliency of the energy system, it would be in a stronger position with regards to its decarbonisation goals.
Large scale demonstration projects in Spain are in early stages. For example, the Power to Green Hydrogen project led by Enagás, Spain’s leading natural gas transmission company and the Technical Manager of Spain’s gas system, that was launched in Mallorca in January 2019, will generate at least 330 tons of hydrogen per year using solar PV electricity. The project aims to demonstrate hydrogen use for transportation applications in sustainable urban transport (5 buses), rental car fleet (10 vehicles), the feasibility of its injection into the gas grid from a dedicated pipeline transporting pure hydrogen through a Guarantee of Origin System, and its use for commercial (hotels and municipal buildings) and port applications (auxiliary power for ferries and port operations).
The NECP ambitious renewable electricity targets for 2030 and beyond imply that Spain could position itself as an exporter of green energy. As an example, the NECP already identifies a minimum of almost 14TWh of curtailed green electricity that could be generated, stored and exported or otherwise commercialised in the form of hydrogen by 2030.
The European Commission launched the process of the Important Project of Common European Interest (“IPCEI”) in order to undertake large-scale transnational projects of strategic importance to the EU and for the achievement of common European objectives. Different hydrogen projects were presented by companies, and the Spanish Ministry put forth a set of hydrogen projects for the first two waves (on technology and industrial application themes), which are now in the pre-notification phase to the European Commission. A third wave is under way and a new set of projects is expected to be proposed for the IPCEI mechanism.
Energy & Industry
At present, the overwhelming majority of hydrogen in Spain is used in industry, mainly refineries and chemical industries – all of which is ‘grey’ hydrogen. However, Spain has set a target to have about 5TWh from low carbon hydrogen (which is about 25% of the total hydrogen consumed in 2030 in all industries) and there is further scope for decarbonisation with hydrogen by blending hydrogen in the gas grid.
A plant for the production of e-fuels has been announced in Bilbao. In June 2020, Repsol announced its plans to build one of the world’s largest plants to manufacture net zero emissions fuels.
This is using CO2 captured in Petronor’s refinery and green hydrogen generated from renewable energy through a partnership with other companies, such as Enagás and Petronor.
The Spanish utility group Iberdrola SA, and the fertiliser producer Fertiberia, announced a plan to install 800 MW of electrolysers by 2027. The initiative will set up a solar-plus-storage system and a 20 MW electrolyser at Fertiberia’s ammonia plant in the city of Puertollano, Spain, with ribbon-cutting scheduled for 2021. These companies intend to expand their alliance by developing three more green hydrogen projects for Fertiberia’s plants in Spain in 2023-2027. The initiative will require an investment of EUR 1.8 billion by 2027.
A fleet of 12 cars (Toyota Mirai) are already on the roads in Madrid, fuelled at a newly built refuelling station (the first HRS in Madrid was inaugurated on 28th January 2021). Similar plans are in development at the Green Hysland project in Mallorca (a fleet of 10 cars and 5 new fuelling stations). In addition, Barcelona is in the process of acquiring and rolling out an additional 8 urban buses and Madrid is considering similar plans in the near future.
The H2Ports project contemplates the deployment of the first fuel cell-powered reach stacker and terminal tractor in Valencia by the end of 2021. This is the first step in the application of hydrogen in ports.
The NECP contemplates the use of green hydrogen for clean transport alongside battery electric vehicles. In addition, in May 2021, the Spanish Prime Minister announced support for development in the field of green hydrogen within the framework of a comprehensive plan for modernising the automotive industry in Spain, a sector responsible for 10% of national GDP.
2. Market Prospects for Hydrogen
The development of a hydrogen market in Spain is at an early stage, with significant space for growth. After launching a national hydrogen strategy by the national government and with input from stakeholders, in October 2020 the Spanish Government published The Hydrogen Roadmap, the national hydrogen strategy in Spain.
This Spanish Hydrogen Roadmap set out the following targets for 2030: the installation of at least 4 GW of electrolyser power; 25% of hydrogen consumption in industry covered by renewable hydrogen; 100-150 HRS with public access; 150-200 FCEV buses; 5,000-7,500 light and heavy freight FCEV vehicles and 2 commercial train lines powered with hydrogen with an investment of EUR 8.9 billion. All of these investments could be undertaken by the private sector with the necessary public support in cases where the need is determined.
Furthermore, it is expected that the development of an economy based on the production and application of renewable hydrogen will accelerate in Spain from the year 2030. The renewable hydrogen economy will imply the constitution of a decarbonised society by 2050 in which renewable energies make up the majority share in the energy mix.
This national hydrogen roadmap establishes the creation of “valleys of hydrogen clusters” which will play a key role where production, transformation and consumption are spatially concentrated, taking advantage of the application of economies of scale, as well as the development of pilot projects linked, among others, to isolated energy systems and to the transport sector. This roadmap also identifies the necessary elements along the value chain in order to help foster the growth of a national hydrogen industry.
Due to the cost premium that green hydrogen and its end users face today and in the medium term, public grant-type funding to help bridge the gap with respect to conventional or competing technologies will be necessary. Early-stage demonstration projects are seeking funding mainly at a European level, although national agencies are increasingly keen to explore funding possibilities and are likely to develop these further. Furthermore, due to the fact that most of the activity has been related to R&D, few well-developed companies or business units dedicated to hydrogen exist, and M&A activity has been insignificant to date. As the market develops and grows, this is likely to result in more commercial and business relationships and increased M&A activity.
3. Challenges Facing Hydrogen Projects in Spain
As noted above, Spain has had a Hydrogen Roadmap in place since October 2020. This Roadmap recognises the complementary role of hydrogen as a necessary energy vector and includes the abovementioned specific objectives related to hydrogen, as well as a system for accounting for renewable gases (e.g. guarantees of origin). The roadmap also provides for different measures regarding financial aspects. For instance, it includes proposals for different hydrogen support mechanisms among the award criteria, and seeks to facilitate the demonstration of innovative technologies based on renewable hydrogen by launching calls within the framework of the Emissions Trading Scheme Innovation Fund. However, there are no specific guidelines on how to implement such measures, so whilst this Hydrogen Roadmap is positive because it sets out the national hydrogen strategy, more concrete measures and their further development are needed.
The publication of the Spanish Hydrogen Roadmap marks an important milestone for the development of this sector.
One of the measures envisaged in this Roadmap is the establishment of a legal basis for Power to X plants (“P2X”) and electrolysis facilities although, again, there are no specific indications on how to achieve this. Besides, hydrogen production from renewable sources is hindered since electrolysis is considered as an “energy use” rather than an “energy conversion device”. Considering that the price of electricity is key in the production of hydrogen in order to obtain a competitive price, the electricity used by the electrolysers should not pay access tariffs because it is an energy conversion (an intermediate process to transform electricity in another energy) and not a final energy use. To date, however, no steps have been taken to address this legal barrier, other than a Royal Decree
which proposes the possibility to eliminate connection charges on a temporary basis. Positively, one of the measures of this Roadmap is the review of the technical and regulatory aspects and the quality of the gases necessary for the injection and use of hydrogen into the gas grid.
Securing end users and reducing costs
The current cost premium for hydrogen technologies compared to conventional technologies remains an obstacle for widespread market uptake. While developing hydrogen at scale remains a key lever for reducing costs, R&D and product development activities also need further support to enable this cost reduction. End users must be identified and engaged with so as to enable large demonstration projects at commercial scale (i.e. multi-MW).
Financial support for deployment
The cost premium requires action by public agencies so as to help remove this barrier and enable hydrogen projects to be implemented. Many in the sector are calling for a funding programme to be put in place for this purpose, with ambitious but progressively decreasing levels of support as technology develops and costs are reduced, thereby incentivising early adopters.
Lack of awareness
Despite the recent surge in interest in hydrogen technologies, they remain largely unknown to potential end users and the public in general. The lack of trained personnel and training programmes may also be considered a challenge. More targeted communication on the benefits of hydrogen will be needed, as otherwise there may be a time investment required in informing potential project partners about the technology, its status and prospects.
4. Regulation of Hydrogen
In Spain, the guidelines for the development of specific hydrogen legislation are set out in the Hydrogen Roadmap of October 2020. So far, in terms of hydrogen production, it is considered as any other inorganic gas production facility and it is subject to the same conditions regardless of size, which could hinder the development of small projects.
In relation to hydrogen’s injection in the gas grid, the PD-01 protocol applies. This document provides the technical specifications for gas circulating inside the grid and makes reference to standard UNE-EN 16726. At present, there is no specific limitation of hydrogen content by volume: it is assessed on a case-by-case basis.
One of the measures foreseen in this Hydrogen Roadmap is reviewing the technical, regulatory aspects and quality of the gases necessary for the injection and use of hydrogen in the natural gas grid.
At national level, the Land Law (Ley del Suelo) establishes a basic regulation of land use without prejudice to the competences of the Autonomous Communities to develop different land use regimes. Hydrogen production plants are considered to be chemical facilities for the production of chemical products and inorganic gases such as hydrogen. Therefore, the land use permit must be obtained for this industrial activity. In this sense, the Spanish Hydrogen Roadmap has instructed the modification of the classification as an industrial activity of the production of renewable hydrogen in situ at service stations, but only in such service stations.
There are no land use prohibitions for hydrogen production, but there are for storage of large quantities of hydrogen. If storage is greater than 200,000 tons, an Environmental Impact Assessment (“EIA”) is needed.
As a rule, local authorities are in charge of permitting. As such, whilst there may be few variations between installations from one part of the country to another as a practical matter, permitting rules will need to be taken into account for each new project.
It is likely that dedicated hydrogen production plants linked directly to renewable energy installations will be subject to similar requirements to those applicable to said installations, amongst them an EIA.
With regard to the transportation of hydrogen by road, the European Agreement concerning the International Carriage of Dangerous Goods by Road rules apply.
Installations where storage of pressurised hydrogen containers may be located will likely require an ad hoc review by local permitting authorities. Such would normally be the case for refuelling stations where high-pressure buffer tanks (up to 1000MPa) are required.
According to article 1.8 of the Spanish NECP and the RED II, it is mandatory to implement a Guarantees of Origin System, and the Green Certificates in accordance with it, for all renewable gases. In that sense, Green Hydrogen is part of this scheme and the development and the mandate to develop this system are still pending.
5. Regulatory Bodies
There is no specific regulatory body responsible for the regulation of hydrogen projects. Instead, there are a number of regulators which would have responsibilities depending on the activity concerned, including the Councils, Regional Governments and the National Government:
Environmental Impact Assessment;
Integrated Environmental Authorisation
6. Upcoming Developments
Key projects that are likely to start implementation in the near future (12-24 months) are as follows:
Green Crane, a joint Spanish-Italian proposal for large scale hydrogen production, led by TSOs Enagás and SNAM. The hydrogen production hubs are located in areas that will be majorly affected by the energy transition (such as locations with closures of coal mines and coal power plants);
The Power to Green Hydrogen in Mallorca (GREEN HYSLAND funded by the FCH JU) will install a production capacity of more than 330 tons per year for a variety of uses, such as transport (rental car fleet and urban buses), commercial heat and power, as well as demonstrating the feasibility of injection into the gas grid;
Hydrogen fuel cell urban buses in Barcelona and Madrid are expected to roll out in the next few years;
A fleet of 12 Mirais in Madrid has been deployed together with the first hydrogen refuelling station. As we have mentioned previously, this HRS went into operation in January of this year, and it has been the first publicly available hydrogen refuelling station in Spain for refuelling at 700bar;
The deployment of demonstration units (a reach stacker and a terminal tractor) within the H2Ports project in Valencia will also advance the development of fuel cell solutions for port-related activities;
The SeaFuel project funded by the Interreg Atlantic Area aims to use the renewable resources across the Atlantic Area to power the local transport fleet and support the shift towards a low-carbon economy in Tenerife (Spain); and
The Sun2Hy project, led by Enagás and Repsol, focuses on the development of a new photoelectrochemical technology that allows the production of green hydrogen, 100% renewable, at a competitive cost, from solar energy through a direct process without external electrical input (bias free). This new technique can achieve a 90% carbon footprint reduction with respect to existing green hydrogen production technologies.
The first phase of the project, in which the project has been developed a demonstrator at pre-commercial scale (TRL-6), is co-financed by the Centre for Industrial Technological Development and the European Union through the European Regional Development Fund (“FEDER”).
The aim of the present project is to demonstrate the first PEC pre‐commercial plant in the world with a production capacity of 201 tH2/year, ensuring supply of Hydrogen Refuelling Stations in the surroundings of Puertollano Industrial Complex (Spain) for the mobility sector (freight buses, trucks and light vehicles). During 10 years of operation, a total amount of 25,217.61 tonCO2eq. will be avoided.