European Union lawmakers have agreed on the world's first binding quota for the use of renewable hydrogen and derived fuels. These rules, issued on March 30, 2023, will create a large demand for renewable hydrogen, forcing existing industrial hydrogen users to replace at least 42% of their demand with renewable hydrogen. They also require that at least 0.5% of transportation energy be hydrogen based.
EU member States should ensure that 42% of existing industrial hydrogen demand is renewable hydrogen by 2030, with the requirement for the proportion rising to 60% by 2035. Industry quotas are for companies such as fertilizer and methanol producers, but not refineries, which fall under transportation requirements. Member States would be legally required to adopt the agreement as national law, and the European Court of Justice would determine penalties for countries that fail to comply.
In the transport sector, fuel suppliers need to replace 5.5% of final energy demand with hydrogen or advanced biofuels, with a minimum target of 1% of hydrogen-based fuels by 2030. But these targets are actually at least 50% lower, because road transport fuels are calculated at twice their energy content, while fuels used in aviation or shipping are calculated at an additional 1.5 times their energy content. Bloomberg New Energy Finance predicts that the share of hydrogen will be closer to the minimum target, because the use of hydrogen alone to achieve the combined target requires extensive use of hydrogen in the field of road transportation. By 2021, the share of advanced biofuels in transportation has reached 2.1%.
This hydrogen is required to comply with EU regulations for the production of renewable hydrogen and derived fuels. Final guidance for renewable hydrogen was issued in February. These quotas could lead to annual EU hydrogen demand of between 2.1 million tonnes and 4.2 million tonnes
by 2030, depending on the share of hydrogen-based fuels in transport applications. Existing industrial users will need to procure about 1.6 million tons of hydrogen per year to meet their quota, further increasing to 2.3 million tons by 2035. Based on the demand of 3,200TWh in 2021, the transportation industry needs 460,000 tons to 2.55 million tons of hydrogen annually to meet 0.5% -2.75% of its terminal energy demand.
Ammonia producers will be most affected by industry requirements because they are the largest existing users of hydrogen. In 2020, EU fertilizer production consumed about 2.3 million tons to 3 million tons of hydrogen. Although refineries as a whole consume more hydrogen, they are included in the lower requirements of the transportation industry, and a large portion of their demand is met by hydrogen, a by-product of other processes.
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