The Polish low-carbon hydrogen economy will be driven by public subsidies and policies – funding for infrastructure, CfDs for operations, required offtake by the industry, and carbon pricing. But what are we really paying for?
Lowering GHG emissions
Hydrogen from electrolysis, or even to some extent biogenic hydrogen or hydrogen produced with CCS/CCUS, can lower the emissions by replacing unabated production from fossil gas. Similar shifts are incentivised with carbon pricing. Unfortunately, Instrat’s research suggests that large-scale electrolysis won’t be a cost-effective decarbonisation method in Poland for a decade or more, depending on the availability of cheap, clean electricity. For the time being, we can achieve more by spending the same money on the electrification of heating or public transport. Furthermore, the pursuit of a cost-effective path towards lower carbon emission costs would encourage some industries to skip the electrification of hydrogen production in our part of the EU and instead relocate to places with cheaper electricity (thanks to better conditions for RES). The EU, and Germany in particular, have hoped for the emergence of a global low-carbon hydrogen market, but technical challenges with hydrogen transport and understandable economic ambitions of potential suppliers might result in the relocation of further parts of the supply chain.
R&D and market development
Of course, all clean technologies have their learning and growing period. Solar power was subsidised for years, and it still is, despite the emergence of relevant carbon pricing and PV’s great technological maturity. Globally, we couldn’t ignore low-carbon hydrogen and then just suddenly implement it on a large scale in 2040 once we have abundant clean power. We need to develop technology, regulations and the markets in advance. But this can’t be a Get Out of Scrutiny Free card for state aid. Polish Hydrogen Strategy or the RED III RFNBO industrial targets require a large-scale roll-out of electrolysers in Poland already before 2030, when, according to the basic scenario in our new NECP, half of our electricity will still come from coal and fossil gas. Is it really a necessary step? Should we not wait a few years and then implement more mature solutions, as we have done with solar power or batteries? Perhaps, in the meantime, we could focus on wind power, electrical grids, low-carbon heat or energy storage. Another question is about the end goal of some early exercises. For example, it is not clear what the added value of the deployment of (mostly biogenic) hydrogen buses in recent years is, as the resulting small hydrogen value chains have limited scaling potential, add little environmental or economic value, and are mostly separate from the more viable future chains centred around the industry.
Geopolitical and economic interests
partial deindustrialisation of gloomy Europe might be a part of the globally efficient decarbonisation scenario, but not the one we want to pursue. Massive domestic production of low-carbon hydrogen, perhaps supplemented with some (costly) imports from reliable suppliers, is a necessary step towards net zero if we want to keep the domestic supply chain of fertilisers, a key aspect of food security. Similar arguments about security or further economic value achieved in the value chain can be raised about petrochemicals or steel. Lowering the reliance on imported fossil gas is another beyond-environmental reason for deploying electrolysis. But this is still not an all-or-nothing issue. This kind of protectionism can have heavy economic and environmental costs, as we see in relation to the EU agricultural policies, or even Polish official reasons for keeping coal in the power system. And we should always consider alternative ways to manage our geopolitical risks.
Hydrogen as part of the industrial strategy
So what is the lesson here? We should still support the development of the Polish low-carbon hydrogen supply chain. But it is neither a goal in itself, a miraculous all-around decarbonisation tool, nor a source of international economic advantage in the temporary need of funding. Instead, for many years to come, hydrogen should be understood as this expensive, complex instrument, one of the many needed to achieve the goals of a realistic industrial strategy that balances the environmental, economic and security factors.
Such an industrial strategy we unfortunately don’t have, nor are we close to having.
