The European Hydrogen Market Benefits from Economic Recovery and Rising Demand for Alternative Fuels

Increasingly stringent environmental legislation and the emergence of new gigawatt-scale electrolyzers indicate that hydrogen fuel boasts the future potential to develop as a strong competitor to traditional energy resources.

Key Trends and Insights

EU hydrogen production declined sharply in April 2020 by -15% against March figures, due to lockdown and stagnation in the chemical industry. Production only recovered in Q4 and continues to increase as of the beginning of 2021.

189 countries are now committed to reducing greenhouse emissions under the terms of the Paris Agreement, indicating that the demand for sustainable fuels will increase. The hydrogen market demonstrates tangible prospects: hydrogen, irrespective of its current high production costs, constitutes an excellent sustainable fuel due to the fact that when being combusted, it transforms to just water, without any harmful exhaust gases or carbon.

In July 2020, the European Union adopted the EU Hydrogen Strategy, to promote the widespread use of hydrogen as an alternative fuel, and conducted research into hydrogen production in Europe to determine investment opportunities from 2020 to 2050. The European Clean Hydrogen Alliance was established at the same time to connect industry, government authorities and the public. A dedicated regulatory and legal framework, specifically the Trans-European Networks for Energy (TEN-E) and The Connecting Europe Facility (CEF) initiatives should further promote the use of hydrogen from the perspective of alternative energy.

In addition to the European Union, Japan, South Korea and New Zealand, amongst others, have already adopted their own hydrogen strategies. The UK carbon-free energy plan also envisages an increased role for hydrogen fuel, while in the U.S., a targeted program has yet to be developed.

Encouraged by the latest technological developments, commercial interest in hydrogen fuel increased over the past year. 96% of global hydrogen output is still generated from natural gas; this process emits considerable volumes of greenhouse gases. The production of 'green' hydrogen through water electrolysis represents a sustainable alternative to this synthesis method. The emergence of gigawatt-capacity electrolysis facilities will reduce production costs and make hydrogen more accessible.

The Netherlands Features the Largest Volumes of Consumption and Exports

Hydrogen consumption rose to 8.1B cubic meters in 2019, picking up by 3.8% on the previous year's figure. The total consumption volume increased at an average annual rate of +1.9% from 2007 to 2019. The growth pace was the most rapid in 2008 with an increase of 26% against the previous year (IndexBox estimates).

The size of the hydrogen market in the European Union declined to $1.4B in 2019, approximately equating the previous year. This figure reflects the total revenues of producers and importers (excluding logistics costs, retail marketing costs, and retailers' margins, which will be included in the final consumer price). In 2020, the value of the European hydrogen market was estimated at approx. the same figure (IndexBox estimates). .

The countries with the highest volumes of hydrogen consumption in 2019 were the Netherlands (2.6B cubic meters), Germany (2B cubic meters) and Spain (1.1B cubic meters), with a combined 70% share of total consumption. France, Finland, Italy and Hungary lagged somewhat behind, together comprising a further 24%.

From 2007 to 2019, the most notable rate of growth in terms of hydrogen consumption, amongst the key consuming countries, was attained by Finland, while hydrogen consumption for the other leaders experienced more modest paces of growth.

The Netherlands represented the key exporter of hydrogen in the European Union, with the volume of exports reaching 301M cubic meters, which was near 73% (IndexBox estimates) of total exports in 2019. It was distantly followed by Belgium (78M cubic meters), mixing up a 19% share of total exports. Germany (14M cubic meters) held a little share of total exports.

The Netherlands was also the fastest-growing in terms of the hydrogen exports, with a CAGR of +9.9% from 2007 to 2019. At the same time, Belgium (+1.4%) displayed positive paces of growth. Germany experienced a relatively flat trend pattern.

Source: IndexBox Market Intelligence Platform