Green hydrogen is one of the key elements to advance the energy transition. However, the profitability of the technology generates uncertainty and expectations about how it could be scaled up.

The Spanish Hydrogen Association (AeH2) points out that there are good prospects for renewable hydrogen in Spain and Europe in the coming years, but they emphasize that government support through financial incentives and collaboration between public and private actors will play an essential role in the profitability of projects.

“To promote the profitability of green hydrogen projects, it is crucial to take advantage of economies of scale and improve production efficiency. Electrolysis technology, although mature and in use for over 120 years, needs large-scale deployment to reduce costs and make renewable hydrogen competitive,” says Javier Brey, president of the Spanish Hydrogen Association (AeH2), emphasizing that financial incentives will drive the profitability of projects.

“Incentives can help cover initial costs and encourage investment in research and development, while cooperation between the public and private sectors will facilitate the mobilization of investments and the construction of the necessary infrastructure for hydrogen transport and storage. This collaboration will be key to reducing long-term costs and ensuring the economic viability of renewable hydrogen projects,” he adds in an interview with Energía Estratégica España.

He also states that as more electrolyzers are installed and production capacities expand, unit costs will decrease, making green hydrogen (H2V) more accessible and the projects more profitable. “This increase in production and the improvement in technological efficiency are essential to achieving real competitiveness in the market,” says Brey.

How to boost H2V demand?

Javier Brey points out that to increase the demand for renewable hydrogen, two things are necessary: clear rules and a good incentive.

“Imposing mandatory quotas in key sectors such as industry and transportation could be a great incentive. The RED III Directive already establishes that 42% of European industrial hydrogen consumption must be RFNBO (renewable non-biological origin) by 2030, and Spain wants to go even further by proposing 74% in the PNIEC,” says the representative of the Spanish Hydrogen Association.

“Additionally, the decarbonization of transportation and quotas for the use of hydrogen in the maritime and aviation sectors will also drive its adoption. Therefore, offering tax incentives and establishing long-term agreements between producers and users will also be very helpful in creating a solid market,” he adds.

The sector believes that the implementation of this European Union regulation, which includes mandatory minimum quotas, could significantly impact the green hydrogen market by increasing its demand, as major industries adopt the energy source to meet their decarbonization goals.

“We see that not only will it incentivize industries to adopt green hydrogen, but it will also strengthen the market, making it more attractive to investors by offering greater clarity and reducing the risks associated with the development of this technology in the medium and long term,” analyzes Brey.

He adds that despite Spain’s delay in transposing these guidelines, it is expected that “it will eventually align with the European trend, which will facilitate greater consolidation of green hydrogen demand.”

He also points out that hydrogen valleys are key to driving demand because they combine production and utilization of the resource in the same location, facilitating infrastructure.

However, he emphasizes: “We are still far from the global production targets, so we need to encourage consumption, through regulation and financing, to make these projects a reality and ensure that renewable hydrogen consolidates as a key energy vector in the transition.”

Hydrogen valleys call for proposals

It is worth remembering that two months ago, the Ministry for Ecological Transition and the Demographic Challenge (MITECO) published the first call for green hydrogen valleys or clusters, aimed at boosting the production and consumption of the energy resource.

Project promoters interested in participating in the call can submit their proposals until the next October 29.

In this context, the AeH2 representative emphasizes that the call represents a great opportunity to foster integrated ecosystems for the production and consumption of H2V, allowing the creation of local hydrogen-based economies.

“These hydrogen valleys will have a significant catalytic impact, as they involve large companies, SMEs, tech startups, research centers, and universities. Additionally, they will contribute to the initial deployment of hydrogen infrastructure, which can later be connected through corridors. This will accelerate the development of the hydrogen economy in Spain,” he adds.

From AeH2, in coordination with its partners, they submitted comments on the call’s framework during the public consultation to adapt the requirements as much as possible to the sector’s needs.

“Proper coordination between the public and private sectors will be key to its success. The planned financial support will help many projects achieve the Final Investment Decision (FID) and move forward, thereby consolidating Spain’s role in the hydrogen economy,” says Brey, emphasizing that with this call for hydrogen valleys, an even greater push is expected to develop a competitive and robust sector in the country.