Hydrogen company finds a solution to Europe’s 'chicken and egg' problem

John Cockerill Hydrogen is building factories in North America, Europe and Asia to serve customers locally instead of dealing with expensive transport costs

The John Cockerill Hydrogen France Gigafactory site and Raphael Tilot. Photo: John Cockerill Hydrogen
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Belgium's leading hydrogen manufacturer is overcoming bottlenecks in the European Union's strategy for growth in the sector with a plan for a string of plants around the world.

It hopes to crack the "chicken and egg" issues that are besetting European expansion.

"What's key for Europe is to gain speed in an industry that is going to become large," John Cockerill Hydrogen chief executive Raphael Tilot told The National.

This is necessary, he said, to produce the "very large volumes" of hydrogen announced by the EU last year to be achieved by 2030: a yearly production of 10 million tonnes combined with imports of another 10 million tonnes.

There is more than €20 billion in European financing available for hydrogen companies under different EU funds to achieve these goals. But senior EU officials also publicly recognise that there is a "chicken and egg" problem in the industry.

"As long as there isn't sufficient hydrogen supply, there won't be demand from customers, and vice versa," said the commission’s first vice-president in charge of the bloc’s green transition, Maros Sefcovic, in a speech last week at EU Hydrogen week, a high-level gathering in the outskirts of Brussels of thousands from the industry.

The strategy at John Cockerill Hydrogen has been to invest in factories around the world in a bid to sell electrolysers for local use.

The company started by purchasing a factory in China in 2017. With the help of EU subsidies, it built twin factories in France and Belgium in 2022 and has since expanded to the US and India.

“We develop here in Belgium, in the heart of Europe, our technologies, which we will deploy where our clients are,” said Mr Tilot.

But Mr Tilot also said it was often “preferable” for clients abroad to produce hydrogen locally in order to benefit from subsidies.

“We’ll produce in Europe for European clients, but when we have clients in North America, or India, looking for competitive products, they are also looking for subsidies in India and the US,” he said.

“Europe doesn’t want to depend on far-away countries for technologies that are critical or strategic. There’s the same way of thinking in India or North America,” he said, pointing at the US’ Inflation Reduction Act, the largest-ever US subsidy scheme to support green industries launched last year.

“Our clients would not be subsidised in the same way if products aren’t built on American soil,” said Mr Tilot.

The $369 billion IRA has drawn criticism from the EU for discriminating against European products but has also been hailed for its simplicity and clarity in comparison to more complicated EU rules.

The bloc cannot have rules as simple as the US ones because it does not have a single budget, said Kerstin Jorna, the European Commission’s director general for internal market, industry, entrepreneurship and SMEs.

“In the US, you read […] three dollars per kilogramme of hydrogen,” she said, in a reference to the tax credit for hydrogen production introduced by the IRA.

“We have different forms of de-risking, subsidies, guarantees […] but we are also striving to make it simpler,” said Ms Jorna, also speaking at EU Hydrogen Week.

The European Commission’s hydrogen strategy was first unveiled in 2020 but it truly picked up last year with announcements of a new hydrogen bank.

The first €800 million pilot auction of the European hydrogen bank was “an important first step to bridge the cost gap between renewable hydrogen and fossil fuels,” said Mr Sefcovic.

Another round of auctions with a value of €3 billion will take place in the spring.

These developments are hailed as important but, for many observers, they pale in comparison to investments made in China and the US.

The EU is going through a “soul-searching” phase as it tries to find the best tools to accelerate the development of its hydrogen sector, said Raphael Hanoteaux, senior policy advisor on gas politics at Brussels-based think-tank E3G.

Further complicating investment planning, there is a lack of clarity on what European demand for hydrogen will look like in the coming years, said Mr Hanoteaux.

Studies show it may be anywhere between 2 and 26 million tonnes a year by 2030, while the cost of developing pipelines across Europe is somewhere between €80 and €143 billion, according to a study by the European Hydrogen Backbone Initiative, a group of thirty-three energy infrastructure operators.

“It’s hard to give certainty to business so that they can invest,” Mr Hanoteaux told The National.

Some countries like Brazil and South Africa have made use of the EU’s Hydrogen Week to pitch themselves as attractive investment prospects for the European hydrogen industry.

But the profitability of such import schemes for Europe remains vague. Hydrogen is much less dense than other energies. Liquefying it or transforming it into ammonia for boat transport and then re-transforming into hydrogen involves “a huge amount of energy,” said Mr Hanoteaux.

“The only plans that are currently realistic are those that involve European production or pipeline import,” he said.

In that context, avoiding transport costs seems like a sensible option for John Cockerill Hydrogen. Shipping electrolysers around the world is risky, said Mr Tilot. Comprised of a large number of electrode stacks, an electrolyser is a large machine that splits water into hydrogen and oxygen and can weigh up to 60 tonnes and needs a lot of maintenance.

“It would be expensive and risky from a point of view of dependency between countries. We saw it during Covid – being dependent in the supply chain on strategic or critical equipment on the long term can be dangerous,” he said.

In January, John Cockerill Hydrogen concluded an agreement to develop the hydrogen sector in Morocco and in June, it signed another agreement with the UAE’s Adnoc and Strata Manufacturing to produce electrolysers in the UAE for local use and export.

Asked what he thought about the EU’s hydrogen bank, Mr Tilot said it was “very positive,” but more needed to be done. “It’s a relatively small amount,” he said. “When you look at the financial needs to launch new value chains from the Middle East, from Namibia, or Chile to supply Europe - we’ll need more than that.”

Updated: November 27, 2023, 10:20 AM