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03 January 2022
roadmap
austria

Austria on its way to number one hydrogen nation?

In 2020, the newly constituted government grandiosely announced that Austria will become the "number one hydrogen nation". But is this even remotely realistic just two years later?

The status quo

Hydrogen is used in a wide variety of ways, for example in the chemical or food industries. Today, it is produced mostly through steam reforming, partial oxidation or similar processes. These processes create huge greenhouse gas (GHG) emissions. An alternative (almost) GHG-emission free way to produce hydrogen is to split water through electrolysis. So far, this process has not been deployed on an industrial scale due to its relatively higher cost (about four times more than via steam reforming) and technical limitations.

Nevertheless, due to the urgency of the fight against climate change, this should change significantly in the near future, according to the plans of the EU and other international players. As cost and technical limitations diminish, electrolysis should also be used to ramp up the production of hydrogen for the steel, cement and fuel industries or in the transport sector. Ultimately, since hydrogen can both be produced from electricity (and water) and be used to produce electricity (in fuel cells), it should also be used as (emission-free) electricity storage.

In short, there are vast opportunities linked to the emission-free production and use of hydrogen. Policymakers are therefore striving to facilitate its production, transport and use. In order to do so, massive subsidies will be required for the scale-up of "clean" hydrogen production and transport as well as modifications of industrial processes. Since hydrogen allows for an even closer interconnection between the gas and the electricity sectors, market regulations also require immediate attention. Finally, the permitting regimes for the production, storage and processing of hydrogen were obviously not designed for a hydrogen-based economy and likewise require several adaptations in order to facilitate the ambitious plans.

 

"The permitting regimes for the production, storage and processing of hydrogen were obviously not designed for a hydrogen-based economy and require several adaptations in order to facilitate the ambitious plans."

 

Recent steps towards a hydrogen economy

In 2021, Austria took the first steps towards promoting hydrogen-related projects in the Renewable Energy Package (Erneuerbaren-Ausbau-Paket), under which the following have been put in place:

  • subsidies of up to 45 % of the planning and construction costs for certain facilities to produce hydrogen through electrolysis or synthetic gas (annual funds: EUR 40m);
  • exemptions from certain network and other charges as well as certain taxes;
  • clarification that hydrogen will fall under the Austrian Gas Act and may therefore be injected into the gas grid;
  • a regulatory basis for the introduction of a "green gas quota" linked to a "green gas" certificate trading scheme.

Further legal acts – as well as the national hydrogen strategy paper – were already announced in 2019 but did not undergo a broader public participation procedure until late 2021.

Necessary steps going forward

The Renewable Energy Package 2021 undoubtedly was a first step towards achieving the ambitious goals set both by the EU and the Austrian Government. However, the currently low number of pilot projects in the (renewable) hydrogen sector and our experience in advising on hydrogen-related projects show that the road to becoming even a "top 10" hydrogen nation is still long. The most pressing obstacles are:

  • the lack of clear market regulations, especially resolving questions regarding overlaps between the gas and the electricity sectors;
  • the need for even further subsidies to ensure the competitiveness of GHG-free hydrogen and related use cases;
  • the need to adapt planning and permitting regimes, such as the Seveso, IPPC and IEA regimes;
  • the need for a clear political commitment to how hydrogen will be used ( absence of a national hydrogen strategy).

While some of the obstacles can be tackled (at least to some extent) on a national level, others such as market regulations and certain questions regarding the planning and permitting regimes must be resolved on an EU level. We are positive and will continue to do our part to ensure that 2022 will take the National and European endeavours towards a hydrogen economy even further.

author: Christoph Cudlik

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Christoph
Cudlik

Attorney at Law

austria vienna