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Watch: Barron’s Senior Energy Writer Laura Sanicola and OPIS Senior Editor of US Solar Colt Shaw discuss what’s ahead for energy this week.

Transcript:

LAURA SANICOLA: Hi, everyone. I’m Laura Santacola, author of Barron’s Energy Insider. And this week, I’m here with my colleague, Colt Shaw, senior editor of US Solar at OPIS. Colt, I figured this would be a good week to talk about new solar tariffs since the Biden administration is slapping another fifty percent tariff on imported Chinese solar wafers. And this is on top of fifty percent tariffs for solar cells and modules. Can you tell us what’s the administration trying to do here?

COLT SHAW: Sure. Well, in their own words, the US Trade Representatives’ tariff hikes are aimed at making domestic producers more competitive and maintaining leverage over China to make the country, quote, eliminate its harmful acts, policies, and practices.

Those have been the aims of every new tariff, aimed at Chinese solar industries, going back to president Obama. From the perspective of American panel purchasers, though, I would say they’ve mainly just succeeded in raising prices.

Twenty-eight cents for imports to the US compared to eight cents for customers in other countries.

But the tariffs have undoubtedly also changed the shape of the global supply chain, if not the ownership.

I think if you can look at the tariff hikes as both a kind of parting shot at China’s continued solar supply chain domination, as well as kind of a last-ditch effort at spurring US production of polysilicon and solar wafers, on his way out the door.

Those two components have not responded to the Inflation Reduction Act’s manufacturing tax credits the way cells and modules have. And so they’ve kind of increasingly taken a kind of tariff heavy approach.

Just for context polysilicon is formed into ingots, which are it’s a semiconductor which is then formed into ingots, which are sliced into wafers Wafers are then treated chemically to make cells, which are assembled into modules, which the kind of colloquial name for them is solar panels.

President Biden doubled section three zero one tariffs, that were first established under Trump on Chinese cells and modules to fifty percent this year. But the previous twenty five percent duty on cells established under Trump was enough to force companies, in recent years to move factories to Southeast Asia in order to keep selling into the US, and the US no longer buys modules from China directly in any significant way.

And while the Uyghur forced labor protection act, has resulted in major polysilicon producers moving their plants outside of Xinjiang province, the vast majority of polysilicon and wafers still come from the country, including those in solar modules shipped to the US from Southeast Asia.

And so, yeah, the the US last year hit many of these firms with new tariffs after determining they were circumventing existing tariffs, by finishing their products outside of China.

And in recent weeks, the Department of Commerce announced new ADCBD tariffs on imports from companies in those countries. And already those companies have begun moving factories to Laos, Indonesia, and elsewhere, and the game of tariff whack a mole continues.

SANICOLA: I like the way you put that. Have these tariffs resulted in actual increase in solar manufacturing here in the US? And if so, which companies are involved in benefiting from these new tariffs?

SHAW: Sure. I mean, there has been an explosion of new module assembly plants in the US in recent years, and a significant amount of new cell plants announced. But these are mainly, I would say, thanks to manufacturing tax credits and the Inflation Reduction Act.

Tariffs have, however, closed the gap between the price of imports and domestic products.

American modules assembled with foreign cells are, as of recently, often quoted at only a few cents more than imports.

But American modules with American cells are more costly between forty and fifty cents, but they’re necessary to claim the ITC domestic content bonus. So significant cell production has been announced and will come online in the next year or two.

But polysilicon and wafers are a whole different story. They’re much costlier, more complex undertakings, than module and cell factories. And there’s really only been a few announcements of new plants following the IRA, in 2022. And already this year, a few of those handful of new wafer plan announcements have been walked back.

So that means module assemblers will still be relying on imported cells, for the near future, and new cell plants will be relying on imported wafers when they do come online.

So whether a fifty percent tariff is enough to change that, I’m not sure. But oversupply crashed prices this year, and OPIS currently assesses the cost of polysilicon produced outside of China as four times more expensive than polysilicon produced in China.

But if it does spark new investment, it’s also not clear that there’s enough supply of either outside of China for American manufacturers to source from while they’re waiting for new American capacity to come online.

I would say not everyone’s exposed. First Solar’s thin film module tech doesn’t require polysilicon, so their entire supply chain avoids China, which has allowed the company to expand manufacturing in the US pretty quickly, and demand a slight premium for its product. Companies like Helene, who inked a deal for output from Norsuns, planned Ingot and Wafer Factory in Oklahoma are well positioned going forward, as is Q Cells, which has locked up American polysilicon and is close to unveiling a fully American supply chain probably, within the month here.

SANICOLA: And, remind me, Cole, that you said this is one of the Biden administration’s parting, parting shots before the Trump administration takes effect in January. Is Trump likely to keep these tariffs, extend them? Is there any way we can tell, based on his rhetoric or past tariffs?

SHAW: Yeah. I’d say, you know, going off of both, I’d say it’s pretty likely he’s going to keep these tariffs. It’s tariffs, especially over solar and and energy as well as kinda clean tech, which semiconductors like polysilicon fall under. They’ve been in kind of rare agreement on that, especially as Trump has given every indication he continues to stoke trade wars on every front and has called for across the board, tariff hikes. I’d also say Trump has not been as negative on solar as he has been on wind, and a lot of the new solar manufacturers that benefit from these tariff hikes are in red states. So I think it’s likely he’s gonna keep the pressure up, especially given that China is the other party here.

SANICOLA: Alright. Thanks so much, Cole, and I’ll see everybody next week.

The European photovoltaic (PV) market is in full swing, having reached record highs of nearly 60 gigawatt (GW) installed capacity by the end of 2023, a massive 40% increase from 2022. Germany returned to the top spot of installed capacity, reaching 14 GW by the end of 2023. Spain, with 8.2 GW, comes second, while France remains in sixth place, even though it recorded a 25% growth.

However, this exponential growth comes at a price. Global panel production overcapacity, mainly in China, has resulted in Europe importing these less expensive modules at prices that have dropped to record lows, even falling below production costs.

While this might be good news for new solar projects using imported materials, these unbalanced conditions also make it extremely difficult for the European local panel manufacturers to build a strong business case, leaving the European PV landscape in deep distress.

And so, the desire to establish solar PV manufacturing in Europe is back on the agenda again. In an interview with OPIS at the European Industrial PV Day 2024, Vincent Delporte, head of public affairs at Holosolis, explained the company’s ambition is to create a new PV manufacturing facility in Hambach, France, which aims to produce modules and cells on an industrial scale never seen before in Europe. When fully operational in 2029, this new €850 million ($917 million) initiative is expected to produce 10 million solar panels and 550 million solar cells annually, enough to make around one European million households energy self-sufficient every year.

OPIS: Holosolis announced its intention to build a 5 gigawatt solar cell-and-panel factory in northeastern France by the end of next year. What is the status today, are you on schedule?

Holosolis: Everything is on track. The process for securing permits for our factory should be ready by the end of 2024 and construction work is planned for mid-2025. It will take us one year to build the factory and three years to ramp up the production lines to 10 million modules/year at full capacity by 2029.

The discussions with local politicians are very positive and everyone wants this project to start. The French government wants to bring solar manufacturing back to France; they are heavily engaged and involved.

OPIS: You mentioned that Holosolis will focus on Tunnel Oxide Passivated Contact (TOPCon) technology. On the other hand, the market of Heterojunction (HJT) technology is expected to grow by 500% between 2022-2025. Is HJT not a more future-proof technology with a higher efficiency rate and better design options?

Holosolis: We had a lot of discussion about which technology to use, but we saw that in recent years, the market fully moved to TOPCon. Although you noted the high percentile growth for HJT technology, yet the starting volume is still very low. We see TOPCon as better because it is more mature, cheaper to industrialize, uses no rare earths and needs 40% less silver, so TOPCon is less expensive.

Going forward, we probably will move to the Tandem solar cell technology in combination with TOPCon, as it greatly increases overall efficiency. We have TOPCon experts in our team and a strong partnership with the Fraunhofer and IPVF institutes who are world leaders in Tandem technology.

OPIS: Which markets are you focusing on?

Holosolis: We target residential, commercial and industrial sectors, valuing ESG criteria. Holosolis has already signed Letters of Intent for multiple gigawatts’ worth of installations with many European developers and distributors, covering large scale utilities to residential projects. We are not dependent on one large market segment or particular market player, and the diversified nature of the photovoltaic customer base is one of the strengths of the solar market.

OPIS: Another French company, Carbon Photowatt, has also announced its intention to build a 5 GW PV factory in France in the coming year. Is France big enough for two 5 GW factories?

Holosolis: Probably not in the long term if you only consider France, but HoloSolis’s objective is to also serve the broader European market. Our factory is perfectly located in northeastern France to be able to serve 85% of our target markets within one day’s truck drive. For instance, we are looking into Italy, Germany, the Netherlands and Austria. Having two gigafactories in France reflects the motivation of the French government to revitalize the development of PV in Europe.

OPIS: Let’s talk about economics. PV modules assembled in Europe today retail at around 250% of the cost of those manufactured in Asia and so are not competitive on price. Following the implementation of subsidies and investment in PV development in Europe, market analysts suggest that PV manufacturers in the region might be able to narrow this significant price difference to just 15%. Do you believe shrinking this considerable price gap is realistic – and how much time and support would it take to achieve?

Holosolis: This [15% difference] seems very low, but it depends on the point of comparison. If Chinese prices in time increase to €0.150/wp (which is on average their production cost), then we could reach the 15%.

It also depends on what kind of European-made product you want and what the definition will look like; if you use Chinese wafers and import them to produce cells and assemble the panels, this will lower the price. But if the whole value chain is EU-made, this will make the end-product more expensive. I expect panel prices in the €0.20/wp-€0.30/wp-range for entirely EU-made manufacturing products. The math works because a solar project developer will benefit from higher feed in tariff revenues or tax credits if they use solar panels made in the EU.

(Note: OPIS currently assesses between €0.085/wp and €0.120/wp for imported Asian panels)

OPIS: The European legislator created a new regulatory framework, the Net-Zero Industry Act (NZIA) to boost development and competitiveness of clean energy sectors, including solar PV. The Act is expected to be approved and published in January 2025, after which Member States have 18 months to implement it. Is the NZIA too little too late?

Holosolis: No, I think the timing is perfect for us: the NZIA package will be in place across all EU member states when we start production. And the good news is that some countries such as France, Italy and Austria are ahead of schedule and have already proposed regulations that implement those of the NZIA. Companies who are active today in the PV market might find the wait challenging indeed. A lot of investors still remember the many bankruptcies of the past, but they also see that new regulations are irreversibly changing the landscape.

Hydrogen is making significant strides in the transportation sector, particularly in long-haul trucking, aviation, and maritime industries, where electrification alone faces hurdles. With its capacity for rapid refueling and longer ranges, hydrogen-powered transportation offers distinct advantages over battery-based solutions. Read on for an exploration of hydrogen’s potential in transforming mobility, examining its role in heavy-duty transport, aviation, and shipping, and the infrastructure challenges that must be overcome.

Why Hydrogen Might Be Better for Large Vehicles and Long Distances

Battery-electric vehicles (BEVs) have garnered much attention for their potential to reduce emissions, but when it comes to heavy-duty vehicles and long-distance transportation, they face significant limitations. These include long charging times, limited range, and the weight of batteries needed to power larger vehicles. Hydrogen fuel cell electric vehicles (FCEVs), on the other hand, offer a promising alternative due to their quick refueling times and higher energy density.

For heavy-duty vehicles like trucks, buses, and long-distance passenger vehicles, hydrogen enables longer driving ranges and shorter downtime for refueling compared to BEVs. Hydrogen’s energy-to-weight ratio also makes it ideal for applications where payload capacity is critical, such as freight transport.

In long-haul trucking, for example, hydrogen FCEVs provide a viable solution for decarbonizing one of the most challenging sectors of transportation. With major automakers and energy companies investing heavily in hydrogen technologies, FCEVs are poised to become the go-to option for long-distance logistics.

The Future of Hydrogen-Powered Aviation and Maritime Sectors

The aviation and maritime sectors are also looking to hydrogen (and its derivatives) as a sustainable fuel source. In aviation, hydrogen’s high energy density offers potential for powering short- to medium-haul flights with zero carbon emissions. Several companies are currently developing hydrogen-powered aircraft, and while commercial deployment is still years away, the promise of hydrogen in aviation is undeniable. Sustainable aviation fuels (SAFs) are a subset of drop-in ready fuels that can be used today in existing aircrafts with conventional fossil jet fuel, and are being explored as decarbonization solutions.

SAFs may be produced through a number of technologies, such as from fats and oils (HEFA), from ethanol (alcohol-to-jet), from waste/garbage (biomass gasification), and from hydrogen and CO2 (electro fuels or “e-fuels”). These pathways typically rely on the availability of hydrogen for their production. The SAF sector has seen rapid development in recent times; in January 2024, LanzaJet opened the world’s first ethanol to SAF facility in Georgia, USA, which would produce 10 million gallons of SAF per year. Elsewhere, other SAF unicorns, Infinium and Twelve, which both utilize the e-fuel technology, have recently received over 700 million dollars combined, for eSAF production. Twelve’s plant, located in Moses Lake, Washington, will make about 50,000 gallons annually when it starts operating in 2025.

Similarly, the maritime sector is exploring hydrogen and hydrogen-derived fuels like ammonia and methanol for shipping. As the global shipping industry grapples with the need to reduce its carbon footprint, hydrogen presents a cleaner alternative to traditional marine fuels. With nearly 400 vessels already capable of running on methanol, hydrogen-powered ships could soon become a regular sight on international waters.

Overcoming Obstacles in Infrastructure and Fuel Supply

While hydrogen holds great promise for decarbonizing transport, significant challenges remain in building the necessary infrastructure. Hydrogen production, storage, and distribution require substantial investments. Moreover, hydrogen’s low energy density and volatility pose storage challenges that need advanced solutions.

For hydrogen-powered transportation to become mainstream, governments and private sectors must work together to expand refueling infrastructure. Hydrogen refueling stations are still sparse compared to traditional fuel and electric charging stations. Investments in hydrogen production facilities, such as electrolyzers, are also necessary to scale up supply.

Conclusion

Hydrogen’s potential in the transportation sector is vast, offering a clean, efficient alternative for long-haul trucking, aviation, and shipping. While the path forward requires overcoming infrastructure and supply challenges, the future of hydrogen-powered mobility is bright, with major advances on the horizon in fuel cell technology and hydrogen-powered vehicles. Hydrogen could indeed power the next generation of sustainable transportation.

In the 1970s, President Richard Nixon faced an extensive energy crisis as fuel demand largely outpaced supply. This was the greatest energy challenge at the time, one in which the president tried to strike a balance between environmental and energy needs as well as national security goals (i.e., decreasing U.S. dependence on foreign oil). Nixon initiated several actions to not only improve environmental quality but also to spur research and development in alternative energy sources, specifically for power generation (i.e., wind turbines and solar). This sent a signal to private industry, encouraging capital investments that would expand domestic supplies of clean energy while letting consumers know that the cost of environmental protection would be reflected in retail prices.¹ The energy crisis of the 1970s was, in effect, the beginning of the United States’ transition away from fossil fuel-based energy toward renewable sources of energy.

The oil shortage also drove interest in biofuels, but federal policies would not come to fruition until the early 2000s. In 2007, President George W. Bush expressed concern about U.S. dependence on foreign oil and called on the nation to reduce gasoline usage by 20% by 2017.² The U.S. was again asked to participate in an energy transition, trying to strike a balance  between environmental and energy needs.

One way Bush proposed to maintain this balance was by enacting the Renewable Fuel Standard (RFS), a program that required large volumes of renewable fuels (i.e., ethanol and cellulosic biofuels) to be blended into the nation’s transportation fuels. This policy paved the way for the healthy biofuels market we see today and reduced greenhouse gas (GHG) emissions in the transportation sector.

And here we are again, in the midst of another energy transition, now moving towards low-carbon and zero-emission fuels – and with a second Donald J. Trump administration on the horizon, there is more speculation than ever surrounding the state of renewable fuels. Yet biofuels have garnered strong bipartisan support, with pledges from Republicans who consistently win big in farm-strong states that produce biofuels feedstocks like corn and soybeans, and Democrats who have pushed for lower carbon emissions coast to coast. The private sector is stepping up to signal the economic and environmental importance of renewable fuels. For instance, Veterans for Renewable Fuels (VRF) sent a letter to Vice President-elect JD Vance pointing out that one out of six ethanol industry workers is a veteran and underscoring its stance that “homegrown, low-cost, environmentally friendly” renewable fuels belong in America’s energy future.³

The popular RFS program will most likely be untouched under a second Trump administration,  continuing to help the U.S. reduce tailpipe emissions and increasing the biofuels industry’s share of the liquid fuels market. Under the RFS, regulated entities must meet a certain Renewable Volume Obligation (RVO) that is based on a percentage of their gasoline and diesel production and imports. These entities must either blend conventional biofuels (i.e., fuels made from corn and grain sorghum) and/or advanced biofuels (i.e., cellulosic feedstocks) or purchase Renewable Identification Numbers (RINs) from obligated parties that exceed their RVO requirements. The current RVO targets are set to expire in 2025, so the new administration will be responsible for setting targets for 2026 and beyond.

The incoming administration’s failure to address climate change at the federal level could be a catalyst for states to implement their own policies, such as clean fuels standards that reduce GHG emissions by decreasing the carbon intensity (CI) of transportation fuels. CI is calculated by measuring carbon emissions over a fuel’s complete life cycle. Fuels with CI scores below a mandated benchmark generate credits, which can be purchased by entities whose fuels have a high CI score.

The longest-running state program is California’s Low Carbon Fuel Standard (LCFS), which has displaced 320 million metric tons of carbon dioxide (CO2) since it was implemented in 2011.⁴ That is the equivalent of GHG emissions from 76,160,582 gasoline-powered cars driven for one year in the state.⁵ Recently, the California Air Resources Board (CARB), the agency governing the LCFS program, approved updates that aim to reduce the CI of California’s transportation fuels by 30% by 2030 and by 90% by 2045. Key amendments also include:

• Accelerating the CI targets for 2025 to 2030 by almost 9% annually. The new average CI target for 2030 is 69.40 gCO2e/MJ compared to the prior average CI of 79.55 gCO2e/MJ. 
• A 20% threshold on using biodiesel made from soybean oil, canola oil and sunflower oil to generate credits.
• Phasing out credits for methane captured at dairy farms over a 30-year period and eliminating credits for biofuels derived from palm oils. 
• Retiring credits at a rate of four times the difference in the producer’s CI score and the producer’s verified operational CI score, effective in the 2025 compliance year. 
• Credits for infrastructure to fuel zero-emission light-, medium- and heavy-duty vehicles. 

Oregon and Washington state have followed in California’s footsteps and implemented their own clean fuels standards, in 2016 and 2023, respectively. As these states use California’s program as a guide (or for lessons learned), they have proposed updates to their programs that are as follows:

• The Department of Environmental Quality’s (DEQ), the governing body of Oregon’s Clean Fuels Program (CFP), proposed amendments are mainly administrative but specifically focus on updating the Oregon Greenhouse Gases, Regulated Emissions, and Energy Use in Technologies (OR-GREET) model, calculations of GHG emissions, addressing issues associated with fuel pathway applications and approval requirements, and adjusting requirements for credits awarded to carbon capture and storage (CCS) projects, such that a reserve account will be created for any CCS projects that leak CO2 in the future. DEQ hosted a public hearing on November 19th to review public comments, and based on the input, could revise the proposal before sending the larger package to the DEQ’s Board for final approval in early January. The proposed amendments would most likely go into effect in 2026. 

• The Department of Ecology (Ecology), which governs Washington state’s program, has released proposed updates to the Clean Fuel Standard that would mandate third-party verification and allow for shared charging and refueling stations to qualify for credits. The next phase in Ecology’s rulemaking will most likely take place in Spring 2025.

New Mexico is also creating a clean fuels program that will likely draw on language from California, Oregon and Washington’s programs. New Mexico’s Clean Transportation Fuel Standard is scheduled to launch by July 1, 2026. There are rumors that Minnesota will introduce a bill to establish a clean fuels standard when its legislature convenes in January.

Irrespective of significant changes to the federal RFS program, the states are sending clear, long-term signals to the biofuels industry to make investments in production and technologies. As Nixon stated in 1971, 

“I am confident that the various elements of our society will be able to work together to meet our clean energy needs. And I am confident that we can therefore continue to know the blessing of both a high-energy civilization and a beautiful and healthy environment.”⁶ 

Join me next time as we explore ethanol-15 (E15), sustainable aviation fuel (SAF) and carbon capture and storage, among other technological advancements in the biofuels industry.

¹ https://www.presidency.ucsb.edu/documents/special-message-the-congress-energy-resources
² https://georgewbush-whitehouse.archives.gov/stateoftheunion/2007/initiatives/energy.html
³ https://d35t1syewk4d42.cloudfront.net/file/2896/VRF%20Letter%20to%20VPE%20Vance.pdf
⁴ https://ww2.arb.ca.gov/our-work/programs/low-carbon-fuel-standard/about
⁵ The EPA’s Greenhouse Gas Equivalencies Calculator is available at https://www.epa.gov/energy/greenhouse-gas-equivalencies-calculator#results
⁶ https://www.presidency.ucsb.edu/documents/special-message-the-congress-energy-resources

As it stands today, the landscape of carbon and clean fuels policy is less about isolated regulations and more about a network of initiatives that are reshaping the future of energy, industry, and investment. From the long-standing markets such as the innovative U.S. and Canada subnational Western Climate Initiative Cap-and-Trade market and Europe’s Emissions Trading System, to newer programs coming out of New York and Washington State, carbon allowance policies are in fact setting the stage for global action. This growing patchwork of government policies is driving the private sector toward decarbonization, with initiatives at national, state, and provincial levels which are advancing clean fuels alongside carbon allowance programs.

These programs underscore the key trend that carbon policy is no longer confined to isolated efforts, but is moving towards a connected global market. The growing discussions of “carbon clubs” (which are alliances among regions with rigorous carbon pricing, such as the EU, Canada, and possibly the WCI), hint at a future where policies converge and offer consistent carbon costs across borders. These connections would not only stabilize prices, but also drive investment in emissions reduction technologies, eventually creating a level playing field for businesses worldwide. For industries spanning fossil fuels, renewables, and transportation, these policies are highly transformative. For example, oil and gas companies are no longer focused solely on extraction. They are also investing in renewable energy and carbon capture to meet compliance demands while also staying competitive. Renewable energy companies are capitalizing on carbon credits while developing projects to sell surplus renewable energy back into the market. The transportation sector also faces new imperatives as electrification and alternative fuels gain traction to meet LCFS and cap-and-trade standards, with public transit systems transitioning to electric fleets and airlines exploring sustainable aviation fuel.

In the broader view, today’s carbon policies have created a landscape where compliance can be a true springboard for innovation. Businesses that embrace this shift are positioning themselves to meet regulations while leading the new low-carbon economy. As potential linkages and transnational partnerships grow, the framework of global carbon policy will continue to evolve and define a new era of sustainable economic strategy.

The following are some of the major programs driving this shift:

• The Western Climate Initiative (WCI) links jurisdictional Cap-and-Trade systems, bringing California and Quebec under a unified framework. By connecting two regions with distinct economic landscapes, WCI has created a linked carbon market where emissions credits flow freely across borders in a stable manner. This approach provides flexibility for industries as companies can buy and sell credits based on need. WCI covers approximately 80% of greenhouse gas emissions in its participating jurisdictions, encompassing sectors such as electricity generation, industrial processes, and fuel distribution. Since its establishment in 2013, California’s Cap-and-Trade Program has funded $28 billion in climate initiatives including public transit, clean energy, and environmental justice programs. Quebec’s Cap-and-Trade System has generated over $9.2 billion in revenue since 2013, which has been utilized to fund Canadian climate initiatives as well. Washington State’s Cap-and-Invest Program will operate as scheduled after voters on November 05 rejected Initiative 2117, which would have repealed parts of Washington’s Climate Commitment Act (CCA), including the Cap-and-Invest Program. This vote could catalyze similar action across the Nation, and Washington State’s potential entry into WCI would further strengthen the network and continue to stabilize the market. On the East Coast, New York’s Cap-and-Invest Program is still under development with a unique design and regulatory framework. While not immediately eligible for linkage, the program is being crafted with the potential for future alignment with WCI.
• California’s Low Carbon Fuel Standard (LCFS) is aimed at reducing the carbon intensity of transportation fuels and has inspired a new wave of policy action. This program has spurred a competitive market for alternative fuels and has also become a model that states like Oregon and Washington are adopting with their own Clean Fuels Programs. For fuel suppliers, LCFS is a major driver of innovation, from renewable diesel to hydrogen and electric vehicle infrastructure. In California, EVs earn credits under LCFS by lowering transportation emissions which allows automakers to generate and trade credits, therefore supporting EV adoption and aligning with state climate targets. These initiatives have established California and its partner states as pioneers in clean fuel standards, with potential linkages to Canadian provinces on the horizon as interest grows in expanding LCFS across borders.
• Federally, the Renewable Fuel Standard (RFS) is crucial in the country’s transportation sector by mandating the inclusion of renewable fuels in the national fuel supply, and in turn supporting biofuel producers and driving demand for alternatives like ethanol and biodiesel. The policy benefits the agricultural sector by creating a reliable market for crops such as corn and soybeans, which are primary sources for these biofuels. The RFS also encourages innovation in advanced biofuels, helping reduce emissions while providing compliance flexibility for fuel refiners.
• As one of the world’s largest oil producers, Canada has set a precedent for a national carbon tax that is reshaping its transportation, industry, buildings, and electricity sectors. Canada’s carbon tax covers about 70% of emissions and sends a powerful signal to reduce emissions while reinvesting tax revenues into renewable energy and community programs. This tax has led oil sands companies to prioritize emissions reduction strategies like carbon capture and storage, which is a move that meets compliance requirements and enhances their standing with environmentally conscious investors. In addition to the federal carbon tax, provinces like Alberta have introduced their own initiatives such as the Technology Innovation and Emissions Reduction (TIER) program which mandates levies on large industrial emitters such as oil and gas, electricity, and mining, in order to incentivize technological innovation and reduce emissions. Revenue generated from the TIER fund is then reinvested into climate-friendly projects such as carbon capture initiatives and technologies. Collectively, Canada’s carbon tax, the WCI, and TIER program exemplify the North American trend toward adopting regional and national carbon policies.
• Regional Greenhouse Gas Initiative (RGGI) has established a strong presence on the East Coast by focusing on the power sector and covering approximately 20% of the region’s total greenhouse gas emissions. RGGI has shown how a regional Cap-and-Trade system can operate at a sector-specific level, and requires utilities to purchase allowances to cover their emissions. This model allows for an incremental approach to emissions reductions while encouraging the power industry to transition towards low-carbon sources. Since its launch, the program has reduced power sector emissions by more than 50% in the region. Revenue from RGGI auctions are then invested into initiatives focused on energy efficiency, renewable energy, and financial assistance for energy customers. States within RGGI are now considering expansions that would bring other sectors under the program thereby creating a more comprehensive emissions reduction strategy. As New York advances its Cap-and-Invest proposal, which could eventually link with other regional initiatives, it stands as an example of how states are customizing carbon policies to fit their needs.
• Europe’s Emissions Trading System (ETS) exemplifies a mature Cap-and-Trade market with high carbon prices and intensive targets. As of 2024, the ETS covers around 45% of the European Union’s greenhouse gas emissions, encompassing sectors such as power generation, industrial manufacturing, and aviation. Since 2013, the EU ETS generated over EUR 200 billion in auction revenues. ETS member states are required to utilize 50% of their auction revenues for initiatives such as renewable energy sources, energy efficiency improvements, and low-emission transport. The rise in ETS prices has made Europe a leader in renewable energy investment and drives companies to innovate new technologies in wind, solar, and battery storage. The EU has even explored partnerships with programs like the WCI. If this is achieved, a transatlantic carbon market could set a new standard for global emissions trading. Since the UK’s departure from the EU, it has operated its own UK Emissions Trading Scheme (UK ETS) focusing on power, industry, and aviation and covering about 25% of the UK’s total greenhouse gas emissions. The program mirrors the EU’s model yet adapts to UK targets, encouraging companies to align with their national net-zero goals.

In a future blog post, I will further discuss global carbon markets including developments in the Asia-Pacific (APAC), Latin America (LATAM), and Middle East and North Africa (MENA) regions.

Hydrogen has emerged as a powerful solution to some of the most significant challenges facing the modern power grid. As renewable energy sources like wind and solar become increasingly central to electricity generation, their intermittency—due to fluctuations in weather—has created a growing need for reliable energy storage and grid stability solutions. Hydrogen is stepping in as a “battery” of sorts, storing excess energy and feeding it back into the grid when needed. Below, we’ll explore hydrogen’s role in energy storage, its potential to decarbonize electric grids, and the challenges it must overcome to realize its full potential.

Hydrogen’s Role as a “Battery” for Storing Excess Renewable Energy

One of the most exciting applications of hydrogen in the power sector is its ability to act as a form of long-duration energy storage. As more renewable energy sources like wind and solar are integrated into power grids, managing the inconsistency of their output is a challenge. Solar power, for example, can only generate electricity during daylight hours, and wind turbines produce energy only when the wind is blowing. These variations in supply make it difficult for renewable energy sources to provide consistent baseload power.

This is where hydrogen comes into play. During periods of excess renewable energy production—when solar panels or wind turbines generate more power than is immediately needed—this surplus electricity can be used to produce hydrogen through a process called electrolysis. Hydrogen produced in this way can then be stored and later converted back into electricity when renewable energy production is low. This ability to store excess renewable energy for future use positions hydrogen as a vital solution to the intermittency problem, acting as a buffer that can provide power during demand spikes or when renewable sources are offline.

Solving Power Reliability Issues and Decarbonizing the Grid

Hydrogen not only helps store energy but can also be used directly to power electricity generation, thereby offering a pathway to decarbonize the grid. Currently, fossil fuels like coal and natural gas are often used to provide reliable baseload power, but these contribute significantly to global carbon emissions. Hydrogen, when produced using renewable energy, can generate electricity in a clean, zero-emissions manner. Whether through fuel cells or combustion turbines adapted to use hydrogen, it provides a means to generate electricity without the carbon footprint associated with fossil fuels.

By integrating hydrogen with renewable energy, power grids can move away from their reliance on coal and natural gas without sacrificing reliability. Countries around the world are already testing the integration of hydrogen into power systems, and its adoption will likely expand as technology and infrastructure develop.

Challenges: Energy Prices, Hydrogen Storage, and Transportation

While hydrogen offers significant benefits for power reliability and decarbonization, several challenges must be addressed before its widespread adoption in the energy sector becomes a reality.

• Energy Prices: Producing hydrogen, especially green hydrogen (derived from renewable energy), can be expensive. The cost of electricity, which is the main input in the electrolysis process, directly impacts the cost of hydrogen. However, mechanisms like Power Purchase Agreements (PPAs) are helping to stabilize electricity prices for hydrogen producers, mitigating price volatility.
• Storage: Hydrogen is difficult to store. Its low energy density means it requires large storage facilities or advanced compression and liquefaction technologies to store in smaller spaces. Moreover, its ability to leak easily because of its small molecular size adds complexity to storage solutions.
• Transportation: Transporting hydrogen is also challenging, as it requires specialized pipelines and infrastructure that can handle its highly flammable and volatile nature. Currently, hydrogen can be blended with natural gas in existing pipelines, but this is not a long-term solution as higher concentrations of hydrogen require purpose-built infrastructure.

Hydrogen’s Synergy with Renewable Energy

Hydrogen’s ability to work in tandem with renewable energy sources is key to its potential in the energy sector. By converting surplus renewable energy into hydrogen, energy that would otherwise go to waste can be captured and stored. This stored hydrogen can then be dispatched when renewable energy production is low, effectively smoothing out the variability of wind and solar power. This synergy ensures that renewable energy plants can operate at maximum capacity without worrying about oversupply, which can destabilize the grid.

Moreover, by co-locating hydrogen production facilities with renewable energy projects, transmission losses can be minimized, and infrastructure costs can be reduced. This approach helps create a more integrated, resilient, and sustainable energy ecosystem.

Can Hydrogen Replace Fossil Fuels in Electric Grids?

The question of whether hydrogen can fully replace fossil fuels in electric grids is one that requires a nuanced answer based on potential futures of a net zero energy system. While hydrogen can be used to generate zero-emissions electricity, as an energy carrier, it needs to be produced from a primary energy source – often renewable electricity (and in some cases from natural gas with carbon capture). Regardless of the exact future energy mix, hydrogen is poised to be a key player in net zero scenarios.. However, the scalability of hydrogen infrastructure and the reduction of production costs would be critical to determining how quickly and extensively hydrogen would be.

While the complete replacement of fossil fuels in electric grids may take decades, hydrogen is already proving its worth in pilot projects around the world. Countries like Germany, Japan, and the United States are investing heavily in hydrogen as part of their broader efforts to decarbonize the power sector.

Real-World Applications and Future Potential

Several real-world applications highlight the potential of hydrogen in the power sector:

• Power-to-Gas Projects: In Europe, projects like the German “Energiepark Mainz” use renewable electricity to produce hydrogen, which is then injected into the natural gas grid or stored for later use in power generation.
• Hydrogen in Backup Power: Data centers and other critical infrastructure are experimenting with hydrogen fuel cells as a backup power source, replacing diesel generators with clean hydrogen solutions.
• Hydrogen-Fired Power Plants: Companies are developing hydrogen combustion turbines that can burn hydrogen as a fuel to generate electricity, providing a scalable, low-emission solution for large-scale power generation. An example of this is the Battle River Carbon Hub, a legacy coal-fired facility, which is under development for 100% hydrogen-fired electricity generation.

Conclusion

Hydrogen has a transformative role to play in the energy and power sector, offering a solution to one of the biggest challenges in renewable energy: intermittency. By acting as a “battery” that stores excess renewable energy, hydrogen helps stabilize the grid while decarbonizing electricity generation. Though challenges related to cost, storage, and transportation remain, ongoing advancements and real-world applications are steadily bringing hydrogen closer to realizing its full potential in replacing fossil fuels in electric grids.

As investments in hydrogen infrastructure grow and costs come down, the future of a clean, reliable energy grid powered by hydrogen seems not just possible but increasingly likely.

Hydrogen has long been regarded as a promising energy solution, but it’s only in recent years that it has truly begun to gain momentum as a key player in the global energy transition. With industries and governments striving to reduce carbon emissions and mitigate climate change, hydrogen offers a versatile, clean alternative to fossil fuels. However, like any emerging technology, it faces skepticism, misconceptions, and challenges. In this blog post, we’ll explore hydrogen’s growing importance and versatility across industries and address common myths surrounding its adoption.

What is Hydrogen and Why is it Gaining Importance?

Hydrogen is not a material that we extract from the earth and consume, like coal or oil. Its usage in the energy industry is primarily going to be as an energy carrier. It will be produced from other energy sources, and then consumed later. In this way it offers great versatility to both store and deliver usable energy. When produced from clean, renewable energy sources (such as from renewable electricity – often referred to as “green hydrogen”), hydrogen offers a clean energy alternative, as its production and use generate little to no carbon emissions​.

As the world moves towards decarbonization, hydrogen is emerging as a crucial solution for industries that are challenging to electrify, such as transportation, including shipping and aviation, and industrial processes like steelmaking and chemical production. Its ability to decarbonize sectors traditionally reliant on fossil fuels makes it indispensable in the push for a net-zero future.

The Role of Hydrogen in Decarbonizing Hard-to-Abate Sectors

Hydrogen stands out because of its versatility and potential to address sectors that have been historically difficult to decarbonize, also known as “hard-to-abate” sectors. These include industries like:

1. Electric Power Generation: Hydrogen can act as an energy storage solution, balancing intermittent renewable sources like wind and solar. When renewable energy production exceeds demand, hydrogen can be produced and stored for later use, helping to enhance the reliability of electric grids​.
2. Transportation: Hydrogen-powered fuel cell vehicles, especially in heavy-duty applications like long-haul trucking, buses, and maritime transport, offer additional energy storage options alongside battery electric vehicles. Hydrogen offers quicker refueling times and longer driving ranges than batteries.
3. Steel and Chemical Production: Industries like steelmaking are notoriously energy-intensive and heavily reliant on coal. Hydrogen, especially when used in processes like direct reduced iron (DRI), can replace coal as a reducing agent, thereby offering a low-emissions pathway for steel production. Similarly, the chemical industry can benefit from low-carbon hydrogen as a feedstock in producing ammonia, methanol, and other products​.

Myths vs. Reality: Understanding Hydrogen’s Real Potential

Despite the growing excitement around hydrogen, several myths have clouded its potential. Let’s address a few common misconceptions:

Myth 1: Hydrogen is Unsafe Due to Its Explosive Nature

Reality: While hydrogen is highly flammable, so are many other fuels in common use today, like gasoline and natural gas. Advances in technology have made it possible to safely produce, store, and transport hydrogen. Rigorous safety standards and infrastructure, similar to those used for other fuels, are continuously being developed and refined to mitigate risks​.

Myth 2: Hydrogen is Too Expensive to Compete with Other Fuels

Reality: Hydrogen production costs are indeed high today, especially for green hydrogen. However, just as the cost of wind and solar power have fallen dramatically over the last 20 years, the cost of hydrogen is expected to fall significantly as technology improves, and economies of scale are realized. Ongoing developments in electrolyzer technology, such as solid oxide and proton exchange membrane (PEM) electrolyzers, will help lower costs. Additionally, with increased government and industry collaboration, the hydrogen economy is expected to grow rapidly​.

Myth 3: Hydrogen is Inefficient Compared to Battery Electric Solutions

Reality: While it’s true that hydrogen fuel cells may have lower lifecycle energy efficiency compared to battery electric vehicles (BEVs), they offer distinct advantages in areas where BEVs struggle. These include heavy-duty applications, long-distance travel, and quick refueling. For sectors like long-haul transportation and industrial processes, hydrogen’s advantages make it a more viable solution.

Hydrogen’s Versatility: Powering Numerous Sectors

One of hydrogen’s greatest strengths is its versatility. Unlike other fuels that serve only a few industries, hydrogen has broad applicability. Its uses include:

• Electric Power: By acting as a backup storage option for renewable energy.
• Transportation: Fueling hydrogen-powered trucks, buses, and in aviation and ships.
• Steel and Chemicals: Offering cleaner alternatives in production processes.
• Heating: Hydrogen can be blended into natural gas grids to lower emissions in heating systems​ (although this may be a limited use case).

The Growing Role of Green Hydrogen

Green hydrogen, produced using renewable energy sources like wind and solar, is at the heart of the hydrogen revolution. It holds the promise of near-zero emissions, making it a key element in the global energy transition. The whitepaper ‘Dispelling Myths around Hydrogen’ discusses the gradual scaling of green hydrogen production and how the combination of policy support and technological advances will reduce costs over time, allowing it to compete with other fuel sources​.

Hydrogen’s Future as a Next-Gen Fuel

As industries and governments ramp up efforts to decarbonize, hydrogen is poised to play an essential role in the energy transition. Its versatility, potential to decarbonize hard-to-abate sectors, and growing cost competitiveness will likely make hydrogen a cornerstone of the global energy system in the coming decades. Despite the challenges ahead, from infrastructure development to cost reduction, hydrogen’s potential is undeniable, and its myths are being steadily dispelled.

By embracing hydrogen, and accurately understanding its strengths and its challenges, we can accelerate our journey towards a cleaner, more sustainable future.

Solar module prices around the world have moved in lockstep with Chinese prices for much of the past decade, which is no surprise given China’s dominance in solar manufacturing. The country accounts for over 80% of the world’s solar supply chain and this excludes its direct investments in other countries, especially in Southeast Asia, another major solar exporter.

But this relationship between FOB China prices and delivered prices is fraying. Thanks to volatile freight rates and a widening webwork of trade barriers, prices of solar modules loading from China and those delivering in the U.S. have been diverging.

From April to July 2024, export prices of FOB China TOPCon M10 modules have fallen by 17% to $0.096 per watt peak (wp), the result of a Chinese solar industry struggling to arrest a downward spiral of growing overcapacity and ruinous price cuts.

Over the same three-month period, however, prices of DPP US TOPCon modules have risen by 10% to $0.296/wp.

Freight volatility is a major factor behind the divergence. The Freightos Baltic Container Index (FBX), a weighted average of spot rates for 40-foot containers on 12 global trade lanes, has risen from around $1,330 per forty-foot equivalent unit (FEU) in February 2020 to over $11,000/FEU in September 2021, crashed back down to below $1,050/FEU in October 2023 before soaring back up to almost $5,200/FEU in July.

In the three years prior from 2017 to 2020, the FBX has stayed in a far narrower range of $1,040/FEU to $1,760/FEU.

Port congestions and geopolitical tensions that are rerouting shipping flows away from key shipping lanes help to explain this freight volatility. Such factors might seem transient, but as events of the past two years have shown, geopolitical flashpoints around the world can easily lead to shipping upheavals — possibly for extended periods.

The other factor behind the divergence between FOB China and delivered solar prices is the shift away from the free market ethos that has underpinned large swathes of global trade since the 1990s.

In place of unfettered free trade, countries are increasingly setting up barriers in the form of import quotas, tariffs and other exclusionary policies. China, with its dominance in solar and other manufacturing industries, has been a conspicuous casualty of this paradigm shift.

With terms like “onshoring” and “friend-shoring” now part of the global trade lexicon, such protectionism appears to be here to stay for now. The U.S., Europe and India, among others, have already promised billions of dollars in incentives and subsidies to build their own solar supply chains outside of China. Chinese manufacturers themselves are setting up factories in end-user markets, including in the U.S. and the Middle East.

All these developments call into question the relevance of FOB China prices as a universal, definitive reference for solar markets around the world.

Despite the growing protectionist shift, China’s massive production capacity continues to supply most solar markets in the world. It also remains streets ahead of any other country in terms of technological innovations and manufacturing capabilities.

But it is also true that freight volatility and trade barriers have decoupled FOB China prices from some of the key delivered markets in the west. Solar exporters have highlighted the difficulties of negotiating delivered prices for shipments delivering months ahead, especially when using FOB China prices as a reference that might not translate well into the eventual delivered price.

There is a precedent for such a price decoupling in the solar supply chain. China is by far the world’s largest producer of polysilicon, the main raw material for solar modules. But trade barriers in the west have resulted in a two-tiered market for Chinese and non-Chinese polysilicon.

To address that pricing divergence, OPIS began to publish the Global Polysilicon Marker (GPM), a pioneering assessment in the industry to reflect the non-Chinese polysilicon market in 2022.

From January 2024 to Jul 2024, the GPM has fallen by around 14% while the domestic price of Chinese polysilicon has fallen by a far steeper 46%, reinforcing the fact that there is no single one-size-fits-all price assessment that can reflect all markets.

The divergence in module prices among regions should similarly be addressed by separate price assessments for the FOB China market and for the delivered markets in the U.S. and Europe.

And likewise, OPIS Solar Weekly officially started spot assessments of TOPCon modules on a DDP Europe and DDP US basis, as well as a 12-month forward curve for DDP US TOPCon modules, from August 6.

The current trade and political climate suggests that the divarication in global module markets has yet to be fully played out. If policies to realize domestic solar manufacturing in major markets such as the U.S., Europe and India are successful, the links between FOB China and delivered module prices could only become more tenuous.

Major energy companies are betting on hydrogen as they branch into new renewable ventures and investors are keen to understand the evolving landscape and what role this alternative could play compared to natural gas and electrification.

The present day is seen as a critical juncture for the hydrogen market. To help investors navigate the emerging hydrogen economy, OPIS recently took part in a roundtable of industry experts, exploring factors that could drive wider adoption of hydrogen as a clean fuel source.

As pointed out during the discussions, challenges of developing hydrogen trade include funding assurance for new projects and the ongoing changing landscape of regulation across the European Union and the United Kingdom. Other key material issues that must be addressed involve convincing industrial sectors how they can electrify or switch to hydrogen.

Well-established corporations such as ExxonMobil see the importance of implementing hydrogen for their energy needs, according to the company’s low carbon hydrogen solutions executive Michael Foley. Besides manufacturing experience, leading energy producers aim to develop hydrogen on a wider scale as part of their overall strategy. For many, however, manufacturing it from natural gas with carbon capture remains the most affordable method.

Another point made during the roundtable concerned hydrogen availability and predictability, that is, whether enhanced cooperation amongst parties can translate into realistic demand. Fuel switching, currently gas-fed networks with hydrogen, remains a huge endeavor, and in here coordination remains a key component in the transition toward hydrogen adoption. In that sense, although hydrogen as a fuel can be seen as very similar in practice to natural gas, it still needs to be treated in different ways concerning its safety criteria, storage, and other matters. As such, a full switch of pipelines and use is not as evident as many would expect.

Expectations anyway remain high, points out Cadent’s director of strategy Angela Needle. Current research for instance confirms that standard natural gas networks can safely handle up to 20% of blended-in hydrogen, without having any significant impact on the majority of appliances that would use the blend. Yet the same cannot be said for larger infrastructure levels such as gas turbines, which would in theory require different blend conditions.

Without a doubt, hydrogen is still an essential component to achieve net-zero targets for power industries, and developing business models together with governments will continue to contribute to creating confidence from the user’s side, said Marta Oliveira of Ikigari Capital.

Incentivizing Hydrogen Investors

From a venture capital perspective, project developers need to look at hydrogen in terms of multi-modal transport demand to push for expansion. Investors need to see more material demand for hydrogen production, and this will help create the infrastructure, testing, and confidence in production. Still, investors need more visibility on potential revenues, for if the issues surrounding establishing and maintaining demand for hydrogen can be resolved, other cost-side challenges can be addressed more quickly.

OPIS produces a hydrogen cost price index that underlines such cost-side challenges. The index reveals that green hydrogen in the Netherlands, Germany and the UK has consistently been more expensive than its chief competitor, natural gas, which hydrogen makers hope will be swapped for the greener gas in industrial processes.

The May OPIS Netherlands green hydrogen price stood a whopping €156.61/MWh more expensive than the equivalent EEX Dutch TTF natural gas price. This compares with €155/MWh in the previous month.

With greater market assurance, there will also be more consistent hydrogen pricing. Producers would eventually manage to trade hydrogen in the same way as other energy commodities.

A key takeaway from the discussion showcases the differences between the EU and U.K. hydrogen prices when reviewing the implementation of industry production requirements. The Hydrogen Bank Allocation program, which entailed direct subsidies intending to incentivize green hydrogen projects, has benefited in curtailing hydrogen production prices for EU-based initiatives. The U.K. Hydrogen Funding rounds display higher prices than their continental counterparts, making them in turn less attractive projects to take up.

Nonetheless, all specialists emphasized the importance of establishing common policies, to encourage investment for scaling up production. New requirements for carbon capture and storage are contributing to creating demand for alternative fuels by a diverse range of industrial sectors. This in turn will facilitate the setting up of business models to support hydrogen pipelines and storage facilities enabling the massification of green hydrogen consumption for Europe’s industrial needs.

Watch our latest on-demand webinar in partnership with Investors Business Daily,
‘Why 2024 Is A Pivotal Year For The Hydrogen Market: A Conversation With IBD And OPIS’

Germany’s approach to achieving climate neutrality by 2045 includes various strategies to mitigate climate impact, but the country’s ambitious move towards hydrogen mobility stands out.

The recent update to Germany’s National Hydrogen Strategy (NHS) lays a framework for integrating hydrogen technology across various modes of transport, including road, air and sea. This multi-faceted approach aims to significantly reduce the transport sector’s carbon footprint, leveraging hydrogen’s potential as a clean energy carrier.

Camila Tubella, green hydrogen project developer at Pacifico Energy Partners, said at a recent webinar: “In Germany, there is a lot of readiness to use hydrogen in mobility.”

One of the central components of Germany’s hydrogen mobility strategy is the development of a nationwide hydrogen refueling infrastructure, an initiative many other European countries are wary of as hydrogen’s low volumetric energy density puts it at a disadvantage to diesel. In the UK, energy major Shell opened three hydrogen filling stations between 2017 and 2019, but by 2022 the company had taken a decision to close them all down.

This German hydrogen endeavor is supported by the long-standing National Innovation Programme for Hydrogen and Fuel Cell Technology (NIP), an early adopter of hydrogen mobility in the continent, which started off with a sizeable budget of €1.4 billion ($1.5 billion). The National Organisation for Hydrogen and Fuel Cell Technology (NOW) runs this ambitious scheme.

HySteelStore, one such project funded by the NIP, aims to solve the difficult integration of a hydrogen tank into a passenger vehicle. Heavy trucks are more suited to being fitted with a hydrogen tank.

The HySteelStore project’s modular steel tank system, designed for integration into future battery electric vehicle (BEV) platforms with underbody battery modules, aims to offer better geometric flexibility, cost-effectiveness, and sustainability compared to Carbon Fiber Reinforced Polymer (CFRP) tanks. This is an example of an innovation that could make a difference in passenger vehicle hydrogen mobility.

Moreover, Germany is making investments in the overall innovation and development of hydrogen technologies. The establishment of the German National Hydrogen Council (Nationaler Wasserstoffrat) early on is a testament to the country’s dedication to supporting research and innovation in the field, much needed in the nascent development of hydrogen fuel cells.

However, transitioning to hydrogen-powered transport is riddled with challenges, including the high initial costs of hydrogen technology and security of green hydrogen supply.

Recent difficulties also included the sacking of a key government official in February in the wake of a nepotism scandal. Consequently, the German transport ministry has put a temporary freeze on the approval of new hydrogen-related funding initiatives.

But other sources of funding for hydrogen continue. The European Commission has approved a €2.2 billion German scheme to support the electrification and decarbonization of industrial processes, including investments enabling the substitution of fossil fuels with renewable hydrogen or renewable hydrogen-derived fuels, to foster the transition to a net-zero economy. The aid will take the form of direct grants, it will not exceed €200 million per beneficiary and will be granted no later than Dec. 31, 2025.

The European Commission has also approved €350 million German state aid in April to support domestic renewable hydrogen production through the Auction-as-a-Service mechanism from the European Hydrogen Bank. The funding will come in the form of direct grants per kilogram of green hydrogen produced and will be available for up to ten years. The goal is to support the construction of up to 90 megawatts of electrolysis capacity, and to incentivize the production of up to 75,000 metric tons of renewable hydrogen in Germany.