May 24, 2022

Infrastructure Bottlenecks Loom for Green Hydrogen Imports in Europe


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Obviously, interest in international trade of hydrogen is rising rapidly. New announcements of credible major export initiatives are occurring frequently. But there remain doubts about the rate of development of the infrastructure needed for importing hydrogen at scale, whether as hydrogen or via carriers such as ammonia.

Momentum is Growing Behind Hydrogen’s Uptake in Europe

The role of hydrogen imports has taken on new dimensions as a result of the war in Ukraine. Hydrogen’s importance as a perceived solution to energy security now parallels its anticipated popularity as a missing link in large-scale decarbonization of hard-to-abate sectors of the economy.

The EU’s immediate response to the Russian action has been a push to urgently and dramatically reduce its dependence on Russian energy. In the near term this will necessitate LNG imports from countries other than Russia. In the medium and longer term, however, the EU’s policy is clearly to promote hydrogen as the imported energy of preference.

By way of recent developments, the EU’s REPowerEU strategy for reducing its energy dependence on Russia has raised the target for hydrogen in the bloc’s energy mix to 20 million (metric) tons per year by 2030, with imports meeting 50% of this. Across individual EU countries, hydrogen import-focused projects have taken shape rapidly since Moscow’s invasion of Ukraine in February 2022. Often, these efforts are tied to the construction of new LNG import capacity that will subsequently be converted to hydrogen/ammonia imports or otherwise be made “hydrogen-ready” in the longer term.

Proposals for such hydrogen-ready terminals include several in Germany—Uniper’s revived plan for an LNG terminal in Wilhelmshaven, the German LNG consortium’s plant in Brünsbuettel and Hanseatic Energy Hub’s (HEH) planned facility in Stade. Additionally, E.ON is partnering with Tree Energy Solutions (TES) to explore building a “green gas” terminal in Wilhelmshaven and is also working with Fortescue Future Industries (FFI) to develop a hydrogen supply chain between Australia, Germany and the Netherlands. (Shearman & Sterling is advising FFI on this transaction). Also in the Netherlands, Gasunie, HES International and Vopak have joined forces to develop an import terminal for green ammonia.

Early Import Infrastructure Choices Will Influence Upstream and Midstream H2 Carrier Choices

Debate continues over whether the optimal delivery mode for hydrogen is liquefaction, conversion into ammonia or methanol or use of a liquid organic carrier (LOHC). Among most large-scale projects under development, conversion to ammonia is viewed as the most effective method of long-distance transportation, given that ammonia is currently much cheaper and easier to store than hydrogen itself, whether in gas or liquid form. As a result, it is likely that during the early stages of emergence of international trade, green hydrogen being shipped internationally will in most cases be converted to ammonia or some other derivative liquid for transportation and (assuming it is to be used as hydrogen) reconverted or “cracked back” to gaseous hydrogen at its destination. Thus, plans for hydrogen-ready terminals will require relevant import, storage and crack-back infrastructure.

Because of the early-stage status of most new hydrogen import initiatives, there are few project details that are currently publicly available. Nonetheless some details are starting to emerge. For example, RWE—one of the partners in the German LNG consortium that is developing the Brünsbuettel project—has disclosed some of its plans for developing an ammonia terminal at the same location. The plan is aimed at preparing the future LNG facility at the site for conversion to hydrogen imports. While the consortium is developing the LNG plant, the ammonia terminal is a project exclusive to RWE. The company said it anticipates 300,000 tpa of green ammonia arriving in Germany from 2026, adding that it intends to incorporate the entire value chain into the project, from the import process to hydrogen reconversion, transportation and utilization by customers.

RWE projects that the second phase of the project’s development would coincide with ammonia import volumes rising to 2 mtpa. This phase of expanding the terminal’s capacity would entail the construction of an industrial-scale unit for cracking ammonia back to hydrogen, as well as development of a dedicated hydrogen pipeline. The company estimates that investment requirements would run into several hundred million euros.

Gasunie, HES and Vopak are also targeting a start date of 2026 for their ammonia import project, known as the ACE Terminal, in the Netherlands. The partners have cited the strategic location of their project, with direct access to the North Sea, a connection to the industrial center of Rotterdam and Gasunie’s infrastructure for transport and storage. Gasunie is also in the process of developing a national hydrogen transport network, to which the terminal would be connected.

The partners are currently in the basic design and permitting phase and anticipate a final investment decision (FID) on the terminal in late 2023. According to public information, the terminal will allow for storage of ammonia in existing infrastructure and for the possibility to crack ammonia back into hydrogen. The site also contains space to expand both cracking and storage capacity, according to available information.

While few further details are currently available, the RWE and ACE plans provide insights into what will be required to develop hydrogen import capacity via ammonia as a carriage.

If several of these planned ammonia terminals are ultimately built, delivery of vessel-borne hydrogen by other means—including via liquefaction or LOHCs—could be pushed back further both in terms of feasibility and timelines. This is because the carrier of choice will have been de facto determined by import capability and by the need to balance the speed of building import infrastructure with regulatory requirements in relation to third party access to privately built infrastructure.

In addition, the shipping of ammonia is already a well-established industry with existing supply chains. Consultancy Wood Mackenzie estimates that, as of January 2022, seaborne trade in ammonia amounted to around 20 mtpa. Scaling up seaborne trade and the related supply chains would be considerably easier than establishing altogether new ones for different types of hydrogen-bearing vessels. For example, compressed hydrogen vessels have yet to be commercialized and the world’s first liquefied hydrogen carrier only completed its first delivery at the start of 2022. While technological advances and new investments are expected by many to help with the uptake of other seaborne transportation options over time, most new entrants to the maritime hydrogen trade will favor the option that is best established at the time of their first cargo’s availability.

Pipelines Within Europe are Needed to Carry Hydrogen into the Hinterlands

Separately from its ammonia plans, RWE has partnered with German gas transmission system operator Open Grid Europe (OGE) on the H2ercules project to expedite the domestic hydrogen infrastructure buildout. The project will entail connecting electrolyzers, storage and import facilities in the north of the country with industrial consumers in the west and south of Germany.

This project, which is anticipated to require investments of about €3.5 billion ($3.7 billion) highlights another factor that hydrogen importers will need to consider,ensuring their terminals are connected to their customers. As hydrogen infrastructure grows, it will become easier to develop and connect import capacity to demand centers over the longer term. The costs of developing this infrastructure will be considerable, though.

Another initiative, the European Hydrogen Backbone, which recently raised its targets in line with REPowerEU, now envisions a European hydrogen network comprising around 53,000 km (32,933 miles) of pipelines by 2040, requiring investment of €80-143 billion ($84-151 billion). This network would also be linked to European green hydrogen production hubs but will be equally necessary for transporting hydrogen from import terminals. While the proposed networks will require a large proportion of existing natural gas pipelines to be repurposed for the transport of hydrogen blends (or pure hydrogen), new import terminals would require new pipelines.

Enhancements made to the RePowerEU strategy on May 18, 2022have further emphasized the EU’s commitment to rapidly build out hydrogen infrastructure in Europe. The European Commission said it was setting aside an additional €200 million ($213 million) of funding for hydrogen research and incorporated further detail on the Hydrogen Accelerator plans included within RePowerEU. It called on the European Parliament and Council to increase sub-targets relating to hydrogen for specific sectors. The Commission said it would support the development of three major hydrogen import corridors—via the Mediterranean, the North Sea and, once conditions allow, Ukraine. It will map out preliminary hydrogen infrastructure needs by March 2023, and set up a dedicated work stream on joint renewable-hydrogen purchasing under the EU Energy Platform.

Intercontinental Transportation Infrastructure Plans are Taking Shape

Aside from intracontinental infrastructure requirements, signs are emerging of efforts to establish fixed intercontinental links between hydrogen suppliers and European consumers. Subsea and onshore international pipelines would offer a way to circumvent the requirement for import terminals and related infrastructure (including related concerns about the timing, cost, energy efficiency and carbon intensity of ammonia crack-back infrastructure) and connect directly to newly hydrogen-ready pipelines on the content.

Last year, Saudi Energy Minister Prince Abdul Aziz bin Salman said his country was prepared to deliver piped green hydrogen to Europe if the economics allow it. Elsewhere across the Middle East and North Africa (MENA) region, Algeria intends start blending hydrogen into the natural gas it exports to Europe, including via pipeline, ultimately replacing that gas with hydrogen altogether.

Similarly, Morocco is considering blending hydrogen into natural gas being transported to Spain via the Maghreb-Europe pipeline. However, that pipeline is currently offline amid an ongoing diplomatic dispute with neighboring Algeria, where it originates. Spain’s Cepsa has also unveiled a proposal to build a new pipeline for transporting hydrogen from Morocco to Spain.

Italy, meanwhile, is eyeing potential hydrogen imports from Algeria and Tunisia via pipeline. In November 2021, Italian companies Eni and Snam struck a deal whereby the latter agreed to buy a 49.9% stake in companies operating two pipelines connecting Algeria and Italy via Tunisia. The companies described the pipelines as a strategic route for the security of Italian gas supply and said their partnership was also aimed at enabling potential development initiatives within the North African hydrogen value chain. The European Hydrogen Backbone has identified the route to Italy from Tunisia and Algeria as one of five key future supply and import corridors for hydrogen.

Libya has also been identified as a potential source of hydrogen supply to Europe but given how oil and gas production there is currently languishing amid ongoing political volatility, this option is seen as less likely to materialize in the nearer term.

The Bottom Line

Hydrogen developers and would-be offtakers and consumers need to consider potential midstream bottlenecks and trends when developing their business plans. Recent events will help to accelerate overall development timelines, with the EU proposing to ease permitting for green energy projects, in a new Commission Recommendation and targeted amendment to the Renewable Energy Directive. This aims to recognize renewable energy as an overriding public interest and to tackle slow and complex permitting for major renewable projects, including green hydrogen. Nonetheless, it will still take time to build new import capacity, as demonstrated by the 2026 targets. For the moment the need for import capacity represents a major potential risk factor for the EU’s hydrogen targets.