Sanchez’s vision to make Spain the European hub of green hydrogen

  • Sanchez’s government is strongly committed to developing a hydrogen industry in Spain. 
  • Green hydrogen is expected to bring various benefits to Spain and Sanchez. 
  • However, investment in green hydrogen seems insufficient to ensure energy security and a carbon neutral economy by 2050. 

How does Sanchez plan for Spain to become a green hydrogen hub?

Answer: Through strong support of the public sector that will help attract private investors.

In October of 2020, “The Hydrogen Roadmap: a commitment to renewable hydrogen” was approved by the Spanish Council of Ministers. The roadmap is meant to complement the broader “EU Hydrogen Strategy” which aims to make the widespread use of hydrogen possible by 2050. This aim in turn is meant to supplement that of the European Green Deal which seeks to achieve climate neutrality by 2050. 

Green hydrogen is considered to be key for a green transition as it is a clean and efficient fuel. It is obtained through the process of electrolysis using renewable sources of energy such as wind or solar power. Furthermore, it is an energy carrier as it can be used to store and transport energy. As a result, it has a wide range of potential applications. It can be used for transport, industrial or residential purposes. Moreover, hydrogen can be transported using the same pipelines that are now used for gas. It is no surprise therefore that the EU and its member states are investing heavily in green hydrogen. 

The EU Hydrogen Strategy plans to have enough electrolysers installed to produce 6 GW by 2024 and 40 GW by 2030. In turn, Spain’s “Hydrogen Roadmap” envisions 300 to 600 MW of electrolyser plants being installed by 2024 and at least 4 GW of electrolyser plants by 2030. The hope is that this will allow as much as 25% of hydrogen consumed across all industries to be green.

It also means that Spain is planning to contribute to as much as 10% of the EU’s hydrogen production target. Moreover, Spain is planning to develop the technology and infrastructure needed in order to allow green hydrogen to power various sectors of the economy including the creation of hydrogen powered vehicles and hydrogen stations. 

In order to reach its objectives, Spain hopes to mobilize a total of 8.9 billion euros of private sector investments by 2030. Spain realizes that private sector investment will only follow if there is strong support from the public sector. As a result, the President of Spain’s government, Pedro Sanchez, announced in November of 2020 that Spain would invest 1.5 billion euros of the Next Generation EU funds in green hydrogen over the next three years. These steps underline that Sanchez’s government is committed to reaching the targets it has set out for itself and is determined in making Spain the European green hydrogen industrial hub.

What has allowed Sanchez to push for Spain to become a green hydrogen hub?

Answer: Favourable conditions in Spain for renewable energy and support from Spain’s biggest utilities. 

“Spain is in the best position to be not just another hub, but the green hydrogen industrial hub in Europe,” said Sanchez. Indeed, Spain has the ideal conditions for the production of wind and solar energy. It has an advantageous climate as well as large areas available for the installation of infrastructure for renewable energy. Furthermore, it already has an extensive gas infrastructure that it could use to transport liquid hydrogen. As a result, Spain is considered the country with the highest amount of surplus green energy potential.

In addition, Sanchez’s plunge into green hydrogen has been made easier by the fact that Spain’s private sector has shown great interest. On November 19 2020 the Ministry of Ecological Transition and the Demographic Challenge called for expressions of interest on projects in renewable hydrogen. Endesa, Naturgy and Iberdrola, Spain’s largest utilities, responded with proposals that exceeded the expectations of the Ministry. This positive response may be due to the fact that green hydrogen is expected to become cost competitive in the next decade. 

According to a report published in December of 2020 by the International Renewable Energy Agency (IRENA), hydrogen could compete in costs with fossil fuels by 2030. The price of renewable energy is drastically declining and has already become the cheapest source of power in many parts of the world. China’s investment in renewable energy has played an important role in reducing solar and wind energy prices. The price competitiveness of green hydrogen will therefore not depend on cheaper wind and solar energy but rather on the ability of companies to reduce the costs of electrolysers. If this is achieved, green hydrogen will become economically viable.

How does Sanchez believe that green hydrogen will benefit Spain?

Answer: Green hydrogen is expected to create jobs in Spain, ensure social and territorial cohesion, develop its energy sector, and position Spain as leader in renewable technology. 

Green hydrogen is expected to contribute to job creation as can be seen from ongoing projects. For instance, Iberdrola in alliance with Fertiberia is planning to achieve 800 MW of green hydrogen by 2027 and this project is expected to create 4,000 skilled jobs.

In addition to creating jobs, green hydrogen is supposed to help develop all regions of Spain. Sanchez has highlighted that in order for the green transition to be fair, it has to generate opportunities for all the territories and thus advance territorial cohesion. For instance Endesa alone is planning to develop 23 renewable hydrogen projects across six autonomous communities: in Galicia, Castilla and Leon, Castilla La Mancha, Andalucia, Cataluña and Aragon. 

Furthermore, if Spain is able to produce hydrogen at competitive prices, this will allow it to “create an industrial value chain of national companies,” says Sanchez.  Building a hydrogen industry in Spain will help create wealth. It will also make Spain a future technological leader. Namely, Spain will need to develop new technology for electrolysers in order to meet energy targets as well as drive down the price of green hydrogen. This will open up the opportunity for Spain to also begin exporting this innovative technology to other countries, truly making it a hub for renewable hydrogen.

How will green hydrogen benefit Sanchez politically? 

Answer: Sanchez’s investment in green hydrogen is part of a broader commitment to a green transition that has earned him international praise. 

Sanchez’s commitment to green hydrogen and more generally to a transition to a green economy will help raise his and Spain’s profile internationally. During the People’s Party’s (PP’s) time in power, Spain faced criticism from European environmental groups for working to prevent the closure of coal-fired power plants. Clashes between the energy and environment ministry had also resulted in Spain being late in adopting and sending Brussels its climate-change bill.

In general, the government at the time was considered to lack ambition in terms of developing renewable energy. On the other hand, Sanchez’s political party (the Spanish Socialist Workers’ Party or PSOE) has branded itself as a pro-renewables party

When PSOE seized power in 2018, it quickly became clear that the government would completely change the country’s policy to climate change and renewable energy. After winning the elections in April of 2019, Sanchez’s government began to take measures to end the regulatory uncertainty surrounding renewable investments in Spain. Moreover, it can be said that it has largely achieved this goal. Namely, while Spain had fallen to 29th place on the EY’s Energy Country Attractiveness Index in 2017, it has again risen to the top 10 in 2021. 

More recently, Spain has decided to use its 70 billion euros recovery and resilience plan in such a way that supports a green transition. Although it falls short of meeting the targets set by the Paris agreement, the plan is still considered amongst the best in the EU in terms of its commitment to a green transition. All of this has helped raise Sanchez’s international profile. Indeed, as a result of these achievements and the successful organization of COP 25 in Madrid, Sanchez was granted the honor to be the first leader to speak at the COP 26 In Glasgow on November 1st.

What does this mean for you? 

Answer: Spaniards are unlikely to see power security in the near future and a carbon neutral economy by 2050. 

While the government’s investment in green hydrogen is expected to bring many benefits to Spain, it is also important to acknowledge the limitations of using this fuel. Namely, hydrogen is a flammable element and thus it requires extensive safety measures in order to be used. Moreover, it also consumes a lot of energy. This is problematic for hydrogen use overall but in particular for the transportation sector. According to a global environmental consultancy, for only 10% of cars, vans and trucks to be powered by hydrogen and 10% by e-diesel, 41% more of renewable energy would be needed than if they were electric cars.

As a result, the transportation sector is having a hard time shifting to hydrogen (and in general to renewable sources of energy), while it makes up over a quarter of the total greenhouse gasses emitted in Spain. This is one of the main obstacles to achieving the goal of banning the sale of diesel, petrol and hybrid cars by 2040 that can be found in the Spanish law on climate change and energy transition.  These problems are further exacerbated by the simultaneous closure of Spain’s nuclear plants.  

While the law does not make any mention of a nuclear phase-out option, the government has promised to close its seven nuclear power reactors by 2035. This decision has been criticized by the International Energy Agency which states that since these reactors produce a significant amount of electricity in Spain (22% in 2019) it would be risky to close them so soon. Namely, the closure of these nuclear facilities could increase the country’s call on natural gas if renewable energy capacity cannot be built as quickly as planned. 

The closure of the nuclear plants would not only impede the green transition but could also put at stake energy security in Spain. If nuclear plants stopped working earlier than expected due to the high taxes being imposed on them this could increase price volatility. Energy prices are already highly unstable in Spain. Like the rest of  Europe, Spain is seeing rising electricity prices as the price for natural gas has soared to almost 5 times what it was in 2019.

Furthermore, Algeria, Spain’s largest gas supplier, has stopped supplying Spain through the Maghreb-Europe pipeline as of November 1st 2021, having cut off diplomatic ties with Morocco. Instead, gas from Algeria to Spain will be supplied using the Medgaz undersea pipeline. However, the capacity of the pipeline is limited and will require expansion. Such expansion could face complications. The remaining gas will most likely be transported by vessels, which will be expensive and could lead to an escalation of the energy crisis in Spain. 

In sum, while Spain’s support of green hydrogen has great benefits it alone will be insufficient for achieving Spain’s climate goals and ensuring Spain’s energy security. Overall, Sanchez’s approach to a green energy transition remains somewhat unrealistic, considering the difficulties of the transition in the transport sector and the shift away from nuclear energy. However, Sanchez will no longer be in power by 2050, and for now his commitment to combating climate change is raising his international profile.