Decarbonising Italian Industry: is there a role for green hydrogen?

The paper analyses the state of play in the market for green hydrogen, which is produced using renewable power, examining the barriers and levers for its development and the potential it offers to meet the challenges of the ecological transition, by furthering the decarbonisation of industry.

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• In recent years, hydrogen has attracted growing importance in the energy and industry debate, thanks to its flexibility and versatility in the contribution it can make to decarbonising the economy.
• Hydrogen today is produced almost exclusively using fossil fuels and is utilised primarily as a non-energy raw material for oil refining and chemicals.
• The EU Hydrogen Strategy, the Fit-for-55 package, the REPowerEU proposal and NextGenerationEU funds have given the growth prospects for green hydrogen an enormous boost, with highly ambitious targets set for 2030.
• However, the problem for hydrogen is its limited energy conversion efficiency, with output at around just 60% of input. As such, the roll-out of green hydrogen should be targeted mainly at applications for which the direct use of electricity is still not possible today.
• At present, green hydrogen can make the greatest contribution to decarbonisation if used in hard-to-abate industry sectors, where electrification is technically not feasible or economically not convenient. In Italy, such sectors account for 85% of natural gas consumption by industry.
• If green hydrogen were to be used today in Italy to satisfy existing demand for hydrogen and replace one-fifth of the gas consumed by Italian industry, the additional power output requirement from renewables is estimated at 25–30 GW, equal to approximately 50% of the current renewable energy capacity installed in Italy.
• That is a very big target to achieve and many barriers stand in its way—first and foremost, production costs, which are much higher than for the fossil fuels to be replaced, and very limited market demand, in the absence of incentives and minimum requirements.
• In developing the hydrogen market, Italy can count on a number of strengths compared to its European peers:
  • a manufacturing industry with one of the highest potentials in the EU for converting thermal and mechanical technology production to hydrogen;
  • a widespread gas network, a large part of which can easily be refitted for carrying hydrogen;
  • growing renewable energy production and the development of biomethane, which make hydrogen easy to integrate into the energy system;
  • a strategic geographical position as an energy hub for inflows from North Africa, as envisaged by EU plans for the development of hydrogen infrastructure.
• To make the most of these opportunities, suitable policy action is imperative to complete the regulatory framework needed to promote the greater use of green hydrogen, including:
  • the outlining of a national strategy to steer efforts towards the consolidation of supply chains and progress on decarbonisation targets;
  • the roll-out of mechanisms to incentivize green hydrogen production, alongside those already envisaged by the NRRP, so as to close the cost gap with fossil fuels;
  • the streamlining of authorisation processes and faster implementation of NRRP measures;
  • the expansion of efforts already underway to support research, innovation and industrial development, such as IPCEIs.