European oil refiners could play a pivotal role in scaling up the green hydrogen industry, according to a new report by Wood Mackenzie. The research suggests that, despite being under increasing pressure from declining demand for conventional fuels, refiners in Europe are uniquely positioned to accelerate the adoption of low-carbon hydrogen technologies.

The report notes that more than US$5 billion has already been invested in low-carbon hydrogen by European refineries. This commitment has been underpinned by the European Union’s Renewable Energy Directive (RED III), which is designed to boost renewable energy use and decarbonisation across multiple sectors. However, while policy has provided momentum, the industry still faces significant obstacles, including high production costs and slow regulatory adoption across member states.

Over the past decade, low-carbon hydrogen has gained traction as governments and industries work towards ambitious climate goals. Yet the sector has struggled to convert early enthusiasm into large-scale deployment, as potential buyers remain cautious due to the high cost of green hydrogen and the challenges of committing to long-term supply agreements. This has slowed progress globally, with numerous projects facing delays or cancellation.

Paradoxically, Europe’s oil refineries – once central to fossil fuel demand – may now provide the demand base needed to kick-start green hydrogen growth. As electric vehicle uptake continues to erode demand for road transport fuels, EU regulations are forcing refiners to decarbonise faster than their counterparts elsewhere. This pressure is creating an incentive for refiners to adopt low-carbon hydrogen both as a feedstock for their operations and as a source of cleaner fuels for hard-to-decarbonise sectors.

Green hydrogen, produced through electrolysis powered by renewable energy, has the potential to deliver almost carbon-free fuel. EU policy broadly favours this approach over blue hydrogen, which relies on fossil fuel feedstocks coupled with carbon capture and storage. For refiners, adopting green hydrogen represents not only a compliance measure but also a strategic opportunity to diversify into new markets.

Still, challenges remain. The cost of producing green hydrogen must continue to decline to compete effectively with fossil-based alternatives. Likewise, regulatory frameworks will need to evolve further to ensure that demand growth is sustained and that the industry can achieve the scale necessary for long-term viability.

Source:

https://strategicenergy.eu/how-europes-oil-refiners-could-offer-a-route-to-scale-up-green-hydrogen/