1The electricity and gas section is the third-largest section, albeit considerably smaller in number than the previous two sections (N=179, 10.72%).1 However, because of the market structure of utilities, they tend to be very large companies, often with local, regional or national monopolies on electricity and gas production, transmission and/or distribution. The separation between electricity and gas companies in the utility market is often artificial, as many large companies are involved in both and are only registered under one primary activity. Engie (trade of gas through mains), EDP – Energias de Portugal (production of electricity), Vattenfall (trade of electricity), and Iberdrola (distribution of electricity) are examples of this. In the context of the hydrogen transition, the sector’s participation can mostly be divided between gas and electricity interests.

2 This section includes companies that transport natural gas via pipeline. Natural gas transmission operators are categorised as “distribution/trade of gas through mains”, or as transport via pipeline under the economic section of transport and storage. This adds another group of companies, including GRTgaz, Teréga, Gasunie, and Northern Gas Networks.

Figure 9: Pie chart for electricity and gas

10.1 Natural Gas

3 Companies involved in the natural gas industry2 constitute slightly less than half of the entities in this section (N=70, 39.11%). Many of the companies have regional or national monopolies on gas transmission, such as Snam in Italy, Fluxys in Belgium, the Public Gas Corporation of Greece (DEPA) in Greece, GAZ-System in Poland, GRTgaz, Engie, and Teréga in France, Enagás in Spain, ONTRAS Gastransport, Open Grid Europe, and Thyssengas in Germany, Gasunie in the Netherlands, Ervia in Ireland, Ørsted in Denmark, and SGN and Northern Gas Networks in the UK. In Austria and Germany, several local operators are included, such as those in Essen, Schwaben, Vienna, and others.

4 Several operators are experimenting with power-to-gas, usually in the form of demonstration projects (see e.g. Wulf et al., 2018). Operators (e.g. GRTgaz, GAZ-System, Snam, Gasunie, Enagás) are also experimenting with blending hydrogen into the natural gas system. Europe’s biggest pipeline operator, Italy-based Snam, invested €1.4 billion in its SnamTec division (approx. 20% of total investment), publicly connecting this to the development of hydrogen projects (Reuters, 2019; Snam, 2019a).3 It is explicitly thinking about using existing gas infrastructure linking Italy with North Africa, where hydrogen can be produced for a much lower cost because of the potential abundance of solar-based renewable energy (McKinsey & Company, 2019; Snam, 2019b; van Wijk & Wouters, 2020).

5Dutch gas operator Gasunie (2020a) has also expressed interest in ambitious hydrogen projects and is very explicit about its high expectations for hydrogen in Belgium, Germany and the Netherlands. It is part of a consortium4 exploring a €500 million investment in a hydrogen value chain surrounding the Magnum power station near Groningen (Gasunie, 2020a) and is also part of a consortium5 backing H-vision, a €2 billion blue hydrogen project to kickstart the hydrogen economy in Rotterdam (H-vision, 2019). The investment decision is pending, with the earliest expectation of a decision being 2021 (Port of Rotterdam, 2019). In early 2020 Gasunie announced its most ambitious project to date with Royal Dutch Shell and Groningen Seaports. This concerns the NortH₂ plan (mentioned in the introduction), with a price tag of tens of billions of euros. It envisions a 10 GW offshore wind park with Europe’s largest green hydrogen factory, which should start operations in 2027 (Gasunie, 2020a, 2020b; Van Dijk, 2020). Notwithstanding the announcement of these plans, the funding for them has not been secured, leaving their future in doubt (Financieel Dagblad, 2020; Van Dijk, 2020). The project would fall within the wider development strategy for a hydrogen cluster in the northeast of the Netherlands, for which allocated private investment until 2030 amounts to €2.8 billion (Samenwerkingsverband Noord-Nederland, 2019).

6 There are various motivations for natural gas companies to support hydrogen. Several business risks are a key factor: they include estimates of decreasing demand for natural gas in the long-term, increasingly regulated CO₂ emissions, and insufficiently diversified business models. More positive incentives are the prospect of new business and increasing the security of supply. Enagás (2019, p. 88) in its Anual Report marks the reduction in natural gas demand as a highly likely and impactful development. Gasunie (2020a, pp. 105; 143) and Fluxys Belgium (2018, p. 133) similarly expect lower demand for gas transport capacity, and the former mentions the partial or complete ending of using gas transport networks before 2070 as a potential risk. These downward trend estimates on the long-term future of natural gas in Europe are broadly in line with other research (e.g. see Cătuţi et al., 2019; IEA, 2019b, p. 180; Navigant, 2019, p. 78). Hydrogen would be one way in which gas infrastructure could remain in use and profitable despite decreasing demand for natural gas.

7 The increasing regulations on CO₂ emissions and/or carbon pricing are another factor, as in other sectors. This affects finances directly, for instance in the case of higher operating costs because of CO₂ emissions (Enagás, 2019, p. 88), but also indirectly through a wider societal-economic push for decarbonisation. This push reaches natural gas utilities via several layers of government (i.e. UN SDGs, European carbon reduction targets, national and local legislation), and also from direct societal pressure. Binding climate regulations have an impact on practically all companies involved in the natural gas industry (Enagás, 2019, p. 16; Ervia, 2018, p. 31; Fluxys Belgium, 2018, p. 133; Gasunie, 2020a, p. 143; SGN, 2020, p. 16; VNG, 2019, p. 50). On top of the binding nature of national and international legislation, many companies also frame emission reductions in a climate-conscious context. Hydrogen, together with other green gases (such as renewable biomethane) is a way to realise a zero-carbon energy system while retaining a profitable gas market.

8 Hydrogen or other green gases can also create new business opportunities. Snam (2019b), Gasunie (2020a, p. 48) and Enagás (2019, p. 18) all list hydrogen as a strategic business opportunity, Ørsted (2020, p. 25) names the potential of renewable hydrogen for new applications, and Engie (2018, p. 6) states that it is convinced hydrogen will be called upon in the energy transition. These positive incentives are more numerous than simple business growth. The transport of hydrogen (and other green gases, CCS and/or heat) is an opportunity for gas companies to diversify beyond the sale of natural gas, as Gasunie (2020a, p. 105) and VNG ONTRAS (2019, p. 47) note. Diversification to include hydrogen gas means creating more independent revenue streams, but it also provides for more security of energy supply. This is an opportunity given Europe’s strained relationship with Russia, but also given the volatility of renewable energy generation.

10.2 Electricity

9Virtually all the remaining companies in this section are active in the electricity sector (N=106, 59.22%). It includes some of the largest companies in several countries, with examples being Vattenfall, EDP – Energias de Portugal, EDF – Électricité de France, Iberdrola, Innogy, Statkraft, Endesa, SSE, and PGE – Polska Grupa Energetyczna. This picture is further complicated by the many ties between some of the companies, with for instance Scottish Power and Endesa falling under Iberdrola and Enel (unregistered) respectively. Moreover, some of the largest European companies in this sector, such as Enel, are absent from hydrogen associations. As with natural gas, there are many different companies and few have a particularly big pan-European presence in different hydrogen associations, with possible exceptions being Vattenfall (5), PitPoint (4), and Innogy Renewables (3). Willingness from the electricity sector to take part in the hydrogen transition is important, as the availability of enough (renewable) electricity will be a decisive factor in the future of green hydrogen.

10 Despite the higher number of registered entities in the electricity sector than in the natural gas sector, the electricity sector does not seem to be as invested in the promotion of the hydrogen transition. This runs counter to the IEA’s (2019c, p. 19) conclusions about the hydrogen coalition consisting of renewable electricity suppliers as well as electricity (and gas) utilities. For most large electricity companies, hydrogen appears to be a technology with potential that needs to be further researched – but not a noteworthy component of the current business strategy. In annual reports from E.ON (2020), EDF (2020), EDP – Energias de Portugal (2018, 2019),6 Enel (2020), Innogy (2019), Vattenfall (2019a), Statkraft (2019), Iberdrola (2020), Endesa (2018b, 2018a) and PGE Polska Grupa Energetyczna (2018) there is no or very limited attention to hydrogen. Verbund (2020) is one of the very few that devote serious attention to green hydrogen, complemented by Vattenfall (2019a, p. 2) stating the concrete goal of 100 MW in green hydrogen by 2025. Fortum (2018) and Vattenfall (2018, 2019b) have hydrogen position papers but mostly focus on the necessary EU-policies to kickstart the transition. There do not appear to be concrete investment agendas for hydrogen, and hydrogen mostly remains something for R&D departments as reflected in EDF (2020, p. 98), Fortum (2019a, p. 5), and Statkraft reports (2019, p. 25), and implied by Iberdrola (2019, p. 381) calling it an immature technology.7

11The average scale of these projects also does not (yet) imply a high will to invest. An example is Vattenfall’s concrete target of 100 MW green hydrogen. Half of this will come from the 50 MW HySynGas project in northern Germany, which mostly relies on funding from the German Federal Ministry for Economy and Energy (ARGE Netz et al., 2019). The HYBRIT (n.d.) project on decarbonising steel is a public-private partnership, with the Swedish government funding 35% of the 1.4 billion SEK (€130 million) total investment.8 The planned Wind2HyRail-project relied on European funding, and fell through at the request of the consortium (FCH JU, 2019c), and the SEK 6 million (€550,000) planning phase for an 18 MW hydrogen gas plant in Gothenburg with Preem has been 50% financed by the Swedish Energy Agency (Vattenfall & Preem, 2018). An investment decision on the large H2M-project in Eemshaven (the Netherlands) with Gasunie and Equinor is still pending. These are all relatively small sums in the context of Vattenfall’s (n.d.) 2020 and 2021 total investments of SEK 58 billion (€5.3 billion).

12 Electricity producers were expected to be motivated to support hydrogen on the basis of hydrogen being seen as a versatile technology that can help stabilise the volatility that comes with high levels of renewable-based electricity production (IEA, 2019b, p. 588). Approximately 3,600 terawatt-hours (TWh) of electricity is needed to increase the share of hydrogen produced through electrolysis from 2% to 100%, which is more than the EU produces annually (IEA, 2019c). Navigant (2019, p. 21) estimates green hydrogen produced from excess electricity production in the EU to reach 19 billion cubic metres of natural gas equivalent by 2050. For electricity producers, this would thus be a promising technology to ensure that surplus capacity can be absorbed, and dispatchability remains high.

13 These incentives to solve the long-term challenges of seasonal and short-term intermittency are still accepted by electricity producers (e.g. EDF, 2020, p. 98; EDP - Energias de Portugal, 2018, p. 39, 2019, p. 36). Yet, potential problems resulting from renewables’ lack of dispatchability appear to be challenges of the second order: for the moment investment in renewables precedes investment in the way they are integrated into the market. Several companies with considerable renewable portfolios have enough renewable facilities and geographic spread to mitigate the dispatchability risks from a business risk perspective (Enel, 2020, p. 64; Iberdrola, 2020, p. 84; Statkraft, 2019, p. 12). Others are based in areas where hydropower can already provide enough flexibility to accommodate intermittent renewables, as is (or would be) the case in the Alpine region, the Balkans, the Nordics, and to a lesser extent the Iberian Peninsula. In some cases, (intermittent) renewables remain a negligible share of total electricity generation as other options are set to remain dominant for the time being, as is the case in Poland (coal) and France (nuclear). Even where intermittent renewables’ dispatchability is acknowledged as a serious business risk, such as by Innogy (2019, p. 100) in Germany or EDP – Energias de Portugal (2019, p. 36), hydrogen is simply not really considered as a solution in the power sector – and is not once named in annual reports.

14 Whereas electricity producers remain on the fence about the potential of hydrogen in the power sector, they see more use for green hydrogen in decarbonising industrial feedstocks. Verbund (2020, pp. 95–96), Vattenfall (2019a, pp. 55; 64), Fortum (2019b, p. 25) and Ørsted (2020, p. 5) are particularly explicit in this. For Verbund and Vattenfall, this practice of “sector coupling” is especially developed in combination with the steel industry, as noted earlier on the projects involving Voestalpine in Austria and HYBRIT in Sweden. It appears likely that other electricity producers will also (proactively) partake in similar projects that aim to decarbonise heavy industries through green hydrogen.

15 As in other sectors, pressure from governments and the increasingly strict climate regulations seem to be key motivations for electricity producers that do explicitly consider hydrogen. The involvement of Verbund (2020, pp. 95–96) is closely linked to Austria’s climate target of 100% renewable electricity by 2030. Vattenfall (2019a, p. 28) links its hydrogen projects in the Netherlands to the Dutch Climate Act and Climate Agreement. Fortum (2019b, p. 25), too, links the development of hydrogen closely to mitigating business risk scenarios based on big climate risks and heavy government interventions. More regulations, such as through more ambitious climate policies in the EU or Russia, create bigger business risks. In this scenario green hydrogen is also mostly used to decarbonise hard-to-abate sectors. Still, for many large electricity companies with similar obligations, hydrogen remains a niche technology, albeit with potential and worthy of further research.