HYDROGEN ROADMAP EUROPE

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1 HYDROGEN EUROPE A sustainable pathway for the European energy transition February 6, 2019 PAGE 1

2 WHY HYDROGEN: TO REALIZE THE AMBITIOUS TRANSITION OF THE EU'S ENERGY SYSTEM, A NUMBER OF CHALLENGES NEED TO BE RESOLVED Mt Power generation, balancing, buffering Transportation 3,536 1,695 1,841 1,070 Challenges Achieving deep decarbonization Managing variable renewables Heating and power for buildings Industry energy Industry feedstock Others CO 2 emissions in 2015 Current plan 1 CO 2 emissions in 2050 Remaining gap 771 CO 2 emissions in 2DS² 1 Emission reductions from current national commitments, energy efficiency etc. as included in the IEA "reference technology scenario" 2 DS = degree scenario SOURCE: IEA Energy Technology Perspectives 2017; Hydrogen Roadmap Europe team 1.5DS 2 : 254 Mt Meeting customer preferences Retaining EU technology leadership to create jobs and wealth PAGE 2

3 ACHIEVING DEEP DECARBONIZATION OF >80% OF CO 2 EMISSIONS REQUIRES HYDROGEN Challenge Hydrogen is the best or only choice for at-scale decarbonization of key segments, for example: Achieving deep H 2 TO DECARBONIZE THE GAS GRID FUEL CELLS/ SYNFUELS FOR HEAVY TRANSPORT AND LONG DISTANCES HIGH-GRADE HEAT FOR INDUSTRY & IN STEEL decarbonization ULTRA-LOW- CARBON H 2 AS FEEDSTOCK, E.G., AMMONIA PAGE 3

4 Demand USING HYDROGEN IN THE GAS GRID OFFERS THREE MAJOR ADVANTAGES OVER OTHER DECARBONIZATION SOLUTIONS FOR BUILDING HEATING 1 Heating Full direct electrification of heating not feasible Winter Summer Power Winter Would require significant increase in power generation and grid capacity that is used only in the winter H 2 TO DECARBONIZE THE GAS GRID 2 Compatible with existing building stock compared to use of heat pumps 90% of all buildings emissions result from buildings older than 25 years 3 Infrastructure, skills and regulations already available and ready to be leveraged 40% of all European households have gas heating as of today making fast and convenient implementation possible PAGE 4

5 EXAMPLE FOR TRUCKS: HYDROGEN FUEL CELL POWERTRAINS ARE A TECHNICALLY ADVANCED ZERO EMISSION TECHNOLOGY AND COST COMPETITIVE FOR HEAVY TRANSPORT FUEL CELLS FOR HEAVY TRANSPORT 1 FCEV powertrains for trucks are cost competitive with BEV from 100 km range 2 Powertrain system cost, '000 EUR ~100 km Energy capacity converted to range, km Hydrogen refueling is 15 times faster than fast charging After 10 minutes refueling/recharging time 90% FCEV truck vs. 10% BEV truck of ~1000 km range BEV truck FCEV truck 3 Recharging infrastructure... H 2 requires 10-15x less space and creates flexible instead of peak load PAGE 5

6 IN INDUSTRY, HYDROGEN PROVIDES LARGE-SCALE OPPORTUNITIES TO DECARBONIZE HIGH- GRADE HEAT OR REPLACE CARBON-INTENSIVE INPUTS AS A FEEDSTOCK 1 Only feasible route for decarbonization of steel Replacement of blast furnace with direct reduction process using hydrogen HIGH-GRADE HEAT FOR INDUSTRY AND AS FEEDSTOCK 2 3 At-scale decarbonization of high-grade heat industrial processes Decarbonization route compatible with current processes Conversion of hydrogen production to ultra-low-carbon hydrogen Decarbonization of hydrogen production where currently used e.g., in ammonia production, refining and petrochemical industries PAGE 6

7 MANAGING VARIABLE RENEWABLES REQUIRES HYDROGEN Challenge Hydrogen is the only option to enable the transition of the energy system managing quadrupling renewables requires... Managing H 2 variable renewables AT-SCALE SECTOR COUPLING MECHANISM LOW-COST SEASONAL ENERGY STORAGE LINK BETWEEN PRODUCTION AND DEMAND REGIONS PAGE 7

8 HYDROGEN AND FUEL CELL SOLUTIONS MEET CUSTOMER PREFERENCES AND ARE CONVENIENT Challenge Hydrogen and fuel cells are compatible with current usage patterns and convenience due to... Meeting customer preferences SUPERIOR RANGE AND REFUELING TIME OF FCEVs NO OR FEW CONSTRUCTION CHANGES REQUIRED FOR HEATING WITH H 2 POTENTIAL FOR LOWER ENERGY COSTS IN THE LONG TERM PAGE 8

9 HYDROGEN AND FUEL CELL TECHNOLOGIES ARE AN OPPORTUNITY FOR EUROPE'S INDUSTRY Challenge Hydrogen and fuel cell technologies are an opportunity for Europe's industry as to... Securing EU technology leadership to create jobs BUILD ON CURRENT SKILLS AND MANUFACTURING CAPACITY REDUCE DEPENDENCY ON FOSSIL FUEL IMPORTS LEVERAGE EXISTING INFRASTRUCTURE and wealth PAGE 9

10 TOGETHER WITH AN INDUSTRY COALITION, A HYDROGEN FOR EUROPE HAS BEEN DEVELOPED Study by the FCH JU, supported by Hydrogen Europe and 17 companies and organizations along the whole value chain of hydrogen First comprehensive quantified European perspective for deployment of hydrogen and fuel cells in two scenarios Ambitious, yet realistic two-degree scenario and business-as-usual scenario Long-term potential Roadmap with intermediate milestones Recommendations to kickstart PAGE 10

11 WHY HYDROGEN ACROSS APPLICATIONS HYDROGEN CAN CLOSE HALF OF THE GAP TOWARDS THE 2DS Carbon emissions gap to reach 2DS 1 in 2050, Mt 1, Total gap to reach 2DS 1 in 2050 Closing ~50% of gap CO 2 abatement potential of hydrogen Segments Power generation, balancing, buffering 2-3 wheelers Passenger vehicles Taxis and vans Buses and trucks Forklifts 508 Remaining gap Aviation Shipping Rail Heating and power for buildings High-grade heat Medium-grade heat Existing: Ammonia, methanol Refining Metal processing Low-grade heat New: Steelmaking (DRI) CCU (methanol, olefins, BTX) Hydrogen decarbonization levers Power generation Transportation Heating and power for buildings Industry heat Industry feedstock Integration of renewables into the power sector 2 Power generation from renewable resources Replacement of combustion engines with FCEVs, in particular in buses and trucks, taxis and vans as well as larger passenger vehicles Decarbonization of aviation fuel through synthetic fuels based on hydrogen Replacement of diesel-powered trains and oil-powered ships with hydrogen fuel-cellpowered units Decarbonization of natural gas grid through blending Upgrade of natural gas to pure hydrogen grid Replacement of natural gas for process heat Switch from blast furnace to DRI steel Replacement of natural gas as feedstock in combination with CCU 1 2-degree scenario 2 Please see the chapter on renewables and power for information on the role of hydrogen as enabler of a renewable power system. The "enabled" carbon abatement from renewables is not included here and is an additional benefit of hydrogen for decarbonization SOURCE: IEA Energy Technology Perspectives 2017; Hydrogen Roadmap Europe team PAGE 11

12 WHY HYDROGEN BESIDES CO 2 ABATEMENT, DEPLOYMENT OF THE HYDROGEN ALSO CUTS LOCAL EMISSIONS, CREATES NEW MARKETS AND SECURES SUSTAINABLE EMPLOYMENT IN EUROPE 2050 hydrogen vision CO 2 ~24% of final energy demand 1 ~560 Mt annual CO 2 abatement 2 ~EUR 820bn annual revenue (hydrogen and ~15% reduction of local emissions (NO x ) equipment) relative to road transport ~5.4m jobs (hydrogen, equipment, supplier industries) 3 1 Including feedstock; 2 Compared to the reference technology scenario; 3 scenario Excluding 3 indirect Excluding effects indirect effects SOURCE: Hydrogen Roadmap Europe team PAGE 12

13 HYDROGEN COULD PROVIDE UP TO 24% OF TOTAL ENERGY DEMAND, OR UP TO ~2,250 TWH OF ENERGY IN THE EU BY 2050 TWh Final energy demand 14,100 11,500 9,300 Thereof H 2 2% 4% 6% 8% 24% 325 x Business As Usual x7 70 Ambitious , Business As Usual Ambitious 1-3 Power generation, buffering 4 5 Heating and power for buildings 6 7 Transportation Industry energy New feedstock Existing feedstock 2015 SOURCE: Hydrogen Roadmap Europe team PAGE 13

14 HYDROGEN TECHNOLOGY EXISTS AND IS READY TO BE DEPLOYED Ambitious scenario Business as usual scenario Start of commercialization Mass market acceptability 1 Today City buses Taxis Forklifts Medium and large cars 4 Transportation Trams/railways Vans Coaches Trucks Synfuel (freight ships and aviation) 5 Heating and power for buildings 3 mchps 2 6 Low/medium industry heat Industry heat High-grade industry heat Pure hydrogen heating Blended hydrogen heating Small cars 7 1 Industry feedstock Power generation CCU (methanol, olefins, BTX) 5 Steelmaking 6 Power generation, balancing, buffering Existing: refining 4, chemicals (production of ammonia, methanol, and others), metal processing 1 Defined as sales >1% within segment; 2 mchps sales in EU independent of fuel type (NG or H 2 ); 3 Pure and blended H 2 refer to shares in total heating demand; 4 Refining includes hydro-cracking, hydro-treating, biorefinery; 5 Market share refers to the amount of production that uses hydrogen and captured carbon to replace feedstock; 6 CDA process and DRI with green H 2, iron reduction in blast furnaces, and other low-carbon steel making processes using H 2 SOURCE: Hydrogen Roadmap Europe team PAGE 14

15 HYDROGEN PLAYS AN IMPORTANT, COMPLEMENTARY ROLE IN THE 2050 ENERGY SYSTEM Segments Key subsegments Relative importance by Large cars (fleets) and taxis Transportation Trucks and buses Light commercial vehicles Trains Heating and power for buildings Industry energy Industry feedstock Hydrogen blending for heating Pure hydrogen grids for heating High-grade heat Ultra-low-carbon hydrogen as feedstock for Ammonia, methanol Refining Feedstock in steelmaking (DRI) Combined with CCU in production of olefins and BTX 1 Power Power generation from hydrogen generation Flexible power generation from hydrogen 2% 2% 9% 20% 30% 22% 16% 23% 30% 80% 39% 55% 100% Complementary decarbonization solutions Battery-electric vehicles Plug-in hybrid electric vehicles Electrified trains Electrification of heating via heat pumps Energy efficiency measures Biogas/biomass Demand side and energy efficiency measures Electrification Biogas/biomass Carbon capture For steel: Coke from biomass CCS on blast furnace For CCU: Carbon storage Biogas Post-combustion CCS Batteries 1 In transportation: percent of total fleet; in heating and power for buildings: percent of total heating demand; in industry energy: percent of final energy demand; in industry feedstock: percent of total feedstock for production; in power generation: percent of total power generation and percent of power generated from natural gas SOURCE: Hydrogen Roadmap Europe team PAGE 15

16 TO REACH THE AMBITIOUS 2050 VISION, WE PROPOSE SHORT- AND MEDIUM-TERM MILESTONES ACROSS ALL SEGMENTS One in light commercial vehicles sold are FCEVs 4...and one in passenger vehicles sold are FCEVs. There are ' '000 trucks and buses on the road......and 570 2,000...diesel trains replaced with hydrogen. A total of 7 % 32 % of natural gas (by volume) is replaced by hydrogen 5...equivalent to TWh 120 TWh...meaning... 2 m 11 m households are heated. The deployment of '000 2,560 '000 fuel cell CHPs increases energy efficiency. 7 There is % 63 % carbon-free hydrogen production in all applications. 1 At 25% utilization; additional hydrogen is produced through SMR and as byproduct 2 Values calculated for "mixed scenario" (hydrogen production via water electrolysis and SMR/ATR with CCS) SOURCE: Hydrogen Roadmap Europe team PAGE 16

17 4 HOWEVER, THIS AMBITIOUS SCENARIO REQUIRES A JOINT ROLLOUT OF SOLUTIONS, OTHERWISE DEPLOYMENT WILL REMAIN AT MUCH LOWER LEVELS Sales number of vehicles in road transport (2050) m vehicles Sales in ambitious scenario Sales in BAU scenario x Number of required HRS (1,000 kg) in ambitious scenario 250 1,500 3,750 8,500 15,000 23,000 33, x more vehicles x more vehicles SOURCE: Hydrogen Roadmap Europe team PAGE 17

18 4 CARS ARE MANUFACTURED IN THE GREATEST QUANTITIES AND ACHIEVE SIGNIFICANT PENETRATIONS IN COMMERCIAL FLEET CATEGORIES Vehicles 1, m FCEV share in respective segment Vehicles sold per year < Small cars Larger cars Taxis Vans/LCVs Buses Trucks 2% 5% 14% 8% 6% 1% 22% 39% 61% 49% 45% 35% Vehicle fleet on the road < Small cars Larger cars Taxis Vans/LCVs Buses Trucks 0% 2% 8% 3% 2% <1% 14% 28% 57% 30% 25% 21% 1 Including fuel cell hybrid vehicles SOURCE: Hydrogen Roadmap Europe team PAGE 18

19 4 THE EQUIVALENT OF ~3,740 REFUELING STATIONS WOULD BE REQUIRED BY 2030, IMPLYING INVESTMENT NEEDS OF EUR ~8.2 BN Required large HRS 1, number Current and planned HRS in Europe xx Cumulative investment need, EUR billions AMBITIOUS SCENARIO HRS in operation 2 Number of HRS announced and/or planned until ~15, ~3,700 ~8, In total, >750 stations announced/ planned for Today ~1, Equivalents of medium HRS (1,000kg daily capacity); utilization relative to steady-state 2 Indicative position SOURCE: European Commission (2017); H2stations.org; press research; Hydrogen Roadmap Europe team PAGE 19

20 5 IN THE EU OVERALL, A 10-18% SHARE OF BUILDING HEAT AND POWER COULD BE REPLACED BY HYDROGEN IN 2050 Total building energy demand, TWh Adoption rates percent x Million households receiving blended H 2 Heating Total building energy supplied by H 2,TWh; Heating rate, m household equivalents x Million households receiving pure H 2 Power 4,857 4,253 3, ,760 3,111 2,586 7% 18% , , , % BAU 1 10% Ambitious BAU Ambitious 1 Business as usual scenario SOURCE: heatroadmap.eu; Hydrogen Roadmap Europe team PAGE 20

21 6 FOR INDUSTRY, HYDROGEN HAS THE POTENTIAL TO GENERATE A SHARE OF UP TO 23% OF HIGH-GRADE HEAT FOR INDUSTRY IN 2050 High-grade heat Medium-grade heat Low-grade heat Power Total industry energy demand, TWh Adoption rates percent Total industry heat supplied by H 2,TWh 3, , , % 23% % 8% 1,425 1, % 4% Part of buildings heat and power BAU 1 Ambitious 48 5 BAU 1 37 Ambitious Business as usual scenario SOURCE: IEA ETP (2017), expert interviews, Hydrogen Roadmap Europe team PAGE 21

22 HYDROGEN PRODUCTION WILL BE A MIX OF MOSTLY ELECTROLYSIS AND SMR/ATR WITH CCS IN EUROPE Water electrolysis SMR/ATR with CCS Carbon-free production method for hydrogen if fueled by renewables Long-term potential to match or even beat SMR costs in case of low-cost solar and/or electrolyzer capex decrease In combination with carbon capture (CCS), carbon emissions are reduced significantly by up to 90% SMR is established and mature technology Provision of sector-coupling mechanism required for integration of renewables No issues with political/ societal acceptance compared to CCS Hydrogen production method for large scale as required for the industry Reliable constant production possible Decentral production taking load off the grid and providing power at remote locations or points of sale (e.g., at refueling stations) Higher infrastructure costs for natural gas and CO 2 handling SMR is currently lowest-cost hydrogen production PAGE 22

23 THE HYDROGEN ECONOMY REQUIRES EUR 65 BN CUMULATIVE INVESTMENTS AND OPENS A MARKET OF UP TO EUR 55 BN ANNUAL SALES IN EUROPE BY 2030 EUR bn Cumulative investments in manufacturing equipment ( ) 1 Supplier OEM Annual revenues in end-uses (2030) 1 Equipment Hydrogen Cumulative investments in hydrogen production, storage, and distribution ( ) 1 Power generation R&D and manufacturing Transportation Hydrogen distribution and retail Hydrogen storage and buffering Hydrogen production Buildings heat and power Infrastructure Industry energy <0.1 <0.1 < New feedstock n/a n/a n/a Including investments/revenues in aftermarket services and new business models (assumption: 8% of investment/revenue) SOURCE: Hydrogen Roadmap Europe team PAGE 23

24 IN TOTAL, A MARKET OF EUR ~150 BN AND ~1 M JOBS COULD BE UNLOCKED BY hydrogen vision Estimation of industry size EU and global market potential taken from hydrogen vision Fair share of EU industry on domestic and worldwide market derived from industry statistics and industry interviews Revenue and jobs multipliers estimated from EU input-output models Ambitious scenario Fair domestic market share for EU players (between 60% and 90% depending on the step in the value chain) Fair market share for EU players in RoW (between 10% and 25% depending on the step in the value chain) EU market Ambitious Imports BAU 1 10 ~ Jobs, 000 EU market served by EU industry Exports ~ ~75 ~ ~ ~450 Σ ~EUR150 bn Market size, EUR billions Σ ~1 m EU industry 1 Business as usual scenario SOURCE: Hydrogen Roadmap Europe team PAGE 24

25 RECOMMENDATIONS INDUSTRY, REGULATORY AND INVESTORS NEED TO ACT TOGETHER Gas grid for building power and heating: binding targets or feed-in tariffs and modernization of regulation Realistic, long-term and holistic decarbonization pathways for all sectors Joint commitment from regulators and industry Power system: decarbonization of power balancing markets using electrolyzers and regulatory mechanisms Transport: credible funding mechanism for infrastructure and clear industry investments in product development Industry: regulatory targets for transition from grey to low-carbon hydrogen Development of additional hydrogen and fuel cell applications Kickstart deployment across four sectors Plans to scale-up proven applications, e.g., hydrogen trains, ships and mchps Overarching Support and enable additional opportunities Build low-carbon supply hydrogen system Strong investment in hydrogen and fuel cell technology by the European industry & continuation and increase of research and innovation funding Scale-up of electrolysis and CCS Electrolysis: incentives from gas grid decarbonization CCS: support for industry-scale demonstration projects PAGE 25