France to launch €4bn contracts-for-difference programme to support clean hydrogen production

The government's objective is to bridge the financial disparity between environmentally friendly and conventional hydrogen (H2) by utilizing 15-year contracts-for-difference (CfDs). According to a report by Le Figaro, the French government will allocate a combined sum of €4 billion ($4.3 billion) from 2024 to 2026 in CfDs to facilitate the production of low-carbon hydrogen.

These contracts will extend over a 15-year span and intend to offset the cost differential between 'clean' and 'grey' H2, the latter of which is derived from unabated fossil gas. Specific criteria for these contracts are forthcoming for public consultation in the following weeks. However, Le Figaro has noted that projects capable of adjusting their production to divert surplus renewable electricity to the grid during peak demand will receive supplementary rewards.

Further incentives will be granted to facilities where 50% of their power input originates from recently constructed renewable sources. This suggests that the French prerequisites for categorizing hydrogen as 'low-carbon' might not perfectly align with the European Union's delegated acts outlining renewable hydrogen.

As per these delegated acts, renewable non-biological origin fuels, including hydrogen and its derivatives, must be generated using electricity from renewables established within the same bidding zone within a three-year window of the electrolysis process. Additionally, hydrogen production must be synchronized with renewable electricity generation on a monthly basis until 2030, and by then, both processes must be synchronized within the same hour.

Hydrogen generated outside of these specifications, like through nuclear electricity or gas feedstock with carbon capture and storage, could be labeled as 'low-carbon' if their life cycle emissions are at least 70% lower than those of grey H2.

Agnès Pannier-Runacher, the French Minister for the Energy Transition, emphasized the nation's commitment to accelerating the production of low-carbon energy sources, including nuclear, renewables, and hydrogen, along with strategies for carbon dioxide storage and utilization.

While the European Union advances its recently updated Renewable Energy Directive, aiming for 42.5% of industrial hydrogen consumption to be renewable by 2030, rising to 60% in 2035, France has effectively advocated for a concession. This concession permits a 20% reduction in the target if member states can substantiate that their contribution to the EU's overall renewable targets aligns with expectations, and if the share of hydrogen from fossil fuels consumed within the country remains under 23% in 2030 and 20% in 2035. This provision could enable France to produce a portion of industrial hydrogen from its array of nuclear reactors.