Today, H2eart for Europe has published a new position paper setting out why de-risking underground hydrogen storage (UHS) should be a regulatory and policy priority at both Member State and EU level.
Read the position paper here.
Hydrogen will play an important role in Europe’s transition to a low-carbon energy system, particularly in sectors where direct electrification is difficult or costly. Yet, a functioning hydrogen market depends on more than production and demand – it also requires infrastructure that can connect supply and demand across time and geography.
UHS is central to this system. It can store hydrogen at scale, improve flexibility, support security of supply and help manage mismatches between production, supply and end-user demand.
Why investment requires public intervention
Our position paper highlights a structural coordination challenge across the hydrogen value chain. Producers, network operators, storage operators and end-users all depend on other parts of the system being developed on time. Yet no single actor can capture the wider system benefits created by their early infrastructure investment.
This creates a hold-up problem: projects that are valuable from a system perspective may remain difficult to finance on a standalone basis.
For UHS, this challenge is especially acute. Projects face:
- high upfront investment requirements;
- long development timelines;
- significant technical and permitting work; and
- limited visibility on future hydrogen storage demand and utilisation.
Without timely investment, Europe risks creating a storage bottleneck, with hydrogen production, demand and transport infrastructure lacking confidence that required flexibility infrastructure will be available.
Different market phases require different de-risking approaches
Given the complex and evolving risk environment faced by UHS operators, we argue that different phases of the hydrogen market require different de-risking instruments:
- in the market creation phase, support should focus on enabling anticipatory investment, including through faster permitting, technical harmonisation, feasibility support and coordinated infrastructure planning;
- during market ramp-up, mechanisms should improve bankability and revenue visibility, including through revenue stabilisation, intertemporal cost allocation, long-term booking frameworks and guarantees; and
- as the market matures, support should shift towards commercially sustainable operation, underpinned by stable tariff methodologies and harmonised market rules.
UHS is core hydrogen infrastructure
Our position paper concludes that UHS should be treated alongside hydrogen transport infrastructure in European de-risking discussions. Storage is not an ancillary part of the hydrogen value chain. It is a core infrastructure component for an integrated, resilient and cost-effective European hydrogen market.