Hydrogen in Austria: Waiting for a strategy

Author: Marco Selenić, Associate, CMS Vienna

All over the world, hydrogen is increasingly seen as one of the key drivers of the energy transition. An increasing number of countries are formulating strategies and announcing investment programs to foster the development of hydrogen projects, especially green ones. In Austria, initial plans of a strategy for the use of hydrogen were announced more than three years ago but little has happened since then – at least politically.

Hydrogen has been hailed as a revolutionary alternative to fossil fuels for decades. The idea of an environmentally friendly energy source that is compact, easily available, and has a wide variety of applications sounds almost too good to be true. One of the major problems of course is the high cost of production of hydrogen. Under the pressure of the climate crisis, recently there has been a stronger focus on developing new hydrogen technologies to make its production and use cheaper.

Despite more ambitious climate goals, hydrogen has fallen somewhat behind on the political agenda

However, it is still a long way before hydrogen will become a real alternative to fossil fuels or electricity generated from renewable sources. Many countries around the world have recognized this and formulated specific strategies. Austria is not (yet) one of them.

Why not? In 2018, the Austrian government kicked off the initial development of an “Austrian Hydrogen Strategy”, which was supposed to be spearheaded by the Austrian Federal Ministry for Climate Action, Environment, Energy, Mobility, Innovation and Technology. Political turmoil led to a new government being elected in which the conservative Austrian People’s Party and the Green Party participated. This led to an even stronger focus on renewable energy sources. However, despite more ambitious climate goals, hydrogen has fallen somewhat behind on the political agenda.

The lack of a clear strategy risks Austria losing ground in several areas: Large amounts of hydrogen will be needed in industry, mobility, heat supply and stabilization of the electricity grid and it will not be possible to cover the need with domestic sources only.

Other countries have begun working on partnerships to secure supply sources. Again, Austria is not (yet) one of them.

However, the situation is not as dire as it might appear at first glance. In July of 2021, the parliament passed the Renewable Energy Expansion Act (Erneuerbaren-Ausbau-Gesetz, REEA). It is a comprehensive legislation package aimed at reshaping the Austrian legal framework on renewable energy production, distribution, and consumption. It is the core piece of legislation on Austria’s path to reach its ambitious climate goals: generating electricity through 100% renewable energy sources by 2030 and reaching carbon neutrality by 2040 at the latest.

Among many other changes, the construction of electrolysis plants for the conversion of electricity into hydrogen or synthetic gas can now be funded by an investment grant. However, such funding is excluded for plants that are built and operated by grid operators or that add hydrogen to natural gas in the public gas grid. The investments may be subsidized with up to 45% of the investment volume directly required for the construction of the plant (excluding the purchase of the land plots). A total of 40 million Euros in public funds will be available for this purpose every year (admittedly, compared with other Western European countries that number does not seem very high).

Further, at a hydrogen event on 20 October 2021 the responsible section chief from the Energy Ministry stated that the hydrogen strategy has been finalized on a technical level, but the political decision is still pending. The strategy envisages the development of an electrolysis capacity of 1,000 MW by 2030, further privileges for hydrogen technologies, and additional subsidies of 125 million Euros from the Next Generation EU fund.

Despite the political hesitation, the business community is moving forward. The general trend that can be observed in many countries around the world has also reached Austria with more and more new hydrogen projects surfacing. Currently, around 180 companies in Austria are focused on hydrogen technologies and interest is continuously increasing. The projects range from holistic power, through gas projects, all the way to production, mobility applications, and storage of hydrogen.

Storage projects are highly attractive to those involved in the energy transition

Especially in view of the problems with preserving energy generated from renewable energy sources during the winter months, storage projects are highly attractive to those involved in the energy transition. ADX Energy, for example, an Australian energy company that recently acquired former oil and gas fields in Lower Austria, is currently working on the use of depleted gas reservoirs suitable for hydrogen storage.

If Austria really wants to play a leading role in the development of hydrogen technologies and applications, politics should follow what the business community has already done and also jump on the hydrogen train. For this to happen, more support and clear directions, in particular a clear regulatory framework for hydrogen, will be required.