With the approval of the National Strategy and the recent agreements with Austria, Germany, Tunisia and Algeria, the action plan for the emergence of a hydrogen market has been definitively outlined, with Italy as the main player in this new process.
On 26 November 2024, at the GSE headquarters, the Ministry of the Environment and Energy Security presented the National Hydrogen Strategy (hereinafter, “Strategy”), a policy document outlining the objectives of the Country to enhance the role of hydrogen - and, in particular, green hydrogen[i] - in the Italian energy transition process, to achieve the decarbonization targets set out in the National Integrated Energy and Climate Plan (“PINIEC”) to 2030 and Net Zero to 2050.
As is well known, in fact, hydrogen is called upon to play a fundamental role in the so-called hard-to-abate (HTA) sectors of industry (steel, foundries, ceramics, glass cement) as well as in other more specific sectors such as mobility, heavy or long-haul land transport, the maritime sector and air transport.
Moreover, at present, its use is limited to that of a technical gas, i.e. a production factor used in some specific industrial processes (oil refining, fertilizer production, etc.) or to use as a fuel in sustainable mobility pilot projects but it has not yet found a significant use for heat production through combustion.
Contrarywise, this gas could take on an important role as an energy carrier, as it can potentially be produced from all primary energy sources - renewable (bio and non-bio), fossil and nuclear, and as it has a certain degree of universality for certain end uses.
The Strategy is therefore articulated along three fundamental lines, namely: (i) hydrogen demand; (ii) hydrogen production and supply; and (iii) hydrogen transport and infrastructure. In each of these areas, the Strategy has developed three scenarios, namely the “base” scenario, the “intermediate” scenario and a final “high employment” scenario, which are followed by a chapter on strategic actions, policies and supporting measures, setting different time horizons between now and 2050.
With regard to the short-term horizon (up to 2030), the Strategy envisages that hydrogen demand will be driven by the European obligations of RED III, in compliance with which Italy has already taken steps to support the emergence of an ad hoc market, thanks to the resources made available by the PNRR that will finance the first operational production projects by 2026. The Strategy aims to implement measures to facilitate the realization of such projects, working on incentive schemes to lower the cost of hydrogen, intervening to support the value chain up to the end user, as well as to simplify environmental and safety regulations and authorization paths.
At this stage, production and consumption will be mainly concentrated in confined areas (so-called Hydrogen Valleys), capable of creating synergies between different sectors, from mobility to industry, and bringing supply and demand closer together. This embryonic development phase of the supply chain and market should make it possible to use renewable and low-carbon forms of hydrogen so that the first significant quantities of hydrogen with specific guarantees of origin will be available immediately. This development will also be accompanied by the development - at local level - of transport and logistics infrastructures.
The sector's potential growth in the medium term will instead be driven by emission reduction policies, favoured by the increasing availability of H2 technologies, as well as supported by measures designed to meet European obligations and by the National Recovery and Resilience Plan (“PNRR”) to allow the emergence of a true hydrogen market, including through the development of large-scale solutions capable of cutting operating costs. With respect to the short-term scenarios, in the medium term, demand is expected to increase in the maritime and air transport, HTA industry, heavy-duty and long-haul mobility sectors.
In the long-term scenario, 2050 will represent the end point of Net Zero commitments, with hydrogen penetration reaching 18% of final consumption in the HTA industry and 30% of final consumption in the transport sector. The infrastructure will play a key role in the exchange of energy with other countries, consolidating Italy's role as a hydrogen import hub for Europe with gas network infrastructures connected to North Africa and a set of ports, enabled for the import of hydrogen (and other energy vectors, including ammonia, methanol, etc.).
The Strategy, considering the variability of production from non-programmable renewable sources, which makes it very useful to include different types of storage systems in the electricity grid, emphasizes the ability of hydrogen, by its very nature, unlike batteries and almost all technologies currently considered for storage, to allow the storage of large quantities of energy even over relatively long periods.
In the scenarios envisaged by the Strategy, importing hydrogen will be a necessary (as well as cost-effective) option to cover part of domestic demand.
In this regard, the construction of an Italian pipelines dedicated to hydrogen transport, part of the broader Southern Hydrogen Corridor, is particularly important in terms of infrastructure.
The demand for hydrogen could, in fact, be covered by a supply of hydrogen partly produced in Italy and partly imported; the subject of possible hydrogen imports has already found its way into the final version of the PNIEC sent to the European Commission on 1 July 2024. In fact, according to the PNIEC policy scenario, it is estimated that at least 70 per cent of demand will be met domestically, while the residual will be imported. Imports will therefore already play an important role in the short term for the spread of hydrogen, in the hope that an international market will develop.
In the long term (beyond 2030), it is also likely that both Italy and Europe will not be able to produce enough hydrogen, especially green hydrogen, locally to cover all future demand.
Thanks to its geographical location and the existing natural gas transport infrastructure network (to be adapted to hydrogen transport), Italy has the opportunity to become a hub for the import, production and export of renewable hydrogen, connecting North Africa with Europe. This role is further strengthened:
(i). by the number and distribution of natural gas storage sites available in the country, which could be converted to hydrogen storage, increasing the security and balancing of the system;
(ii). by the availability of sea ports for imports from the Mediterranean and Middle East of energy carriers (e.g. ammonia) to be converted into hydrogen.
A major role in the supply of renewable hydrogen in the European Union could be played by the Southern Hydrogen Corridor (“SoutH2 Corridor”).
As part of the joint activities for the development of a SoutH2 Corridor (which, crossing Italy, Austria and Germany, will allow the import and supply of low-cost renewable hydrogen, produced in the countries of the southern Mediterranean probe, to the main demand clusters in Italy and Central Europe), the Ministry for the Environment and Energy Security has been working with the German and Austrian Ministries to evaluate hypotheses of collaboration on specific tools to support import.
The latest act in this ambitious project dates back to 21 January 2025: Italy, Germany, Austria, Algeria and Tunisia have, in fact, signed a letter of intent committing to the construction of the South Hydrogen Corridor (about 4,000 km long), which will connect production centers in North Africa with the heart of Europe.
Five sub-projects with a transport capacity of up to 163 TWh per year are planned for the realization of the South H2 Corridor. For Europe, 60-70% of the projects concern the conversion of existing pipelines. The various sections of the Corridor have been recognized by the EU as Projects of Common Interest (PCI) and have been granted “Global Gateway” status by Brussels.
In the declaration, the signatories pledged to strengthen cooperation for the development of the infrastructure through a joint working group of five members, which will meet every six months, in order to coordinate national policies, exchange experiences to ensure the effective implementation of the project, identify financing needs and risk-reducing mechanisms, and develop the necessary expertise.
Moreover, the supply of hydrogen from imported energy carriers would have a positive impact for Italy in terms of diversification of energy supplies, already in the short/medium term, and in terms of preparing for the widespread use of hydrogen, through dedicated infrastructures contributing to supplying renewable hydrogen at a more competitive price to Italian industries. Furthermore, the role of ports would be enhanced, converting them into new renewable energy hubs that would act as catalysts for the development of demand, similar to what is already happening in Northern Europe. This could also have positive spin-offs in terms of developing skills and a dedicated hydrogen logistics chain.
Related to the issues of the hydrogen supply and market is undoubtedly the issue of its traceability and certification of its origin. In May 2024, the Council of the European Union finally adopted a regulation and a directive (so-called hydrogen and gas market package), which aims, among other things, to create a regulatory framework for hydrogen infrastructure and markets and for integrated network planning. In particular, the package envisages the issuing of gas quality standards and its monitoring, also following blending; it also envisages the development of a low-carbon hydrogen certification scheme. The certification scheme (it also extends to derivative products) is to be developed in line with what is already envisaged for renewable hydrogen of non-organic origin, thus completing the regulatory framework for the traceability and certification of hydrogen and “low-carbon” fuels, whether produced in the EU or imported.
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The Strategy envisages several scenarios, emphasising that the multiplicity and complexity of hydrogen development issues means that a number of factors must be taken into account that cannot be fully determined well in advance of the time when a broad deployment of technologies will be needed. Hence the choice of several scenarios to chart a medium- to long-term course on the use of hydrogen.
In the ‘high employment’ scenario, the hydrogen carrier is given a very important role, although differentiated sector by sector. In contrast, the ‘base’ scenario, while recognizing a significant contribution to hydrogen, assumes a longer delay in the maturation and achievement of competitiveness of this vector.
The scenarios to 2050 estimate hydrogen consumption at between 6.4 and 11.9 million tonnes per year (6.39 million tonnes in the ‘base’ scenario, 9.08 million tonnes in the ‘intermediate’ scenario and 11.93 million tonnes in the ‘high employment’ scenario). The ‘high employment’ scenario envisages consumption covering 30% of transport, 18% of hard-to-abate industry and 0.7% in the civil sector in 2050.
The projected investments vary according to the share of domestic production and import: a scenario with 70% domestic production and 30% import and a scenario with 80% import and 20% production. In the scenario with 70% domestic production, EUR 8-16 billion is estimated for 15-30 GW of electrolysis, while with 80% import the expenditure is reduced to EUR 2-5 billion for 4-9 GW.
[i] Hydrogen is often classified according to the production chain used. However, one may still come across terminology, which is not official, referring to colors: (i) grey hydrogen, produced from fossil sources without capturing the CO2 produced; (ii) blue hydrogen, produced from fossil sources but capturing the CO2 produced; (iii) green hydrogen, produced from renewable sources; (iv) pink hydrogen, produced from nuclear sources; (v) white hydrogen, of geological origin. The European Hydrogen Strategy (COM/2020/301), on the other hand, refers to different types of hydrogen, classifying them as follows 1) electrolytic hydrogen, produced through the electrolysis of water in an electrolyser powered by electricity, irrespective of the source of the latter; 2) renewable (or clean) hydrogen, produced through the electrolysis of water by electricity from renewable sources 3) hydrogen of fossil origin, produced through various processes whose raw materials are fossil fuels; 4) hydrogen of fossil origin with carbon capture, characterised by the capture of greenhouse gases emitted during the production process; 5) low carbon hydrogen, which includes hydrogen of fossil origin with carbon capture and electrolytic hydrogen.
