View from Brussels: Hydrogen and nuclear play the EU waiting game

Will EU countries agree on which ‘green’ projects are best suited to propelling them out of this economic slump?

In setting up a level playing field for green finance, the EU put together a common rulebook, known as the taxonomy, which tells investors whether or not their money is tied up in a sustainable project.

The taxonomy has proved divisive. Central and Eastern European countries wanted natural gas labelled as a ‘transition’ fuel, while France and the UK have pushed for nuclear to be classed as a ‘green’ technology.

Both those asks have been opposed by countries that think renewable power should be the only tech that gets a green label or insist that atom-smashing is too politically toxic or expensive to include.

The EU’s new executive branch, the Commission, has bet big on climate policy and agreed to kick the nuclear issue into the long grass in order to secure a compromise. Its in-house experts will now make a decision, away from the pressure of political talks. According to the Commission’s note on the taxonomy, although “nuclear energy is generally acknowledged as a low-carbon energy source, opinions differ notably on the potential environmental impacts”.

Experts at the Joint Research Centre of the European Commission (JRC) and of its Institute for Energy and Transport in Belgium will now assess nuclear against a ‘do no significant harm’ principle. Its findings are not expected before the end of 2020.

The EU institutions have a complicated relationship with atomic energy. The Commission’s latest climate strategy, which targets net-zero greenhouse gases by 2050, acknowledges that ‘climate neutrality’ is not achievable without nuclear power. But it has stopped short of explicitly supporting it. MEPs are divided on the issue too. At the tail-end of 2019, the Parliament voted to lend their support to the idea of nuclear power contributing to climate policy, although in the same resolution some lawmakers were pushing for a phase-out to be official policy.

Most significantly, the European Investment Bank, which has pledged to mobilise €1tn in green financing this decade, has ruled out the funding of new nuclear builds. The EU lender also recently decided to scrub its loan books of fossil fuels.

That complicates matters, as the EIB is heavily involved in managing the billions of euros in green investments the Commission has planned over the same period. If the JRC report comes back positive, the bank will have to ensure its cashflows are kept separate.

One other low-carbon energy source is getting a lot attention at the moment: hydrogen. Earlier this month, Brussels unveiled a new strategy aimed at finally realising the potential of the zero-emission gas, which when burned only produces water. The plan is essentially a resource-management strategy, as hydrogen is still a somewhat precious commodity.

That is why the EU is starting to think about where hydrogen should be deployed in order to maximise its effectiveness and drive down the cost. That mantra basically rules out passenger cars and energy generation, where clean electricity rules the roost of low- emission options. Instead, its likely applications will be in energy-intensive processes like steel-making and smelting, as well as heating and heavy transport. 

To what extent investors will shell out extra cash to boost green hydrogen – produced using renewable power and electrolysis – over blue hydrogen – generated by natural gas and decarbonised using carbon capture – remains to be seen. There is another option that few policymakers have dared champion yet, due to the probable high costs and political sensitivity attached to it: purple hydrogen, produced using power generated by nuclear plants.

Aside from the environmental concerns linked to waste disposal and the price of new nuclear, one of the main concerns raised is lack of flexibility. It is difficult to turn reactors on and off, so integrating them with fluctuating energy sources like wind and solar is complex.

In economies that are spending big on renewables, that creates a grid-balancing headache that is putting off some governments from betting on nuclear too.

The more hydrogen, the better though. In a ‘purple scenario’, reactors would run 24 hours a day fuelling electrolysers in a non-stop hydrogen processing line. It will depend on whether the JRC rules in favour of nuclear and how fervently European countries invest in the hydrogen economy.

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