Hydrogen’s empty promises: How Hungary, Poland and Romania are betting on false solutions

A recent Bankwatch report sheds light on the hydrogen plans of Hungary, Poland and Romania, stressing the need to avoid misguided investments in greenwashed fossil hydrogen projects and inefficient end-use applications. 

The Financial Times recently reported a major drop in hydrogen stock prices in both the EU and the US, citing ‘lower than expected demand, regulatory uncertainties and growing investor skepticism’. While industry players admit to having ‘unrealistic expectations’ about the pace of project development, they’ve been quick to place the blame on ‘rigid’ and ‘stringent’ EU legal definitions of renewable hydrogen, whilst ignoring the dawning realisation: Maybe they’ve just been plain wrong from the very start?  

Though the EU is prioritising the development and use of renewable hydrogen, actual spending has fallen short of its ambitious targets. In fact, the EU is set to reach only about 4 per cent of its 2024 electrolyser target set in 2020, with built capacity of 0.216 gigawatts (GW) of its 6 GW target achieved in 2023. Additionally, most EU funds do not explicitly target renewable hydrogen production, as they also provide funding for ‘low-carbon’ hydrogen, restricting the support available for renewable hydrogen projects. 

This confusion extends to the hydrogen plans of governments in central and eastern Europe. As our new report shows, Hungary, Poland and Romania are expecting hydrogen to play a significant part in their decarbonisation strategies, ignoring issues of cost and efficiency. Despite the EU’s alleged focus on renewable hydrogen, these nations are weighing up all their options across the ‘hydrogen rainbow’.  

Unfocused  

Whilst recognising the need to ramp up renewable hydrogen production, the three countries have worrying plans to increase the use of non-renewable hydrogen. Fossil hydrogen with carbon capture, also known as ‘blue hydrogen’, has been shown to produce higher greenhouse gas emissions than burning fossil gas directly. Furthemore, carbon capture is not commercially viable and has not proven effective in reducing carbon emissions, considering the vast subsidies the projects require. None of these countries’ hydrogen strategies rule out the need for fossil-based hydrogen, not even after 2030.  

Hungary and Poland have also adopted more ‘technology-neutral’ definitions of hydrogen production technologies. Hungary lumps water electrolysis in with nuclear hydrogen under the blanket term ‘green and other carbon-free hydrogen’, while Poland classifies fossil gas with carbon capture, utilisation and storage, nuclear, and biomass-based hydrogen all as ‘low-carbon’ along with renewable hydrogen. This greenwashes the use of fossil gas or nuclear for hydrogen production, while promoting false solutions such as carbon capture.  

All three countries agree with the EU’s priority sectors for hydrogen use: decarbonising industry and other hard-to-abate sectors. However, they haven’t stopped there, treating hydrogen as a solution to every sector in need of decarbonisation.  

The unfocused nature of their hydrogen strategies and plans means that the countries now lack clear ideas about what sectors and hydrogen applications must be prioritised to assess limited public funding. EU funds therefore risk being used to support fossil fuels.  

One of the key issues with the hydrogen strategies of Hungary, Poland and Romania is their affinity for blending hydrogen with fossil gas under the pretence that it will reduce carbon emissions. For instance, Hungary plans to blend hydrogen into its existing fossil gas transmission system, with new gas power plants set to incorporate a 5 to 30 per cent hydrogen blend. In Poland, retrofitted gas infrastructure is expected to accommodate a 10 per cent blend. The Hungarian and Romanian governments plan to initially blend 2 per cent hydrogen into the distribution network, with Romania aiming to reach 20 per cent, having invested EU funds for this purpose. But even assuming renewable hydrogen is used in all these cases – which is far from certain – the ultimate emissions savings would be marginal and represent a waste of a limited resource and are associated with significant costs.  

Perhaps the most obviously unsuitable application for hydrogen use has somehow also made its way into these national strategies – the heating and cooling sector. Scientific findings suggest that hydrogen is not a cost-optimal solution for decarbonising the heating sector, compared to electrification’s higher efficiency and lower costs. Despite this evidence, Poland has included future large investments in heating and cooling infrastructure to introduce a hydrogen-fossil gas blend, while Romania plans to use hydrogen in heating after 2030, and Hungary potentially after 2040.   

Unrealistic 

The pace of renewable energy deployment in these countries lags far behind that needed to reach their renewable hydrogen production targets by 2030, which requires even more renewable energy production. The pace and scale of hydrogen targets both within the EU and in these countries is unrealistic, bordering on the impossible. This is also not reflected in hydrogen projects receiving public funding – Romania is the only country of the three that’s allocated a relatively significant amount of funding for electrolysers, and even that’s negligible compared to the intended renewable hydrogen consumption levels. None of the countries target the issue of necessary additional renewable capacity in their hydrogen strategies. Therefore, a massive funding and planning gap stands between the expected renewable hydrogen production capacity by 2030 and the reality of countries lacking electrolyser and renewable projects. 

The importance of hydrogen in decarbonising the transport sector is also overinflated and problematic in all the countries, considering that electrification – a more efficient and competitive alternative – is available for local transport and passenger cars. A considerable amount of funding is allocated to purchasing unnecessary hydrogen buses and other vehicles in both Hungary and Poland. 

All the countries plan to invest, or are already investing, in hydrogen transmission, both by retrofitting gas transmission networks and developing cross-border projects and brand-new hydrogen pipelines, which is disproportionate to the scale of development of renewable hydrogen production capacity.  

Unaffordable 

Lastly, no consideration has been given to the misuse of public funds or the social impact of the future renewable hydrogen price in the ‘all-of-the-above’ hydrogen applications approach these countries have adopted. While many hydrogen projects proposed today will remain only dreams of fossil fuel companies, funding the wrong projects could still do a lot of damage. The public is at risk of footing a hefty bill.  

Unfocused, unrealistic and unaffordable – three adjectives that sum up the misguided hydrogen strategies of Hungary, Poland and Romania. They all provide unverified plans for their envisaged hydrogen economies. The lack of connection between policy objectives and reality reflects a political perception of hydrogen as a magic bullet, when in practice it’s almost completely missed the target. 

What should and should not be funded?  

Renewable hydrogen is scarce, expensive and only the most useful solution in a few select cases. Public financing in the EU should be restricted and targeted at those most needed end-use applications and should not be available for solutions outside of that scope to avoid wasting public funds. The EU and its Member States should:  

• remove support for projects that support the development or use of non-renewable hydrogen and prohibit the subsidisation of fossil hydrogen; 
• prioritise funding for renewable hydrogen production near to the points of consumption and high-efficiency hydrogen use in ‘hard-to-abate’ sectors over less efficient and no-go applications;  

• base funding allocations on independent, realistic, scientific assessments and projections for the future of renewable hydrogen, including end-user costs, ensuring investments are grounded in reality;  

• align investments in demand-side projects directly with the capacity and pace of investments in supply-side projects to avoid mismatches; 

• exclude public support for hydrogen use in local public transport and passenger vehicles and, under no circumstances, allow funding for the development of the least efficient end-uses of hydrogen, such as heating and cooling; 

• remove funding for projects that blend hydrogen with fossil gas; 

• introduce other mandatory hydrogen-use efficiency criteria based on life-cycle emissions savings, cost-effectiveness, energy efficiency, and comparisons to viable alternatives before allocating funding to hydrogen projects; and 

• revise national strategies and plans for hydrogen based on the above recommendations.