Energy Transition Digest: 29 April - 5 May 2024

1. First EU Hydrogen Bank Auction Completed

European Commission awarded €720 million in subsidies to seven hydrogen projects in the first auction of the EU Hydrogen Bank.

So what? The EU Hydrogen Bank is a mechanism for state support of renewable hydrogen production designed to help bring costs down by scaling production. The first auction is positioned as a pilot, and further auctions are planned with more subsidies to support the emerging sector.

Details:

• Subsidies will be funded by the sale of emission allowances in the EU Emissions Trading Scheme.
• €590 million will be allocated to five projects in Spain and Portugal and the rest to the projects in Scandinavia. All of them must start production by 2029.
• The auction was very competitive: 132 projects submitted bids, and the level of subsidies awarded was €0.37-0.48/kg, which is significantly lower than the €4.5/kg cap defined by the auction rules.

2. G7 Countries Agree to Phase Out Coal

Energy, environment, and climate ministers of G7 countries agreed to phase out unabated coal power by 2035.

So what? G7 represents ~20% of global GHG emissions, and the commitment means the continued transition of the power sector towards cleaner sources. Furthermore, the need to replace coal-fired power can give a new impulse to other large-scale predictable power generation technologies, such as nuclear.

Details:

• The agreement provides for the flexibility to continue operating coal-fired power plants equipped with CCS or if a country’s overall transition trajectory is in line with the net-zero pathway.
• Ministers also agreed to increase energy storage from 230 GW in 2022 to 1500 GW in 2030 (by the way, why in terms of capacity and not the amount of energy stored?..)

3. UAE (and Italy?) Plan Nuclear Power Expansion

UAE plans to build its second nuclear power plant, and Italy sees the role of nuclear energy in decarbonizing its power sector.

So what? Although nuclear energy remains a divisive topic, many countries increasingly recognize its role in the low-carbon power generation mix.

Details:

• UAE is about to put into commercial operation the last unit of the 5.6 GW Barakah nuclear power plant operated by a JV between Emirates Nuclear Energy Company and Korea Electric Power Corporation (KEPCO) .
• Following the completion of the Barakah power plant, UAE wants to continue developing its nuclear energy sector and reportedly plans a second power plant to be operational by 2032.
• Italy has banned nuclear energy in the country following a referendum in 2011, but the country’s energy minister apparently wants to bring the discussion back.

4. New Electricity Links Planned in Central Asia

The energy ministers of Kazakhstan, Azerbaijan, and Uzbekistan agreed to cooperate on interconnecting their energy systems.

So what? Building new electricity links will improve the flexibility of the energy systems and help integrate higher shares of variable renewable sources. Furthermore, it can be a step towards potential electricity exports to Europe – such plans have been discussed in the region for a while now.

Details:

• They are scarce for now: Almassadam Satkaliyev, Kazakhstan’s Energy Minister, said that the ownership structure, financing mechanisms, and revenue streams are yet to be developed.
• The cooperation will focus on laying high-voltage cables at the bottom of the Caspian Sea and potentially in other regions, too.