Hydrogen aviation needs incentives to become cost competitive

If hydrogen stands a chance to become the dominant fuel for aviation in Europe, national and/or EU policies are needed to incentivize production. Hydrogen can become price-competitive and even cheaper if taxes and carbon pricing on conventional fuels are introduced. This is one of the conclusions in a report that was commissioned by the European lobby group Transport & Environment and the European Climate Foundation. Hydrogen aviation needs incentives to become cost competitive. The report, which was completed in April by Steer, the Technical University of Hamburg, and cost consultants Doig + Smith, has analyzed the costs of developing, deploying, and operating hydrogen aircraft and supporting hydrogen infrastructure. A number of initiatives have been launched on developing hydrogen aircraft. ZeroAvia and Universal Hydrogen started flight testing reconfigured aircraft with hydrogen-electric fuel cells to power an electric motor. Although the test aircraft are currently small 19-40 seaters, both companies intend to mature the fuel cell technology and make it available for 40-80 seaters. Airbus is working since 2020 on the ZEROe project, which includes a turboprop and a short-medium-range aircraft with either fuel cells or direct injection of hydrogen. Aircraft development will cost 15 billion The report says that developing the technology for a hydrogen aircraft accounts for some €15 billion. According to the study, this compares to €12.5 billion that Airbus has spent on developing the A350 over seven years. While fifteen billion is serious money, it is just five percent of the overall costs to make hydrogen aviation a reality. By far the most expensive part of the chain is the production of hydrogen and the associated infrastructure, which is estimated to cost around €161 billion. This is 54 of all costs. The production costs include the electrolysis of water to make hydrogen and the renewable energy required for the electrolysis process. Also, on-site storage of hydrogen prior to its distribution in either gaseous or liquid form and additional production is needed as hydrogen will boil off. Over time, production costs will come down driven by productivity improvements and volume. Costs are the lowest in the UK and Denmark, where a higher proportion of wind energy is possible. Liquefaction, the process to cool gaseous hydrogen to -253 Celsius to make it liquid, accounts for 23 percent of the overall costs at €68 million. The hydrogen infrastructure at airports, including storage and distribution to the aircraft, is estimated to cost €37 billion and take up 12 percent of all costs. Next is distribution costs by trucks, ships, or pipelines, which will cost €18 billion. That makes €299.4 billion in total over a 2025-2050 period, including inflation. Based on 2020 price levels, overall costs would be some €126 billion. The study assesses that unit hydrogen fuel costs, including production, distribution, and liquefaction costs could fall by 10 percent from €3.90 per kilogram in 2035 to €3.45 per kilogram in 2050. The costs of operating a flight with a hydrogen aircraft would be 27 percent higher, some of which will be passed on to passengers through higher fares. By comparison: using sustainable aviation fuels (SAF) or synthetic e-fuels will increase operating costs by 24 and 25 percent, respectively. Getting the hydrogen infrastructure ready As T&E Aviation Technical Manager Carlos Lopez de la Osa says is a statement: “Building these planes is economically feasible, but if we want Airbus to walk the talk, we’ll need to create a market for zero-emission aircraft, by taxing fossil jet fuel and mandating zero emission planes in the future. If we have to rely only on Airbus’ goodwill, hydrogen jets will never be more than a pipe dream.” It is something that has been acknowledged by Airbus CEO Guillaume Faury on numerous occasions like the Airbus Summit in 2021 and 2022. Not the development of the aircraft is difficult, but getting regulators to prepare for its certification and make sure that the hydrogen infrastructure is in place is what is the reason for concern. Faury said in November that Airbus might delay the launch of the hydrogen airliner if there are indications that the ecosystem would not be ready around 2035, when the airliner should enter service. The T&E study identifies the availability of enough renewable energy, electrolysis capacity, and demand as the main challenges. “Many of the challenges associated with the hydrogen fuel supply chain stem from the fact that, based on current trajectories, projected renewable energy and hydrogen production capacity will not be sufficient to produce the quantity of hydrogen required to meet net-zero targets by 2050.” “It is also difficult to envisage that the aviation sector alone will be able to fund or finance the cost of the fuel supply infrastructure required to accommodate hydrogen aircraft. Instead, it seems likely that the wider hydrogen ecosystem will need to develop for the aviation industry to be able to utilize the necessary infrastructure.” The report adds: “Before ordering hydrogen aircraft, airlines will require sufficient assurance that hydrogen fuel supply and airport infrastructure is available, and established enough that prices are competitive, in order to make their investment in hydrogen aircraft worthwhile. Airlines will not order hydrogen aircraft if they do not believe the hydrogen fuel ecosystem will be in place, which, as has been discussed, will be a significant challenge to overcome.” Universal Hydrogen has just started flight testing its hydrogen-electric fuel cell system on a De Havilland Canada Dash 8-300. (Universal Hydrogen) Policy options Transport & Environment sees a number of policy options that are essential for the European Union and the UK. These options should apply to the hydrogen chain infrastructure as well as to airlines and should help to bring costs down. The first option is direct financial support in the form of grants or cheap loans to finance technology research and the construction of fuel production infrastructure. The second option is indirect financial support, such as tax breaks or subsidies. These would incentivize investment in infrastructure. A third option is supply-side measures, such as usage mandates or floor prices, which would provide more certainty to suppliers to invest in capacity. Fuel supply mandates are already part of the EU’s ReFuelEU initiative for SAFs, which has recently been reaffirmed by the European Parliament. T&E remarks that costs could come down by some €100 billion if leisure remains at 100 percent of 2019 levels and that of business travel would be halved. As Carlos Lopez de la Osa says: “For hydrogen planes to take off in the next decade, we need to enter the virtuous circle of regulation, investment, a fall in prices, followed by stronger uptake. But the cost must be shouldered by the aviation industry and its users, by ring-fencing part of carbon and kerosene tax revenues for green tech like zero-emission planes and clean fuels.”

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