Spain's Cepsa to Invest $3.1 Billion in Green Hydrogen Project

(Reuters) — Spanish oil company Cepsa plans to invest 3 billion euros ($3.1 billion) in a green hydrogen project in Andalusia, southern Spain, CEO Maarten Wetselaar said on Thursday.

Green hydrogen, or hydrogen produced from renewable energy, is seen as a solution to decarbonizing heavy transport including commercial shipping and airlines, and Spain has signaled its ambition to become a major player, with its ample solar and wind power and proximity to sea providing renewable energy options.

The project will consist of two electrolyzers of 1 gigawatt (GW) each in the port cities of Algeciras and Huelva.

Wetselaar said Cepsa would also invest 2 billion euros in renewable energy in the region to power the plants.

The project will help Spain become "an energy powerhouse with capacity to export to the rest of the world and guarantee Europe´s energy independence," he said.

But given the high cost of producing the fuel, the project's success will depend on whether Cepsa can secure a steady demand, said Faig Abbasov, shipping program director at Brussels-based NGO umbrella group Transport & Environment, which promotes sustainable transport in Europe.

"To make those investments viable they need to find priority sectors, sell the hydrogen on purchasing agreements or rely on government regulation that would mandate the use of that hydrogen," Abbasov said.

Cepsa in October signed a deal with the Dutch port of Rotterdam to ship green hydrogen from southern Spain to northern Europe. It could start shipping hydrogen from Algeciras as early as 2027, the company said.

A European Parliament bill on the use of renewable and low-carbon fuels in maritime transport in October added an amendment that would require all ships using EU ports to use either green hydrogen or hydrogen-based fuels in at least 2% of yearly average energy used onboard ships. The draft legislation is being negotiated between the European Council and EU parliament.

A 2% mandate for green fuel would create demand for 205,000 tonnes of green hydrogen for shipping by 2030 and 2.2 GW of electrolyzer capacity, according to Transport & Environment.

($1 = 0.9577 euros)

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