Importance of hydrogen for the transformation of the domestic economy

Round table discussion, moderated by Dieter Aigner, Managing Director of Raiffeisen KAG, with the experts

• DI Andreas Indinger, Head of Center Research and Innovation, Austrian Energy Agency

• Dr. Sorin Ivanovici, Head of Hydrogen & CCU, Business & Digital Transformation Fuels & Feedstock, OMV

• Mag. Hannes Loacker, Senior Fund Manager, Equities, Developed Markets, Raiffeisen Capital Management

• Mag. Brigitte Straka-Lang, Managing Director of TAG GmbH

„We need binding framework conditions!“

Dieter Aigner: Mr Indinger, Austria is working intensively on the development and implementation of hydrogen technologies. This includes both the production of green hydrogen, which is generated by electrolysis using renewable energy, as well as the creation of a corresponding infrastructure for transport and storage. Can you please give us an overview of what is happening in Austria?

Andreas Indinger: I'll try to describe this along the value chain and start with production. The Linz Chemical Park produces 100,000 tonnes of hydrogen every year - albeit from fossil fuels. This hydrogen is processed into ammonia within a few minutes and later into artificial fertiliser and other products. Now the focus is on how this can be produced not from fossil raw materials, but from green electricity in order to reduce emissions. That is the main reason for this endeavour: Primarily, we want to reduce emissions, but we also want to diversify our procurement lines. Thanks to the launch of the electrolyser at OMV, we now have a production capacity of 28 megawatts. There are around ten projects underway and some are at an advanced stage of planning. It's less about the kilograms of hydrogen produced and more about learning. Many of these projects have already learnt a lot and there have been setbacks and standstills.

What about transport?

Andreas Indinger: Until now, it was not necessary to transport hydrogen as it was used locally. Now, however, we have started to look at launch networks in eastern Austria and in the Upper Austria region. The integrated Austrian grid infrastructure plan has been important here because electricity lines, gas lines and hydrogen lines have been considered together. It's about where the generation centres and consumption centres are.

What about the storage options?

Andreas Indinger: Austria has an outstanding project with Gampern in Upper Austria and RAG Austria. We are a world leader in storing hydrogen underground in a pore storage facility - an extracted gas field. Austria is a world leader in this field and a further EU project is already underway.

What applications are there in Austria?

Andreas Indinger: There are many possible applications, for example in the OMV refinery. voestalpine is also planning to upscale a process from Donawitz in Linz with the HiFor® plus Smelter project. Here, steel can then be produced in a highly innovative way using hydrogen and electricity in what is sure to be a pioneering process. There is also a pilot plant in Donawitz where hydrogen plasma is produced in order to directly produce steel by smelting ultra-fine iron ores, naturally in small quantities. What is missing in the area of customers are binding announcements. Many players are waiting for companies to clearly communicate when and to what extent they will need hydrogen. Such signals have yet to materialise - not only in Austria, but worldwide. There is a lack of binding purchase commitments, which would be crucial for planning security and investments.

How important is research in Austria in this area?

Andreas Indinger: We have very good technology developers such as AVL in Styria, Andritz in plant engineering and some really outstanding research institutes in the Graz area, at the Vienna University of Technology, in Upper Austria and also the AIT. There really is a lot there. And within the framework of our Hydrogen Partnership (HyPA), we can discuss many open issues. It is important to stay in dialogue.

What significance would you ascribe to hydrogen for the transformation of the economy towards CO2 neutrality?

Andreas Indinger: I don't see hydrogen as a "silver bullet" or panacea. It is one element in the comprehensive transformation of the energy system. This is not just about climate protection, but also about digitalisation, electrification and the many players who will need more energy in the future. We are hoping for further economic growth, and hydrogen is a building block in this transformation. In a few areas, it will remain the only option; in some areas of material utilisation, it will prevail. In many cases, however, electrification or other technological solutions will be better, more efficient and cheaper. And it is always an advantage when there are alternatives. I feel good about it when we don't have to rely on a single solution.

TAG GmbH is a leading operator of gas networks. In the medium term, hydrogen is to be transported through at least part of the gas pipelines. Can you tell us more about this project? Where is the journey going?

Brigitte Straka-Lang: TAG GmbH is a leading Austrian transmission system operator and an important partner for gas supply and renewable energy sources such as biogas and hydrogen. With over 50 years of experience in gas transport, we have established ourselves as a European interconnector - a role we also want to fulfil in the hydrogen age. Green hydrogen is becoming a central component of the energy transition, especially for industry, power plants and mobility. As part of "REPowerEU", a total of 20 million tonnes of hydrogen are to be used by 2030 - half produced in Europe, the other half imported. This requires a corresponding infrastructure. Together with other transmission system operators, we are working on the "European Hydrogen Backbone" initiative. One key result is the SoutH2 Corridor, a transport corridor that will bring green hydrogen from North Africa via Italy to Central Europe. We are actively involved with our PCI project "H2 Readiness of the TAG Pipeline System". More than 65% of the pipelines along the SoutH2 Corridor are already underground as natural gas pipelines and can be used for hydrogen in the future. Our vision is that TAG will also transport green hydrogen safely and across borders in the future - for a climate-neutral Europe.

How complicated is it to transport hydrogen through existing pipelines?

Brigitte Straka-Lang: Transporting hydrogen through existing pipelines is technically feasible but involves challenges. We are conducting a feasibility study to convert one of our three pipelines to 100 % hydrogen. The greater expense lies in the above-ground systems such as fittings, valves, compressors and measuring systems. The flexibility of our infrastructure allows us to switch between natural gas and hydrogen. Converting existing pipelines costs five times less than building new ones. We want to know which pipeline is best suited by 2026.

How is the co-operation with the other network operators concerned proceeding?

Brigitte Straka-Lang: Close cooperation with neighbouring network operators is essential, as we are part of an integrated, cross-border network. We liaise with Snam S.p.A (Italy), Gas Connect Austria and bayernets (Germany) to clarify pressure conditions, material compatibility and other technical details. A coordinated approach is the only way to ensure safe, efficient transport across borders.

Let's turn to the investment side of hydrogen. Around five years ago, you could make a lot of money with hydrogen shares thanks to the boom. Why has the performance of hydrogen shares suffered so much in recent years?

Hannes Loacker: The hype was undoubtedly there, but in the end the companies also have to deliver in the form of profits and sales growth. The outlook that companies gave in 2020 and 2021 has not materialised. The companies have simply not yet turned a profit with their business models. We can now see that it will take much longer.

Why was that the case?

Hannes Loacker: Customers or potential customers of electrolysers have been much more cautious in recent years, i.e. 2022 and 2023, than originally expected. The high interest rates are also difficult for growth companies. If you want to invest in projects, grow or refinance, high interest rates are obviously not conducive. In contrast to the eurozone, interest rates in the USA are still high. Political support such as the REPowerEU programme looks quite nice on paper with the target of 20 million tonnes by 2030, but we will most likely not reach it by then, but much later. In addition, there are still many uncertainties regarding the so-called regulatory framework conditions. Companies didn't really know how to get their subsidies, which meant that the final investment decisions (FDI) were pushed back. We are now simply seeing that these customer decisions are coming much later than the companies expected. With the high interest rates, profit development has been poor and achieving economies of scale has been difficult. Most of the projects are still far too small to be managed profitably. As a result, these companies have not yet been able to break even.

What impact will this have on the energy transition?

Hannes Loacker: Even if the picture has clouded over, we need green hydrogen in the long term. The International Energy Agency names seven technologies that we need to create an efficient, affordable and safe energy transition. In addition to photovoltaics and wind power, electromobility and heat pumps, hydrogen is one of them. It lists three scenarios, including one in which only current policies are continued, but also an Announced Pledges Scenario in which governments fulfil all their climate commitments and identify and undertake additional efforts. This scenario is perhaps a little too optimistic, but in this scenario, an additional third of today's electricity consumption would be needed worldwide by 2050 to produce green hydrogen. Even if we assume only half of that, we would still need an additional 15 to 20 per cent of electricity compared to today's electricity demand. These are dimensions that show that green hydrogen can definitely play a significant role in the energy transition.

Does this mean that hydrogen could become interesting again in the long term?

Hannes Loacker: In the long term, I believe that companies will be successful again. However, the current situation is similar to that of the solar industry in Germany in the 2000s: We didn't know who the winners of tomorrow would be. That's why we are currently investing less in traditional hydrogen companies and more in companies where the hydrogen segment is only part of their business activities.

Mr Ivanovici, OMV commissioned the largest production plant for green hydrogen in Austria in April 2025. What does this mean for the company?

Sorin Ivanovici: Our new plant has a capacity of 10 megawatts and, with the production of up to 1,500 tonnes, already covers a small part of the hydrogen requirements of our refinery in Schwechat. Green hydrogen is produced by electrolysis of water using renewable electricity, resulting in no CO2 emissions. In contrast, the production of grey hydrogen, which is obtained from fossil fuels, causes considerable CO2 emissions - around 9.4 kilos of CO2 per kilo of hydrogen.

Where will this green hydrogen be used?

Sorin Ivanovici: We utilise hydrogen as a material in our refineries, particularly in Schwechat, to produce fossil diesel and biodiesel. This allows us to reduce greenhouse gases for our products . Hydrogen is also used in the chemical industry to produce ammonia and other chemical substances where electrification is not possible. Another important area of application is e-fuels, in particular e-SAF (synthetic sustainable aviation fuel), which are necessary for non-electrified segments of mobility such as air travel.

What challenges do you face?

Sorin Ivanovici: The production of green hydrogen is more cost-intensive than that of grey hydrogen, as more energy is required. Despite the higher costs, green hydrogen is essential for areas where there are no alternatives. We are therefore focussing on the material use of hydrogen in the refinery and chemical industry, where there is a clear business case. We are also already planning to build an additional 140-megawatt plant in Lower Austria to replace all fossil-based hydrogen in Schwechat with green hydrogen by 2027.

OMV has closed its hydrogen refuelling stations. What prevented this concept from being economically viable?

Sorin Ivanovici: We have been pioneers in hydrogen mobility from the very beginning and have invested a lot in sustainable mobility. Unfortunately, the technology has not caught on in the car mobility sector, as the electric alternative is more efficient and cheaper in terms of overall costs. We therefore see no need and no point in pushing a bottom-up market. Instead, we are focussing on areas where hydrogen actually makes sense and is economically viable.

Would it make sense to produce hydrogen with the surplus energy that we have at times, or is that too naïve an idea?

Hannes Loacker: A few weeks ago in Lower Austria, twice as much electricity was produced from renewable energy sources in one day as was consumed. On days like that, when I have an abundance of electricity, it doesn't really matter - to put it bluntly - that the production of hydrogen with reconversion is so energy-inefficient. Before I switch off a wind turbine or can't use the electricity at all, hydrogen - and of course batteries, to be fair - can play a significant role. If you look beyond Austria, you can already see that there are large offshore wind projects with plans to produce hydrogen directly on site. Hydrogen as seasonal storage will be very interesting in the future because batteries cannot fulfil this function.

Do you feel supported by politicians in your hydrogen initiatives? Where would you like to see more support?

Brigitte Straka-Lang: Politicians have recognised the importance of hydrogen, but there are still unresolved issues in terms of implementation, such as the appointment of a certification authority. This is important in order to be able to play a part in the important institutions at European level and maintain our role as a European interconnector. We are currently not allowed to transport hydrogen as we do not have the necessary certification. We need a legal framework and authorisations to implement our project. Politicians are aware of this issue and efforts are being made to amend the Gas Industry Act in this regard as quickly as possible and to find further solutions. The financing is also essential: the development of a hydrogen infrastructure is capital-intensive and requires clear models and planning security. We would like to see greater political support here.

How important is speed in regulation?

Brigitte Straka-Lang: Speed in regulation is crucial. If Austria hesitates too long, we risk losing importance as an H2 interconnector or transit country. Harmonised and binding regulations are necessary, as are technical specifications and standards. Different national standards make cross-border transport more difficult. We are therefore working intensively with partners and authorities to create clarity in good time.

Sorin Ivanovici: We are also dependent on clarity and rapid implementation of the regulatory framework. We are planning to switch to a large electrolyser and have further plans because existing regulations, the so-called Renewable Energy Directives - RED 2 and RED 3, oblige us to reduce the greenhouse gas emissions of our products. However, we now need rapid implementation of the new EU regulations, RED 3, to provide clarity for customers. We have made the investment decision for the 140 MW plant and need clear framework conditions, not just for this year or next year, but also for the next ten years. The project must pay off over several years. Both politicians and ministries need to create clear rules and implement them quickly. We do not want extra rules, but rather the rapid adoption of EU requirements into national law.

Mr Indinger, what can you add to this topic?

Andreas Indinger: I see two main points: Regulation and subsidies. In terms of subsidies, things are looking very good at the moment. There is a lot of money available, but it could become less due to the budget situation. There is also a lot of funding in the research sector. The regulatory situation is different. Many laws were well advanced, but failed due to the political vote or the two-thirds majority, particularly because of the election campaign. The administration is working on a number of laws, such as the Gas or Hydrogen Economy Act, but the political vote will be exciting. Hopefully the next few months will bring progress.

Brigitte Straka-Lang: The EU gas and hydrogen package must be quickly transposed into national law in order to actively shape the ramp-up of the hydrogen market. It is important to keep options open and not exclude large industrial companies from the outset. Rapid implementation could give Austria a locational advantage and advance the decarbonisation of industry.

What role do imports play?

Andreas Indinger: The government programme states that imports are important. The hydrogen strategy should be supplemented by an import strategy, as we need to import energy. Renewable gases, e-methanol and e-ammonia are being discussed in Europe. We recently organised an ammonia workshop in Linz, for example. The topic of hydrogen is not just about the molecule itself, but also about "packaged forms", also known as derivatives, such as ammonia, which the chemical industry needs. It is important that cost-effective and sufficient quantities are available.

Hannes Loacker: In 2020, voestalpine said that it would need around 27 terawatt hours of electricity per year to fully convert its domestic steel production to green steel. With a total annual consumption of 70 to 75 terawatt hours in Austria, this shows how much the demand for electricity would increase. Ultimately, most of the green hydrogen would have to be imported.

Sorin Ivanovici: Imports will play an important role, but diversification is needed. It's not just about hydrogen molecules, but also about alternatives such as ammonia and methanol. We are already involved in bilateral projects to import these substances. Local projects are important for the security of supply and the optimisation of electricity and gas grids. But without support for local projects, the industry may move away.