Cepsa to invest 5,000 million to develop Europe's largest green hydrogen project in Andalusia

The Spanish oil company CEPSA announced on Thursday an investment of 5,000 million euros to turn Andalusia into the largest European green hydrogen hub. The project, with a capacity of 2,000 MW and a production of up to 300,000 tons of green hydrogen, is ten times the largest announcement made in Europe in the sector, made by Shell in the Netherlands last July. This will allow the company to export its derivatives such as green ammonia or methanol, as well as to advance its own decarbonization.

The initiative, which will generate 10,000 jobs, was applauded by the entire political arc. During his visit to the company's facilities in San Roque, Pedro Sánchez, President of the Government, stressed the importance of Spain becoming a global leader in the energy transition, while developing its export capabilities. "Investors know this and trust in our country, which is one of the main recipients of green investments," he said in his speech, under the watchful eye of the President of the Junta de Andalucía, Juan Manuel Moreno Bonilla, the Minister for Ecological Transition and the Demographic Challenge, Teresa Ribera, and the CEO of CEPSA, Maarten Wetselaar.

This is the second major announcement that the government has celebrated in recent weeks. The shipping company Maersk announced in early November a 10 billion euro commitment to produce green hydrogen in Andalusia, as well as in Galicia.

The two plants planned by the company in Palos de la Frontera (Huelva) and San Roque (Cadiz) will be commissioned from 2026, reaching full capacity around 2028. "The Andalusian Valley will contribute to Spain becoming an energy powerhouse. The most competitive green hydrogen on the continent will be produced here," said Wetselaar.

With this, the company expects to advance in the decarbonization of its production of advanced biofuels for aviation, maritime and land transport. The company estimates an emissions reduction of six million tons of CO2 per year.

To secure renewable electricity to produce the hydrogen, and earn the green label, Cepsa will develop a 3 GW wind and solar power project charter in Spain, representing 40% of the total investment.

Industrial decarbonization

Spain aims to reach 10% of all hydrogen production capacity planned by the EU by 2030. The Andalusian Green Hydrogen Valley, as CEPSA calls the initiative presented on Thursday, could account for up to half of what the country generates in 2030. The oil company even highlights that Andalusia already consumes 40% of the hydrogen produced in Spain, but that this new project seeks to replace the dirty, or gray, hydrogen that currently feeds the large steel industries or refineries.

The investments announced on Thursday, which total 5,000 million euros, confirm what the company announced in March, when it presented its 2030 strategy.

In this plan, the company highlights its commitment to offer "a complete range of solutions" for its industrial customers, and therefore expects to be able to develop different final alternatives from the hydrogen produced in Andalusia. This will include biodiesel alternatives, green marine fuel and mobility solutions for heavy trucks and buses. At the same time, plans include the transformation of its own traditional chemical poles, now called Energy Parks, which will abandon the use of hydrogen from non-renewable sources.

The prize is no small one. Total demand for green hydrogen could exceed 600 million tons by 2050, according to the consulting firm McKinsey. This represents almost seven times more than in 2021 and would allow a 20% reduction in global emissions.

To this end, Spain faces competition from other leaders in the sector, especially the United States, whose leadership was mentioned by Sánchez in his speech. Washington has redoubled its bet in September with a new strategy with more than 9.5 billion dollars in aid, which they hope to attract private investment. However, Spain is relying on the low costs of renewable energy generation to strengthen its position, as a recent Goldman Sachs report reaffirms.

North-South Hydrogen Corridor

According to the International Energy Agency, despite the energy crisis, the promoters of this type of projects face great uncertainty in an incipient market where purchase and import agreements lag behind future exports. CEPSA seeks to ward off these ghosts with a view to its 2030 strategy, ensuring the viability of its commitment to the energy transition.

The production of CEPSA's new project has an additional confirmed lever: Rotterdam, Europe's most important energy port, which generates 13% of European energy demand. In early October, the Spanish oil company and the port authorities signed an agreement to develop a green hydrogen corridor between Algeciras and the Dutch city.

The local authorities estimate that, by 2050, they will be able to produce only 10% of their hydrogen demand locally. The application of renewable hydrogen for maritime transport encompasses not only the use of fuel cells in ships, but also in the machinery used in ports and cargo terminals. This will also make it possible to link the Iberian corridor with other European and Asian ports.