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The Spanish government is backing Mubadala’s local refinery, Cepsa SA, as the Mediterranean country aims to become Europe’s main green hydrogen hub.
The company, which is controlled by Abu Dhabi’s sovereign wealth fund, will allocate 3 billion euros ($3.1 billion) to build two new production plants in southern Andalusia, Chief Executive Maarten Wetselaar said on Thursday.
Located near the port of Algeciras and the province of Huelva, respectively, and with a capacity of 2 GW each, they will be the largest green hydrogen facilities in Europe. The plants are expected to be fully operational by 2028.
Cepsa’s project will strengthen Spain’s position as an energy exporter and help give the country a competitive edge, Prime Minister Pedro Sanchez said at an award ceremony for the new plant.
Spain wants to use its abundant and low-cost renewable electricity generation, which has accounted for 42% of the country’s energy mix so far this year, to become Europe’s leading producer of emission-free alternative fuels.
Spain has announced around 13 gigawatts of capacity for electrolyzers — the units needed to split water into hydrogen and oxygen, according to BloombergNEF. This easily exceeds the government’s target of 4 GW by 2030.
Sánchez announced a €16 billion plan last year to boost production of green hydrogen and create nearly 300,000 jobs. Funding in part from the EU recovery fund is expected to attract private investors and save the country around 67 billion euros in fuel imports, he said at the time.
Hydrogen and its derivatives account for 12% of final energy use and 10% of CO2 emission reductions by 2050, according to projections by the International Renewable Energy Agency. Around 5,000 GW of electrolyser capacity is needed, up from 0.3 GW in 2021.
The new facility is part of Cepsa’s green strategy, which involves investments of up to 8 billion euros. To differentiate itself from its peers, the refinery will focus on heavy industry and transportation energy. To power the new plant, the company will invest an additional 2 billion euros in developing 3 GW of wind and solar power.
Spain plays a central role in Cepsa’s strategy because its sun-drenched south has some of the cheapest solar production in Europe, Wetselaar, a former Shell executive, said in March. The company is also working with the Port of Rotterdam to create an export corridor to transport hydrogen to the Dutch hub.
local economic boost
Last month, Danish transport giant AP Moller-Maersk A/S also signed a deal with Spanish authorities to potentially deliver up to 2 million tonnes of the green fuel a year, exploring a large-scale production facility in the Andalusia region.
The new investment could help boost the economy of the low-wage region, which has the second-highest per capita income in Spain and the third-highest unemployment rate, according to the National Statistics Institute.
Cepsa’s new project is also likely to contribute to business at the port of Algeciras, at a time when its most direct rival, the booming Tanger Med hub in Morocco, has been challenging the Spanish port’s hegemony in the transshipment business. will create the hinterland it lacks.
© 2022 Bloomberg Intelligence
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