European-produced green molecules have a crucial role to play in resolving the EU’s energy trilemma—the challenge of providing sustainable, secure and affordable energy in the face of rising global temperatures, ongoing geopolitical conflicts and disruption to global trade routes.

Green molecules in the form of green hydrogen and its e-fuels derivatives (e-SAF, e-ammonia, e-NG and e-methanol) as well as biofuels like biodiesel, biomethane and SAF are a solution to decarbonise large swaths of energy usage that cannot be powered by electrons, helping the EU meet its emissions reduction targets in 2030 and beyond.

Renewables now meet over 40% of EU electricity demand, thanks to prices enacted through the EU emissions trading scheme (ETS) and targets mandated in the updated Renewable Energy Directive (RED III).

But industry and heavy transport have been slower to decarbonise. Whilst the road transport sector will be at least partially electrified with battery electric vehicles, some sectors that are largely dependent on hydrocarbons for heat intensive processes—such as steelmaking, fertilisers, cement, refineries and chemicals, as well as aviation, maritime and freight transport—will require a green molecule to cut their emissions.

“Green molecules are a viable solution to decarbonise key parts of the economy such as industry, shipping, aviation and trucking” Wetselaar, CEPSA


A package of policy initiatives called the European Green Deal has begun to incentivise a move away from traditional hydrocarbon fuels over the past few years, bolstered by the EU’s REPowerEU initiative, enacted following Russia’s invasion of Ukraine. But to meet the growing demand for alternative fuels, the supply of green hydrogen, biofuels and green hydrogen derivatives still needs to grow significantly.

The EU’s green hydrogen strategy aims to develop 10mt/yr of green hydrogen production from within the region and secure 10mt/yr of imports by 2030. The region has recently defined green hydrogen through two delegated acts and has held the first auction to subsidise supply under the European Hydrogen Bank, with the second auction due later this year.

“Clean hydrogen shows that we can reconcile our economy with the health of our planet. And this is why we have put hydrogen at the heart of the European Green Deal,” said President of the European Commission Ursula von der Leyen last year.

A key part of achieving this goal will be the Andalusian Green Hydrogen Valley that Cepsa is developing at its energy parks in Huelva and Algeciras, southern Spain, as part of its Positive Motion strategy to transition from being a traditional oil and gas producer to a leading European supplier of green molecules this decade.

Cepsa is developing the valley, one of the most ambitious projects in Europe, alongside an ecosystem of alliances including Fertiberia, EDP, Yara Clean Ammonia, Enagas Renovable, Alter Enersun and C2X, an independent company set up by A.P. Moller Holding and A.P. Moller-Maersk.

By 2030 it will encompass two green hydrogen plants with a total capacity of 2GW, a green ammonia plant with production capacity of up to 750,000t/yr and a green methanol plant with production capacity of 300,000t/yr.

This is in addition to Cepsa’s renewable fuels complex in the region, which includes the construction of southern Europe’s largest second-generation biofuels plant as part of a joint venture with Bio-Oils, a subsidiary of Apical. The plant, due to open in 2026, will have the capacity to flexibly produce 500,000t/yr of SAF and renewable diesel (hydrogenated vegetable oil or HVO), contributing to Cepsa’s larger production goal of 2.5mt/yr of biofuels by 2030, of which 800,000t/yr will be SAF. Cepsa controls 55% of the joint venture.

“Green molecules are a viable solution to decarbonise key parts of the economy such as industry, shipping, aviation and trucking. There are very few companies that are developing green molecules at scale this decade. This is what makes Cepsa stand out,” said Cepsa CEO, Maarten Wetselaar.

Green hydrogen

Hydrogen could meet 13% of total global energy demand by 2050, according to both the IEA and the Energy Transitions Commission (ETC).

There are two main forms of low-carbon hydrogen—blue hydrogen made from steam reforming natural gas (with CCS) and green hydrogen made by separating water into oxygen and hydrogen using electrolysis powered by renewable energy (labeled as RFNBO) or from steam reforming biomethane.

“This is a one-time opportunity to seize the energy transition and reshape the European market” Barrasa, Cepsa


Cepsa is focusing on the production of green hydrogen, betting that its position in southern Spain offers a unique competitive advantage, given that around 80% of the production cost is derived from the renewable electricity used for the electrolysis. Thanks to a unique combination of abundant sun, wind and space in Andalusia, green hydrogen can be produced below €2.8/kg ($3/kg), nearly half the cost in northern Europe.

“Cepsa will benefit significantly from its position in Andalusia and the synergies with its current assets and capabilities, and should be able to scale up its operations in conjunction with the rising demand for green fuels given its large customer base. This is a onetime opportunity to seize the energy transition and reshape the European market,” said Carlos Barrasa, Cepsa’s executive vice president of commercial and clean energies.

Spain’s good renewable resources are demonstrated by the amount of low-carbon electricity already on the grid. Renewables accounted for over 50% of the nation’s electricity generation in 2023, according to grid operator Red Eléctrica—higher than the EU average of around 40%. On one day in November last year, renewables accounted for 88% of electricity generation.

Spain also has an unusually well interconnected grid, which means that green electrons can be sent to and from various different parts of the country, depending on where the wind is blowing and the sun is shining. This can help make hydrogen production more efficient.

To reach FID, green hydrogen production projects typically need to secure offtake from a number of partners who will guarantee to contract large volumes. Cepsa has locked in around 60% of the offtake from the two plants and hopes to take FID in the near term, once the right regulatory frameworks and incentives are in place.

The firm has an advantage over some projects in terms of offtake as it will use some of the hydrogen it produces for its own operations and partners, as well as for those of third-party industries that are adjacent to it in the La Rábida (Huelva) and San Roque (Cadiz) energy parks—replacing grey hydrogen currently used there.

The firm already produces and uses around 115,000t/yr of hydrogen in the Andalusian region. When combined with the demand of other nearby industrials, this amounts to around 200,000t/yr—around 40% of the hydrogen used in Spain today.

“This is a very large amount of demand concentrated in one region,” said Joaquin Rodriguez, director of hydrogen and clean power at Cepsa.

Cepsa will develop a hydrogen “ring” in the region that will distribute hydrogen to its own and other local applications.

As well as the two electrolytic green hydrogen facilities, the ring will also be supplied by two small modular reactor (SMR) facilities—one in Algeciras and one in Huelva—which process biomethane to produce green hydrogen from biological origin.

“This enables us to keep a balanced system with a regular flow of hydrogen, even if the intermittency of renewables slows production in the electrolysers,” said Rodriguez.

Cepsa is considering a combination of alkaline and proton-exchange-membrane electrolysers for its hydrogen plants, powered by a mix of dedicated renewable assets and grid renewables.

The firm may increase the capacity of the SMRs as it develops more biomethane projects.

The ring will allow the firm to optimise the kind of hydrogen (green, low-carbon and grey) it is distributing, depending on what the supply and demand conditions are at any given point in time—simultaneously avoiding unnecessary intermediate storage and providing full guarantee of supply.

“That’s why it is very important that we have our energy parks, and the majority of the industrial demand sectors colocated, so you can optimise your portfolio and make the most of each hydrogen molecule produced,” said Rik Sneep, director of strategy and transformation at Cepsa.

Cepsa is looking to build connections with even more firms in the Andalusian Green Hydrogen Valley before it starts production.

“We’re working with local stakeholders and companies that might require hydrogen or consider switching to hydrogen. Hard-to-abate sectors such as fertilisers, metals and cement have a strong presence in the region,” said Sneep.

Part of this work involves helping these third-party industries understand the economics of switching to green hydrogen.

“For most industries, switching to hydrogen comes at a cost,” said Sneep. “Not decarbonising, however, has a financial cost too, either in the form of penalties for not meeting mandatory requirements, reduced product pricing, or through losing clients that are becoming more and more critical on sustainable sourcing. What we’re trying to do is help customers understand this picture and work together to develop the decarbonisation solutions for their industrial needs.”

The Spanish government’s Hydrogen Roadmap sets a target for 25% of hydrogen consumption in industry to be renewable by 2030.

Cepsa, which aims to supply half of Spain’s total 2030 green hydrogen target, is also looking at supplying mobility solutions, especially heavy-duty transport.

The firm has a goal of establishing a refuelling station for heavy-duty transport every 300km by 2030.

Cepsa believes that developing the Andalusian Green Hydrogen Valley will create 10,000 jobs, 1,000 of them directly, as well as boosting the economic activity of more than 400 small and medium enterprises in the area.

International transportation

In addition to supplying clean energy for Spain, the development of the Andalusian Green Hydrogen Valley will also enable Cepsa to become an exporter of green hydrogen. The valley is well positioned to have access to deep water ports at Huelva and Algeciras that already have some infrastructure in place.

Cepsa has reached an agreement with the Port of Rotterdam to create the first Green Hydrogen Maritime Corridor linking southern and northern Europe.

Given Spain’s cheaper wholesale electricity prices and better renewable assets than Northern Europe, the firm believes there will be a strong demand further north on the continent for the green hydrogen molecules it produces in the valley.

“We have the potential to develop an industry on the back of plentiful and competitive renewal energy and the opportunity to move a product around, scale up and match demand with supply across Europe,” said Barrasa.

Cepsa believes that by 2050 the Iberian peninsula will have an 895TWh surplus of green hydrogen, while northern Europe will have a 340TWh demand gap on top of the volumes the region can produce locally.

While Europe will eventually develop a hydrogen pipeline network through the European Hydrogen Backbone (EHB), Cepsa believes that the best immediate means of transporting volumes of hydrogen across the continent is by sea.

Transporting hydrogen in its purest form is difficult due to its low energy density, meaning that the fuel has to be transformed into a carrier before being shipped.

Methanol, liquefied hydrogen, compressed hydrogen and liquid organic hydrogen carriers are all forms of the fuel that could potentially be used to transport hydrogen molecules over long distances.

But Cepsa sees ammonia as the best near-term solution, due to its existing maritime infrastructure and strong safety record.

The firm will convert hydrogen into ammonia via an ammonia production plant to be built near the Algeciras Bay. The plant will be capable of producing up to 750,000t/yr by 2028. Green ammonia from this plant will be sold as a sustainable marine fuel to shipowners operating from the Port of Algeciras, as well as being sent through the Green Hydrogen Maritime Corridor to the Port of Rotterdam.

Fertiberia, another of Cepsa´s industrial partners, is already operating another ammonia plant near the La Rábida energy park in Huelva. This plant currently produces 400,000t/yr of ammonia which will be turned green with hydrogen supplied by the two electrolysers. The green ammonia will be used for the production of green fertilisers as well as for some marine fuel bunkering.

Cepsa has signed collaboration agreements with Yara Clean Ammonia and Dutch gas infrastructure company Gasunie to help advance the corridor concept.

Yara Clean Ammonia will leverage its customer network to market the fuel from the Algeciras plant. The firm currently trades about one-third of the world’s ammonia using its own network of dedicated ammonia tankers, as well as chartered vessels, and has a number of ammonia plants operating around the world.

Once in Rotterdam, the green ammonia will be either cracked back into green hydrogen and carried through pipelines to industrial customers or sold to shipowners as a decarbonised fuel.

At the Port of Rotterdam, there are currently several ammonia terminals under development, some of which include a cracking facility with the capacity to crack imported ammonia back into hydrogen.

A network of pipelines being developed by Gasunie called the Delta Rhine Corridor will be able to carry both ammonia or cracked hydrogen to meet industrial demand in the Netherlands, Germany, Belgium and Denmark. The Delta Rhine Corridor will eventually form part of the EHB.

Cepsa has also signed an agreement with energy service provider Getec to supply green hydrogen and its derivatives to Getec’s customers in Germany, Belgium, the Netherlands, Switzerland and Italy, and is also negotiating agreements with other German industrials and utilities.

“Some utilities in Germany are starting to co-fire ammonia with coal to reduce the carbon footprint,” noted Rodriguez. “So we see a lot of different end-uses in the region.”

Marine bunkering

Cepsa’s strategy includes producing and supplying green marine fuels to its customers, another area where ammonia can play a key role. Cepsa has one of the biggest marine bunkering operations in the south of Spain, with facilities in both Huelva and Algeciras that can provide green ammonia to be used as a marine fuel to power ships.

“We are talking to several shipping companies and looking at how to optimise our share of the ammonia between local bunkering and export to Rotterdam,” said Sneep.

Local bunkering operations will involve using a network of small bunkering vessels to distribute ammonia to the tanks of the vessels being refuelled.

The International Maritime Organization (IMO) has facilitated discussions between a number of large ports—including Singapore, Rotterdam and Algeciras—to agree standard procedures for ammonia bunkering. Cepsa, which is already a major bunkering supplier, has been party to the discussions as part of its initiative to build links for green ammonia.

“Marine fuelling with these sustainable fuels could be set up by 2026 or 2027, when the first ships will be delivered with these kind of engines,” said Rodriguez.

In 2023, shipping firms put in orders with shipyards for 11 vessels powered by ammonia, according to Clarksons Research, as interest in the fuel starts to grow.

Cepsa will also produce e-methanol for bunkering as well as biofuel fuel oil blends.

This article is taken from the special report Positive Motion: Enabling Europe’s Green Hydrogen Ecosystem, produced with Cespsa To read the report in full, click here.



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