(Bloomberg) -- Repsol has decided to halt all its renewable hydrogen projects in Spain after the government said it’s considering making a controversial windfall tax on energy companies permanent.
The Madrid-based oil producer will hold back on plans to build so-called electrolyzers with a total capacity of 350 megawatts, a spokesperson for the company told Bloomberg News. The projects were nearing investment decisions, the representative said.
The move comes after Spanish Economy Minister Carlos Cuerpo said the cabinet is considering indefinitely extending a levy on the domestic revenue of energy companies. The tax, approved in 2022 to fund measures to curb the impact of a cost-of-living crisis, sparked criticism that it would make Spanish companies less competitive.
European fuel producers are seeking to use green hydrogen to reduce their carbon emissions. The gas is an essential part of oil refining, used to take impurities out of fuels.
Spain aims to reach 12 gigawatts of electrolyzer capacity by the end of the decade, according to the National Climate Plan submitted last month to the European Commission. The technology allows the use of renewable power to break up water molecules into hydrogen and oxygen.
Last year, Repsol kicked off its renewable hydrogen production with the start of a 2.5 megawatts facility built mainly to supply one of its refineries near the northern city of Bilbao.
That project cost €11 million ($11.9 million) and was meant to be the first step of a plan that included a 100 megawatt unit in the following years. Repsol had already signaled it could scale back investments in its home market, citing a lack of regulatory stability.
Repsol isn’t the only active player in the Spanish green hydrogen industry. The country’s second-largest refiner Cepsa SA, which is controlled by Abu Dhabi sovereign wealth fund Mudabala, unveiled in 2022 a €3 billion investment to build a green hydrogen hub in the southern region of Andalusia, while utility giant Iberdrola SA announced in September a joint venture with BP Plc to develop a 25 megawatt project at a BP refinery in the Mediterranean city of Castellon.
--With assistance from Rachel Graham.
©2024 Bloomberg L.P.