GERMANY’S NATIONAL HYDROGEN STRATEGY

The German Federal Government agreed on a “National Hydrogen Strategy” on 10 June 2020.

Germany considers hydrogen to be an essential part of its decarbonisation strategy and the energy transition. The strategy therefore focuses on the entire hydrogen value chain - i.e. development, production, storage, transport and use of hydrogen - and only deems “green” hydrogen generated from renewable energy sources sustainable in the long run; merely CO2-neutral “blue” or “turquoise” hydrogen, i.e. produced from fossil fuel involving processes for carbon capture and storage (CCS) or for separation of solid carbon respectively, is to be used on a transitional basis.

The German Government considers the action plan to be a contribution to overcoming the consequences of the Corona crisis at domestic and European level. Therefore, in addition to funds of more than EUR 1 billion which are foreseen as financial support for various measures during the period from 2020 to 2023 in the National Hydrogen Strategy as such, the fiscal package announced by the German government on 3 June 2020, which aims at strengthening economic recovery with a strong focus on climate action, contains additional EUR 7 billion for the market launch in Germany and further EUR 2 billion for international partnerships, totalling to financial support of more than EUR 10 billion.

The National Hydrogen Strategy expects the current annual hydrogen demand of approximately 55 TWh to increase to 90 to 110 TWh until 2030. Up to 14 TWh, which requires 20 TWh of electricity generated from renewable energy sources, is planned to be covered through the installation of 5 GW offshore and onshore green hydrogen production capacity in Germany by 2030. An additional 5 GW is envisaged to be reached by 2035, at the latest by 2040.

This approach to reach an aggregate 10 GW production capacity by 2035 has been agreed upon as a compromise within the German Government. The Treasury as well as Education and Research Departments were in favour of a 10 GW domestic production capacity target by 2030. The Ministry for Economic Affairs and Energy argued that if the hydrogen production capacity was increased by 5 GW the limited areas available for the generation of electricity from renewable energy sources in Germany would not allow the German target of 65% electricity from renewables in 2030 to be met.

In the long run, Germany will to a great extent need to rely on hydrogen imports. Cooperation with other EU Member States will therefore be intensified, in particular with respect to hydrogen production from offshore wind in the North Sea and Baltic Sea. In addition, cooperation projects with Southern European countries (based on PV and wind) are envisaged, mainly for the period from 2030. Moreover, hydrogen production projects with developing countries are a possibility.

This approach aligns with the initiatives of other industrial countries, namely the joint statement of cooperation signed by Australia and Japan earlier this year.

Action Plan

The strategy contains an action plan of 38 measures which are intended to form the basis for private investments in economical and sustainable production, transport and the use of hydrogen. The measures contained in the action plan reflect the first phase of the hydrogen strategy until 2023. During this period, the market launch will take place and the basis for a functioning domestic market will be established. For the next phase, from 2024 onwards, the strategy aims at strengthening the domestic market and shaping the European and international dimension of hydrogen.

Hydrogen production

Plants at industrial scale shall be erected for technology demonstration purposes to achieve significant cost reductions in the production of hydrogen. In this respect, the action plan includes the following measures:

• Reform of the state-induced price components of energy sources. This includes the introduction of a CO2 price for fossil fuels in the transport and heat sectors. In addition, wide exemptions from taxes and levies for electricity used in the production of green hydrogen shall be considered. Electricity used to produce green hydrogen is planned to be fully exempt from the renewable energy levy.
• Enabling cooperation models between operators of electrolysers and gas and power grid operators, including through potential changes of the regulatory framework. One or two model projects shall be used to test whether significant grid relief at adequate prices can be secured without affecting equal competition on the hydrogen market.
• Financial support for electrolysers to promote the conversion to hydrogen in the industrial sector. In addition, tendering models for the production of green hydrogen used for the decarbonisation of the steel and chemical industry will be considered.
• Development of a framework for the production of green hydrogen through the use of power generated by offshore wind farms. First steps, which may include the designation of additional areas for offshore hydrogen production or power-to-x as well as additional auctions for the generation of electricity from renewable energy sources, shall be implemented from 2020 onwards.

Areas of hydrogen use

The hydrogen market shall be developed further through an incremental expansion of the areas where hydrogen is used as a fuel, i.e. in certain areas of the transport and industrial sectors. Emphasis will be on areas where the use of hydrogen is already close to economic viability or where no alternative for decarbonisation exists. The action plan specifically provides for the following measures:

• In the transport sector, the minimum share of renewable energy within the final consumption of energy in 2030 shall be increased significantly beyond the EU requirement of at least 14% contained in the Renewable Energy Directive (EU) 2018/2001. In addition, a minimum requirement of at least 2% kerosene from renewable energy in 2030 will be considered for the aviation sector. Several support programmes with continuous calls for tender starting in 2020 shall be available, in particular for the promotion of research and development in the areas of hydrogen-powered vehicles and electricity-based fuels as well as for the emergence of a competitive supply industry.
• For the industrial sector, the action plan acknowledges that, due to the international competitive environment, costs for investments in CO2-free technologies cannot be fully passed on to customers. Therefore, several support schemes will promote the conversion to hydrogen, especially in the steel and chemical industry. In addition, the Federal Government will launch a pilot project for carbon contracts for difference. Moreover, the Federal Government will consider a quota for climate friendly basic materials, e.g. green steel. Finally, stakeholders from the steel, chemical, logistics, aviation and other industrial sectors shall be involved in the development of sector-specific long-term decarbonisation strategies based on hydrogen, e.g. replacing grey hydrogen by green hydrogen in the chemical industry.
• In the heat sector, the existing support scheme for highly efficient fuel cell heating systems shall be continued and potentially extended. An amount of up to EUR 700m will be available for the period from 2020 to 2024. In addition, the Federal Government will consider supporting hydrogen-ready plants through the German CHP subsidy regime.

Hydrogen transportation and supply infrastructure

The future infrastructure for the transportation and supply of hydrogen will make use of the potential of existing infrastructure and include newly built assets (an example for this approach is the “GET H2 Nukleus” project of BP, Evonik, Nowega, OGE and RWE Generation which aims at a 130 km publicly accessible hydrogen grid). In this vein, the following measures are planned:

• The process for the transformation of existing infrastructure will be developed with the relevant stakeholders, i.e. in particular gas grid and storage operators, and be partially implemented from 2020 onwards.
• The planning, financing and regulatory framework of electricity, heat and gas infrastructure will allow for a coordinated and cost-efficient further development which also takes into account the potential of existing hydrogen infrastructure as well as connectivity at European level.
• The installation of new infrastructure will include an adequate expansion of hydrogen filling station network for both road and rail traffic.

Research, development and innovation

Several support schemes are planned in order to promote research, development and innovation along the entire hydrogen value chain. As Germany intends to position itself as a leading player for green hydrogen technologies on the global market, this includes, among other things, a common hydrogen roadmap with international spill-over as well as a research initiative for hydrogen technologies, which will be launched in the first half of 2020.

Action at EU and international level

Germany intends to use its presidency of the Council of the EU in the second half of 2020 to pro-actively advance important hydrogen topics, in particular the “Clean Hydrogen Alliance” announced by the European Commission as well as the EU strategy on smart energy system integration, and to promote the “European Green Deal”. In addition, Germany intends to establish and intensify international hydrogen cooperation activities. The proposed measures at EU and international level include the following:

• establishment of sustainability and quality standards for power-to-x, including certificates of origin for green hydrogen and secondary products;
• strengthening of investments in research and development of green hydrogen at EU level, with the potential creation of a new “Important Project of Common European Interest (IPCEI)” for hydrogen technology and systems along the entire value chain;
• supporting the preparation of a Green Paper by the European Commission for an EU hydrogen strategy to enable economies of scale and to create the basis for an internal market for hydrogen through common market-readiness of hydrogen technologies;
• incorporation of a European hydrogen company for the development and exploitation of common international production capacities and infrastructure;
• use of existing energy partnerships and creation of new partnerships for the implementation of hydrogen projects, depending on the energy demand and natural resources of the partner.

Outlook

While certain schemes to support hydrogen are already available, the implementation of other measures from the action plan and the further development of the hydrogen strategy is an ongoing process. It will require numerous changes to the political, legal and regulatory framework. Stakeholders should follow the discussions in the corresponding legislative processes at domestic and EU level closely

Key German stakeholders

1. Alstom Transport
2. Asahi Kasei Europe
3. Audi
4. BMW AG
5. Daimler
6. Denso Automotive Deutschland GmbH
7. Elringklinger AG
8. EWE
9. FCP Fuel Cell Powertrain
10. FEV Europe GmbH
11. Freudenberg FST GmbH
12. Honda R&D Europe GmbH
13. Hy2gen AG
14. Hydrogenious Lohc Technologies GmbH
15. Hypion GmbH
16. Hyundai Motor Europe GmbH
17. Linde
18. Mercedes-Benz Fuel Cell
19. Ontras Gastransport GmbH
20. Open Grid Europe GmbH
21. Proton Motor
22. Robert Bosch GmbH
23. Salzgitter Mannesmann Forschung
24. Siemens
25. SMA Sunbelt Energy GmbH
26. SunFire
27. Thyssenkrupp Uhde Chrorine Engineers
28. Toray Industries Europe GmbH
29. Tüv Süd AG-V4 e-Mobility
30. Uniper Energy Storage
31. Viessmann
32. Wystrach GmbH

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