(Berlin) - The development of a hydrogen network in Germany is being unnecessarily delayed. Although there are “important preparatory measures” on the part of the transmission system operators, “significant investments” are missing. One of the main reasons for this is “particularly the existing amortization risk” in the initial phase, says the German Energy Agency GmbH (Dena).
Agree on the development of a hydrogen network
The experts at the federally owned institution suggest spreading the risks of a “starting network” across several shoulders. The federal government and network operators would therefore have to agree on the accelerated development of a supra-regional hydrogen network at the long-distance pipeline level.
The industry will then receive the order to build this network based on their network construction proposals. This could be done both through new construction and by retrofitting existing natural gas pipelines. According to Dena, the hydrogen network operators submit to cost regulation based solely on hydrogen by the Federal Network Agency (BNetzA).
Advance payment with own funds
To finance this, network operators should make advance payments with their own funds. The state secures the investments “by guaranteeing the network operators long-term profitability”. Once a line is completed - Dena mentions the year 2026 - the network operators could charge fees. “In order to make the network fee economically attractive for the very few initial customers, it will initially be capped,” is the proposal. The specific amount will be checked and confirmed by the BNetzA. The end users of the hydrogen “in any case paid a higher network fee than if they were cross-financed via natural gas regulation”, for example double the current network fee for natural gas.
The capped network fee collected in this way is initially paid by a presumably small number of connected customers. This means that the total does not initially result in an adequate remuneration that adequately covers the expenses.
“Amortization account” instrument
To reduce risk, the core idea comes into play here: Since the combination of the network operator's mathematical claim and the required cap on the network fee in the ramp-up phase results in a financing gap, according to Dena, the instrument of an “amortization account” helps. On the one hand, the network fees are paid there, and on the other hand, the account is used to pay the costs of setting up the network. “This creates a financial gap in the ramp-up phase and a corresponding deficit in the account.” The network operator initially makes up for the gap, which is continued over the following years and bears interest.
The state, in turn, ensures the amortization of the lines in the event that the hydrogen ramp-up is delayed and thus profitability is at risk. To do this, financial resources could be built up for a key year - the Energy Agency suggests 2035 - which would be used to compensate for the amortization gaps. “It is important that the agreed amortization regulation is secured in the federal budget so that there is appropriate security for the necessary investments,” is the proposal. After the depreciation period has expired – i.e. 2045 – any excess or shortfall in revenue would be offset.
Expansion of the infrastructure can be planned
According to Dena, several goals could be achieved as a result: the expansion of the hydrogen network infrastructure would be accelerated, network operators could begin the conversion and construction of lines promptly, and opportunities and risks would be distributed among various actors such as network operators, end users and the state. In addition, producers, importers and consumers of hydrogen have a predictable time corridor, as the question of transport by cable has been solved for the foreseeable future.
“The concept of amortization protection would be suitable for the start-up phase of a hydrogen infrastructure 
“Specifically for lines that are planned to be put into operation in the next ten years, for example,” emphasizes the chairman of the Dena management, Andreas Kuhlmann: “From 2035 onwards, a sufficiently large number of network users should support a regulated hydrogen pipeline system through refinancing with network fees.”
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Dena suggests that the federal government and network operators should use an “amortization account” to spread the risks of a “starting network” for hydrogen across several shoulders. © German Energy Agency GmbH
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Andreas Kuhlmann, Chairman of the Dena Management Board. © German Energy Agency GmbH (Dena) / photothek
Deutsche Energie-Agentur GmbH: “A proposal for more speed in the expansion of the hydrogen network infrastructure”, free of charge PDF.
