Update hydrogen strategy (1): advance production and application

(Berlin) - The Federal Cabinet has decided to update the National Hydrogen Strategy (NWS). This was preceded by a political agreement between the five core departments of economy, environment, development, transport and research.

The previous strategy from 2020 still exists, but the goals and tasks formulated therein have been adapted to current developments in climate protection and the energy market. In order to accelerate the market ramp-up and expand the possible applications, the federal government has put together a series of plans, some of which are concrete and some are just vague.

The underlying scenarios therefore see a new demand for hydrogen in Germany of 2030 to 40 terawatt hours (TWh) in 75, which will increase sharply after 2030. In addition, there is the existing demand of around 55 TWh, which is currently covered by gray hydrogen. The paper therefore assumes a total demand of 2030 to 95 TWh for 130, which shifts the previous estimates (90 to 110 TWh) upwards. This also includes hydrogen derivatives such as ammonia, methanol or synthetic fuels.

Production of hydrogen in Germany

The federal government is placing a particular focus on expanding domestic electrolysis capacity on an industrial scale. The goal is to double the previously planned five gigawatts to ten gigawatts (GW) by 2030. In order to achieve this, the funding budget for the first hydrogen projects as part of the “IPCEI Hydrogen” has already been increased. The state aid approvals for issuing funding notices for electrolysis projects with a total installed capacity of around 2,5 GW are to be issued this year.

In addition, in the years 2023 to 2028, 500 megawatts (MW) of installed electrolysis capacity “of green hydrogen produced in a way that serves the system” would be put out to tender every year and incentives would be created for investments in electrolyzers amounting to at least two gigawatts for applications in the transport sector, in particular in order to avoid gray hydrogen with green hydrogen To replace refineries, to use the energy source directly in fuel cell vehicles and in the production of e-fuels.

As part of the National Innovation Program for Hydrogen and Fuel Cell Technology (NIP), decentralized projects amounting to 60 MW of electrolysis power to supply hydrogen filling stations have already been approved. An additional call for funding for a further 40 MW is planned for this year. In the medium term, funding programs should be revised and technologies advanced.

Hydrogen import strategy

The domestic production potential for hydrogen and derivatives is limited. According to the federal government, around 2030 to 50 percent (70 to 45 TWh) of the demand forecast for 90 will be covered by imports. This proportion will continue to increase in the years after 2030.
In order to secure the long-term import demand for the sustainable energy source, a “hydrogen import strategy” is being developed. The aim is to “open up broadly diversified import channels and avoid new dependencies,” the document says.

According to the NWS, imports will largely take place by ship until 2030, for example in the form of ammonia. Imports of green methane, synthetic methanol, LOHC (Liquid Organic Hydrogen Carrier) and liquid hydrogen could also play a role in the medium to long term. Various sustainable transport routes would be taken into account, including the creation of green corridors, and the increasing use of green fuels for ship imports would be sought. The lead times for the procurement of ships must also be taken into account. After 2030, the pipeline-based import of green hydrogen is to be expanded more strongly. In addition to building an EU-wide hydrogen network, the goal for Europe is particularly the production of green hydrogen in EU member states with sufficient potential for renewable energies.

The foundation was set up at the beginning of the legislative period to promote non-European imports and to support the global market ramp-up “H2Global” founded. This organizes two separate auctions. First, it is determined which exporter offers the lowest price for delivering green hydrogen. In a second step, the purchased quantity is auctioned among interested buyers. The companies with the highest bid will win the contract. The difference between the higher purchase price and the lower sales price (“Contracts for Difference”, CfD) is compensated by the federal government. The first round of tenders was published in December 2022, and the first deliveries are scheduled for the end of 2024.

Building a hydrogen infrastructure

For the market to ramp up, it is also essential to quickly set up a terminal, network, tank and storage infrastructure for hydrogen. This primarily includes a national hydrogen network that is able to connect future consumers in Germany with the production and import locations. The German transmission system operators recently had initial plans for the future Hydrogen core network presented.

Existing natural gas transport pipelines should be used in particular to ensure rapid construction. According to the NWS, more than 2030 kilometers of converted and newly built hydrogen pipelines could be available in Germany by 1.800. Across Europe, the aim is to reach 4.500 kilometers, of which 3.000 kilometers will be through repurposed natural gas pipelines. From 2030, the German hydrogen network should be connected to neighboring EU states via the first European hydrogen network (European Hydrogen Backbone).

The ports are of particular importance here. Where wired supply is not possible, transport by sea, rail and roads should be examined.

Imports from third countries

While the expansion of a European hydrogen core network requires a cross-border infrastructure in particular, the focus in cooperation with non-European countries must be on the accelerated construction of import terminals that can be converted to hydrogen and on the expansion of the transport infrastructure in ports on the German coast.

Planned terminals for liquefied natural gas (LNG) should be built in such a way that they are “H2-ready”, i.e. suitable for the landing of hydrogen derivatives and transport media with little economic effort. In addition, further terminals would have to be built only for hydrogen or its derivatives.

Establish areas of application

Whether hydrogen is used more depends in particular on its sufficient availability and its attractiveness compared to alternative options. “As long as hydrogen is a scarce and expensive raw material and energy source, the focus should be on applications for which direct electrification does not make economic sense or for which there are no alternative technical solutions to achieve climate neutrality.”

The NWS therefore sees the area of ​​application of hydrogen by 2030 particularly in industry as well as in fuel cells in the transport sector or in the production of renewable fuels. In the electricity sector, hydrogen contributes to energy supply security through gas power plants that can be converted to climate-neutral gases (“H2-ready”).

Heating sector: No widespread application until 2030

Although there is still “no widespread use” in the heating sector by 2030, “the conversion of gas distribution networks to hydrogen and the use of decentralized H2 boilers should also be made legally and technically possible”. Direct use of hydrogen for space heating will only be relevant after 2030, except in pilot projects.

The use of hydrogen boilers or combined heat and power (CHP) with hydrogen systems could, however, “represent a necessary technology option” in buildings where there is no heating network and where heat pumps cannot be operated efficiently; especially if there are large hydrogen buyers in the neighborhood and there is sufficient supply at low prices.

In the future, the framework conditions for heat supply are currently being further developed in the Building Energy Act, in heat planning and in the European gas market package.

Suitable framework conditions

The market ramp-up requires suitable national, European and, if possible, international framework conditions such as efficient planning and approval procedures, uniform standards and certification systems as well as adequately equipped administrations coordinated at all levels. Generation capacities as well as storage, tank and transport infrastructure must be expanded quickly and in line with needs. Approval procedures for the construction of hydrogen filling stations, for example, would be simplified and digitized.

German developers offer lead technology

Hydrogen technologies “Made in Germany” are in international demand. There is therefore a need to build up skilled workers for the ramp-up of the hydrogen economy. Among other things, a package of measures is being developed to increase the attractiveness of hydrogen-related professions, including an overarching initiative for MINT specialists. In addition to long-term, this also includes short-term (retraining, further training) and medium-term measures such as promoting university education and immigration of skilled workers. Young hydrogen talent from universities in particular would be supported and an international exchange of young talent would be offered.

The aim of the NWS is “a reliable supply of green hydrogen to Germany,” according to the Federal Ministry of Economics. The world market for hydrogen must be “fair and therefore different than the global fossil economy ever was,” says Federal Development Minister Svenja Schulze.
However, it remains unclear how much the state and companies will have to spend financially on switching to hydrogen. Experts vaguely expect an investment requirement of many billions of euros.

Editor's note: We have summarized the numerous opinions, concerns and desires expressed by business and associations in the last few days in a separate article.

Photos
Paul Löbe House / © German Bundestag, Simone M. Neumann