Limited support for blue hydrogen in Germany, green potential capped by RES

Germany's national hydrogen strategy, presented June 10, focuses on kick-starting a green hydrogen economy based on the electrolysis of renewable energy, but there is a small opening for blue hydrogen.

The strategy talks of a 'stakeholder debate' with the energy-intensive chemical and steel sectors on possible decarbonization methods other than green hydrogen using carbon capture and utilization (CCU) technology as well as carbon contracts for difference.

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And with Germany's ability to produce green hydrogen domestically constrained by renewable electricity volumes, there is room for blue hydrogen (steam methane reforming plus carbon capture) to grow if it can do so without the bulk of the subsidies on offer.

The government plans a pilot carbon CFD program for steel and chemical sector projects, it said.

That would subsidize the cost difference between a project's avoided CO2 emissions and the CO2 price in the European trading scheme (EUA), it said.

Germany's 2030 climate law has set legally binding emissions targets for all sectors from power to transport and industry.

The focus on green hydrogen in the strategy, however, should not be underestimated with Eur9 billion ($10 billion) in support, of which Eur2 billion would be for green hydrogen projects abroad.

"The government's recognition that only green hydrogen from renewable sources is sustainable reduces the long term risk of fossil gas surviving through the backdoor," Felix Heilmann, researcher at climate think-tank E3G said.

"At the same time, the long negotiations within the government regarding the potential for green hydrogen production in Germany illustrate the difficulties that countries which pin too many hopes on hydrogen will face," Heilmann said.

Green hydrogen from the planned 5 GW of electrolyzer capacity by 2030 would only produce a sixth (14 TWh) of hydrogen demand by then, the strategy estimates. German hydrogen demand is set to almost double from 55 TWh to a forecast range of 90-110 TWh.

The government expects CO2-free hydrogen derived from natural gas to play a role in other European hydrogen markets and, therefore, in Germany.

Meanwhile German utility lobby BDEW has criticized the lack of a clear European certification process for green hydrogen, decarbonized gases and a trading system for such products.

The BDEW was working on a relevant proposal, it said.

National hydrogen council

A new national hydrogen council (NHC) will be essential in the implementation of the strategy.

The government has appointed a cross-section of 25 industry managers, scientists, unions, experts and environmental activists to the council.

"Feeling the responsibility for being the only direct representative of the German large utilities in the NHC, I am delighted to make this expertise available to the Hydrogen Council," Uniper CEO Andreas Schierenbeck said.

Schierenbeck has called for a technology-neutral approach to hydrogen.

Uniper has a joint venture with Siemens involving its closed coal plant sites.

"Hydrogen is the connecting element between the sectors and helps us as a society to avoid the billions of euros in damage caused in Germany alone by the destruction of the value of unused electricity from renewable energy sources," Schierenbeck said.

Some 3%, or 6.5 TWh, of renewables were curtailed last year to keep the power grid stable, most of it wind during winter.

The advisory NHC, comparable in composition to Germany's coal commission, includes company representatives from all industrial sectors such as BASF, Daimler, Linde, MAN, ThyssenKrupp/Salzgitter, Siemens and Viessmann alongside scientists, researchers, unions and environmental activists such as BUND and Klima Allianz.

Germany's biggest power generator RWE, which on June 10 signed an agreement with steel maker ThyssenKrupp on a green hydrogen project, called for a quick implementation of the strategy.

The GETH2 project would be based on a 100 MW electrolyzer at RWE's Lingen site with the hydrogen transported via pipeline by gas operator OGE (also represented in the NHC) to the Duisburg steel plant, supplying 70% of the plants demand to produce 50,000 tonnes of green steel annually.

A June 5 study by Prognos for the energy ministry highlighted energy-intensive sectors such as steel and chemicals as essential for decarbonization, but with wholesale transformation only feasible in the 2030s due to massive energy demand.

The hydrogen strategy's focus on green hydrogen would add approximately 20 TWh in additional demand for renewable power to feed the 5 GW electrolyzer capacity by 2030 with the government keen not to increase power sector emissions amid the coal-phase-out with the 2022 nuclear exit already reducing CO2-free electricity in Germany's power mix.