Expert: Germany "not competitive" in green hydrogen

Renewable energies are to be used to decarbonise industry with "green" hydrogen. But the energy companies do not see the big business with production in Germany.

Berlin – "green" hydrogen produced with green electricity is urgently needed for the climate neutrality that Germany is striving for. The decarbonisation of industrial companies with high greenhouse gas emissions is to be driven forward with the ramp-up of the hydrogen market. But how will the growing demand be met? From abroad? This is one of the reasons why Federal Minister of Economics Robert Habeck recently visited Namibia. In any case, energy suppliers in this country do not expect to be self-sufficient in sustainably produced hydrogen in the future.

From the point of view of the Spanish energy giant Iberdrola, this is also due to the lack of supply of the required electricity from renewable energies. "As long as we still have to "green" large amounts of electricity in Germany, the hydrogen economy will always suffer from competing for renewable energies," said Sven Wolf, head of sales at Iberdrola Germany, to the German Press Agency.

RWE: Demand for green hydrogen in Germany higher than production capacity

This is also how RWE and Eon see it: "Germany's demand for hydrogen is significantly greater than its possibilities for generating renewable electricity," says RWE. However, the raw material does not have to be a scarce commodity. "We are in contact with companies around the world who want to deliver," Eon emphasizes.

The Federal Ministry of Economics also expects only a partial supply of the German economy through self-production: "Since the domestic production potential for hydrogen is limited, the greater part of the demand will have to be covered permanently by imports of hydrogen and its derivatives," says the draft for the update of the National Hydrogen Strategy. So far, the German government wants to build up an electrolysis capacity of at least ten gigawatts in Germany by 2030.

But what are the obstacles to hydrogen production from green electricity in Germany and Europe? Energy suppliers point to the costs of expanding renewables. "As significant amounts of electricity are needed to produce 'green' hydrogen using electrolysis, the cost of renewable energy sources such as wind and solar must continue to fall," Eon said.

Hydrogen from Germany "not competitive" under normal market conditions

The German hydrogen economy is confident: In the energy mix, the use of hydrogen is nowhere near as uneconomical as often portrayed, says Mischa Paterna from the Mecklenburg-Vorpommern Hydrogen Cluster. When it comes to the storage capacity and coupling of the electricity and heat sectors, there is simply no alternative, and political guidelines force rapid action.

In order to limit risk and prices for electricity producers, hydrogen producers and industrial customers, companies rely on long-term power purchase agreements (PPAs), among other things. Felipe Montero, head of Iberdrola Germany, considers the production of hydrogen without fixed contracts to be uncompetitive under normal market conditions, especially in Germany.

Steel producer Salzgitter and Iberdrola recently signed a long-term supply contract for green electricity. This is to come from the "Baltic Eagle" offshore wind farm under construction in the Baltic Sea. The aim is to produce "green" hydrogen, which is a core element for the production of "almost CO2-free steel".

PPAs likely to be existential for hydrogen transition

From RWE's point of view, such PPAs will be almost existential for the green hydrogen transition in industry and the transport sector, also for regulatory reasons. Reference is made to EU requirements according to which "operators of electrolysers within the EU need long-term electricity consumer contracts for electricity from renewables in order to be allowed to market the hydrogen produced as 'green'". In order to avoid rising production costs within the framework of European CO2 certificate trading, energy-intensive companies therefore have little room for manoeuvre.

The EU rules presented in February 2023, which specify the targets for hydrogen production, are generally welcomed by the business community. Finally planning security, they say. However, Iberdrola criticises the fact that after a transitional phase, it must be proven to the hour that the electricity used comes from renewable sources. Eon and RWE are also talking about over-regulation. "This makes hydrogen unnecessarily expensive in the EU," RWE criticises.

Industry needs funding

From the point of view of the energy industry, in order for there to be any significant production of hydrogen in Europe at all, subsidies are necessary, especially in the initial phase. Eon, RWE and Iberdrola cite subsidies for the electricity required for hydrogen production, aid for investments in electrolysis plants and a more transparent funding landscape at European level as possible starting points.

Hydrogen clusters in Germany, in which companies, for example, bundle and coordinate their activities, hope that the federal government will also take the H2Global funding project as a model in Germany: Here, when importing "green" hydrogen, the federal government guarantees that buyers and sellers can trade with each other on the best possible terms and ensures that producers take over possible gaps in coverage. According to Paterna, setting a fixed price to enable planning security for the market ramp-up would be the wish of the hydrogen economy. (dpa, lf)