Germany´s National Hydrogen Strategy Released

On 10 June 2020 the German government finally released its long-anticipated national hydrogen strategy. We take a look at the most important provisions, provide an overview and flag issues. The blog entry also discusses particular legal amendments to the energy market design in Germany. The aim of the  national hydrogen strategy is to boost hydrogen in Germany further and ultimately create a hydrogen economy, with Germany as `hydrogen world leader´. The national hydrogen strategy is available here.

The German government decided to provide a total of 9 billion Euros foir the creation of a German hydrogen economy in the next years. The main aim of the strategy is to have 5 Gigawatt electrolyser capacity installed in Germany by 2030 and to add further 5 GW capacity until 2040. The focus of the strategy is placed on so called `green´ hydrogen, which is produced from renewables. Politicians claim that the core-idea of Germany`s national hydrogen strategy is to use offshore wind energy transport it to the shore and convert it into hydrogen. However, while some plants for that are being constructed in rural communities in the German region of East-Frisia, it will take decades for Germany to be able to produce sufficient amounts of hydrogen from green sources in this manner for its energy intense industry.

Hydrogen should be used to decarbonize heavy-industries in Germany like cement or steel factories, which otherwise would be difficult to include in Germany`s decarbonization targets (p. 2/3 national hydrogen strategy).

Due to the vast amounts of hydrogen that will be needed in Germany in the coming years, the governmnet is not only banking on German domestic production. The biggest share of hydrogen for usage in Germany shall be imported form, predominantly Westafrican countries. In particular Morocco shall be used as Germany´s  hydrogen factory. This step is quite controversial due to the impossibility to ensure that the hydrogen there is really produced from renewables and not from fossil fuels. In fact, the national hydrogen strategy admits that the imported hydrogen will probably not be produced from `green´sources (p.6 national hydrogen strategy). But also because hydrogen has been praised as an `energy security weapon´ to strive towards energy independence in a country that is poor in natural resources.

There is, however, a problem as hydrogen is often produced from fossil fuels (natural gas, methane) in these countries and can therefore not be considered `green`. The  national hydrogen strategy is taking this into account, explicitly allowing for emission neutral hydrogen `blue´and `turquise´hydrogen, which can be produced using Carbon Capture and Storage (p. 4 national hydrogen strategy). However, the focus shall be on `green` hydrogen from renewable sources.

Here is the second issue of the strategy: while it estimates that for the running of electrolysers additional renewable elictricity in the magnitude of 20 TWh is required until 2030, has the increase in renewable energy facilities in Germany recently been stalled, due to the switch from a Feed-in tariff to a feed-in premium system, but also due to several political hurdles, like a 1000 meter distance requirement for onshore winsmills to dwellings.

A further interesting feature is the plan to convert gas infrastructure that will become redundant in the next years to be coverted to hydrogen infrastructure (p.7 national hydrogen strategy). This is of particular relevance for the low-calorific gas infrastructure (L-Gas) in the nortwest of Germany at the border with the Netherlands. Large amounts of L-Gas have in the past been imported from the Netherlands, but given the phase-out of gas production in Groningen (that has been discussed earlier on this blog) exports to Germany will cease as well.

Governance of the implementation of the national hydrogen strategy will be done via a national hydrogen council, a new-to-build national governance structure (p. 15/16 national hydrogen strategy). It consists of 26 experts from all relevant walks of life (economy, science and civil society). Their task is to give advise to the government on the implementation of the strategy and to focus on issues that may be improved. Every year a monitroing report shall be issued and decisions of the hydrogen council and the government shall be based on these results. Based on this, every three years a comprehensive evaluation of the implementation of the hydrogen strategy shall take place.

From a legal perspective several measures shall be taken. Besides an ambitious national implementation of the recast Renewable Energy Directive with focus on hydrogen, several national energy market rules shall be evaluated and changed (p. 18-20 national hydrogen strategy). The national hydrogen strategy wants to ensure that electricity, which is used for the production of `green´ hydrogen is exempted from taxes and leview. In particular shall the production of `green´hydrogen be exempted from the renewable energy levy.

A further interesting aim is the re-design of the liberalization rules for the energy market. The government wants to allow model projects in which electrolyzer operation companies and TSOs/DSOs can cooperate, while ensuring `competition-neutrality´in the hydrogen market. It remains to be seen which concrete steps the government proposes to square that circle.