German billions accelerate global hydrogen economy
It’s hard to overstate how much Germany wants to wean itself off Russian gas.
Such is its desire to rid itself of dependence on the hydrocarbons that are fuelling Vladimir Putin’s war machine that it is not only investing in hydrogen production at home; it is planning to fund infrastructure abroad to meet expected demand.
In December last year, Germany’s €900 million ($1 billion) plan to subsidise green hydrogen production outside the EU countries was approved by the European Commission, which waved state-aid rules.
The program, H2Global, is looking to fund up to 500 MW of electrolyser capacity abroad using competitive auctions to drive down the cost of globally traded hydrogen.
Such is Germany’s desire to rid itself of dependence on the hydrocarbons that are fuelling Vladimir Putin’s war machine that it is not only investing in hydrogen production at home; it is planning to fund infrastructure abroad to meet expected demand.
Moreover, an even larger figure – €3.6 billion – is being sought for the scheme to accelerate Germany’s energy transition, according to the country’s draft budget for 2023 that was approved by the Federal Cabinet on July 1.
That suggests even greater ambition for a project that promises to accelerate global hydrogen production and trade, eliminating some of the chicken and egg dilemma that can hold back the development of new markets.
Germany launched H2Global in early 2021 because it believes it will struggle to produce enough clean hydrogen domestically to meet its decarbonisation goals.
The cheapest green hydrogen is expected to be produced by countries with the greatest renewable energy resources, such as solar, wind and hydropower. However, shipping costs will add to the price for end users, such as Germany.
Europe’s largest economy has already signed agreements with Canada, Chile, Japan, Morocco, Saudi Arabia, the United Arab Emirates to work together on clean hydrogen. However, concrete import deals will only be signed following forthcoming auctions.
The cheapest green hydrogen is expected to be produced by countries with the greatest renewable energy resources, such as solar, wind and hydropower. However, shipping costs will add to the price for end users, such as Germany.
In April, S&P Global Commodity Insights reported that H2Global would begin its first auction for a 10-year contract for green ammonia (derived from green hydrogen) imports in the second quarter, leading to a first cargo in 2024. That is yet to materialise but suggests the first auction is imminent.
Germany will subsidise the cargoes using a contracts-for-difference mechanism similar to that being used by the UK government to support affordable domestic hydrogen production
It will be fascinating to see which countries bid in the first auctions, what prices are achieved and who wins.
The EU is planning an agreement with Namibia, long touted for its potential as a green hydrogen hub due to its exceptional renewable energy resources.
Ultimately, the scheme will accelerate the adoption of clean hydrogen and help build a global trade network in the fuel that is the key to decarbonising heavy industry, transport, manufacturing, energy and heating.
Germany is not alone. The EU is planning an agreement with Namibia, long touted for its potential as a green hydrogen hub due to its exceptional renewable energy resources, to support imports of the fuel from the African nation, officials told Reuters this week.
Government backing for hydrogen imports would ensure that the UK is also at the centre of the emerging trade in the clean fuel.
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