Germany’s Green Hydrogen Strategy: Missed Opportunity for Domestic Production?

Germany’s ambitious hydrogen strategy may be overlooking the benefits of producing its own green hydrogen, potentially hampering its long-term cost competitiveness.

A recent meta-analysis commissioned by the State Association for Renewable Energies North Rhine-Westphalia reveals that domestically produced green hydrogen is projected to be cheaper than imported hydrogen until 2030. This cost advantage holds true not only for long-distance imports but also for piped imports from neighboring European countries and North Africa.

According to the analysis conducted by the Wuppertal Institute for Climate, Environment and Energy, the estimated cost of domestic green hydrogen production in 2030 ranges from €0.07 to €0.13 per kilowatt-hour (kWh), equivalent to €2.33 to €4.33 per kilogram (kg). In contrast, hydrogen shipped over long distances is forecasted to cost between €0.09 and €0.21 per kWh (€2.99-€6.99/kg), while piped imports are estimated to range from €0.05 to €0.15 per kWh (€1.67-€5.00/kg).

Among the 12 studies analyzed, the most cost-effective green hydrogen imports for Germany originate from Spain, Eastern and Northern Europe, and North Africa. Moreover, recent studies trend towards more optimistic cost estimates for hydrogen imports. However, leaked drafts of Germany’s national hydrogen strategy suggest that the country plans to meet 50-70% of its renewable hydrogen demand by 2030 through imports, despite doubling its electrolyzer installation target to 10GW by that year.

While Germany has been actively pursuing agreements with potential hydrogen exporters worldwide, including Australia, Brazil, Egypt, Namibia, and South Africa, the report argues that the German government should prioritize building domestic hydrogen capacity in the short term. The authors emphasize that strengthening a domestic green hydrogen economy brings inherent benefits and challenges the notion that importing hydrogen necessarily offers cost advantages.

However, the study recognizes a potential trade-off between increased overall demand for green hydrogen and higher import dependency. Projections for 2030 estimate demand to range from 29-101TWh, but for 2045 or 2050, it could increase significantly to 200-700TWh. Over time, the cost gap between domestic and imported green hydrogen narrows, with domestic production estimated to cost €0.07-€0.09 per kWh (€2.33-€2.99/kg) by 2050, similar to imported hydrogen costs of €0.07-€0.11 per kWh (€2.33-€3.66/kg). Piped imports are also expected to fall to €0.04-€0.12 per kWh (€1.33-€3.99/kg) by 2050.

The analysis dismisses the viability of blue hydrogen imports from Norway due to higher greenhouse gas emissions compared to renewable hydrogen. Even under the most favorable assumptions for upstream emissions and carbon capture rates, blue hydrogen still falls short of the emission reductions achieved by renewable hydrogen. The study also cautions against blue hydrogen produced in countries such as the US, which relies on fossil gas with even higher upstream emissions.

While the EU currently focuses solely on renewable hydrogen, there may be increasing pressure to reconsider support for blue hydrogen as part of the upcoming hydrogen and decarbonized gas markets package. The findings of the meta-analysis highlight the importance of striking a balance between imports and domestic production to ensure long-term cost competitiveness and achieve ambitious climate goals.