Germany must address several issues to lead hydrogen revolution

Green hydrogen drives decarbonization. Political ambitions match. Yet, aspirational ambitions alone will not improve the hydrogen economy. Implementation issues remain, but solutions are near.

German climate protection discussions must include decarbonization. It reduces the economy’s or sector’s carbon content. The data indicate how difficult this is in energy-hungry Germany.

The Climate Protection Act required annual emissions reductions, but 2022 was not doable. The value was 762 million tons, five million tons above the target. Germany must decarbonize energy, industry, transport, and buildings to reach climate neutrality by 2045.

The federal government is expanding wind and solar generating capacities to decarbonize the energy industry, the nation’s top emitter. By 2030, 80% of electricity should be renewable. Transport and construction are electrified. E-cars and heat pumps should gradually replace combustion engines and gas or oil heating systems. Industry, the second-largest emitter at 182 million tons, cannot electrify.

Hydrogen’s future importance has long been acknowledged. EU and national hydrogen economy goals exist. The need is great. The German Energy Agency expects 90 to 110 terawatt hours by 2030 for Germany alone. Hydrogen imports and indigenous generation satisfy energy needs. 2030 electrolysis capacity is 10 gigawatts. Germany’s 2030 ambitions are high, while the EU’s are 75 gigawatts.

Financing critical projects remains a hurdle. Electrolysers that generate green hydrogen from renewable energy are essential. High risk premiums and equity ratios for project developers deter banks from investing in such ventures.

First is adequate renewable energy. Wind and solar parks are needed for sustainable, long-term operation. Politics and society encourage renewables’ rapid growth. Due to lengthy approval processes, Germany lacks green power plants. Here, important decisions have been made, but streamlining and acceleration are possible.

Second, it needs long-term creditworthy buyers. Banks focus on project cash flow, which is dictated by customers. This requires proper acceptance requirements. Consider the natural gas market. Delivery requirements and penalties must be effectively linked with the project and electrolyser operation.

Thirdly, product transit is risky. Furthermore, longevity. Decentralized projects will leverage mobile storage for its flexibility and inexpensive investment costs. A extensive pipeline network is needed in the future. Cooperation between Spain, France, and Germany is a crucial first step.

Fourth, projects may fail. Electrolyser procurement is riskier than wind or PV projects, although approval is less unpredictable. Because electrolyser production is still mostly manual, global supply chains are unlikely to revive. Medium-term production capacities will expand exponentially.

Due to a lack of experience, electrolyser operation is still questionable. Long-term manufacturer assurances reduce investor risk.

The regulatory framework remains lacking. Market participants and investors are uncertain. A year later, the EU Commission has presented green hydrogen and derivative standards in two “delegated acts”. A standard definition and exception regulations are key steps toward a pragmatic market ramp-up, even though these restrictions are more complex than desired.

The European Council and European Parliament must approve these legal actions for Germany and the EU to achieve their aims in the near future. Adequate but pragmatic funding tools are also needed. USA-launched.

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