Germany says no to the funding of blue hydrogen

Last week, the new federal administration revealed intentions to significantly extend the national hydrogen strategy. There is one caveat: despite industry desires, hydrogen produced from natural gas is unlikely to be included in the subsidy schemes.

Clean hydrogen is being hailed as a potential panacea for decarbonizing sectors such as steel and chemicals. These sectors are now unable to be fully electrified due to the high energy demands of industrial operations and chemical reactions.

Hydrogen, according to the European Commission, will be critical in meeting the EU’s climate goals. Clean hydrogen might provide 24% of the world’s energy needs in 2050.

On January 11, Vice-Chancellor Robert Habeck announced in Berlin, “We need a tremendous ramp-up of hydrogen.” He stated that the steel industry alone required five times the amount of hydrogen that is now projected across all sectors.

As part of the impending “Easter Package,” Germany will quadruple its hydrogen electrolysis capacity from 5GW to 10GW in 2030 to reach this target, according to Habeck.

Habeck seeks to boost productivity by rushing through the 8 billion euro “Important Projects of Common European Interest” (IPCEI). He also wants to establish more subsidy programs and provide businesses with “Carbon Difference Contracts” (CCfDs) to help them lower their investment risk.

In addition, by changing the legislative framework, the production, transportation, and use of so-called green hydrogen will be boosted. Using sustainable power, green hydrogen is created by splitting water molecules into oxygen and hydrogen.

“We are also committed to this at the European level,” adds Habeck in his opening balance sheet on climate protection, which mentions certification systems as a component of EU legislation that Berlin now wants to favor green hydrogen.

According to Patrick Graichen, Habeck’s state secretary and right-hand man, Germany is unlikely to grant subsidies for “blue hydrogen.”

Blue hydrogen is created by burning fossil fuels and employing carbon capture and storage (CCS) technology to absorb CO2 emissions.

The federal government’s strategy is difficult to read for blue hydrogen supporters. Representatives from the oil and gas business have previously shown significant support for blue hydrogen.

Blue hydrogen will be required for the transition to a hydrogen economy based solely on renewable energy, according to the European Commission.

Producing hydrogen from natural gas might save Europe €2 trillion by 2050, according to a 2021 industry-sponsored analysis. This is mostly owing to the fact that it can expand using the existing gas infrastructure.

Blue hydrogen proponents also argue that it can help address the chicken-and-egg conundrum, in which a shortage of hydrogen production leads to a lack of demand and vice versa.

On January 13, Sigfried Russwurm, President of the Federation of German Industries (BDI), said, “If we want to solve this chicken-and-egg dilemma, then it’s time to enter into the hydrogen economy and embrace it with diverse types of hydrogen.”

“We have to confront the truth that huge volumes of green hydrogen are not feasible nor available now or in the years to come, since the market will only scale up slowly,” he told journalists at EURACTIV’s request.

His stance is backed up by Veronika Grimm, a powerful German economist and member of Germany’s national hydrogen council. “Green hydrogen, realistically, will not be accessible anytime soon,” she told EURACTIV. “Blue hydrogen may be used to construct a bridge here.”

However, despite its proponents’ best efforts, blue hydrogen cannot escape its dark side: the reality that fossil natural gas plays a significant part in its manufacture, with all the issues that involves.

Natural gas, which is mostly supplied from crucial nations such as Russia, has a tendency to leak from pipelines, posing major climate risks because methane is a powerful greenhouse gas.

“We have yet to visit a place where oil and gas plants are not leaking methane at worrying levels,” said Jonathan Banks of the Clean Air Task Force, an environmental non-governmental organization.

The most recent setback for blue hydrogen occurred as a result of the European energy crisis, which saw gas prices reach new highs following the summer. Because blue hydrogen relies on gas, its price has risen dramatically, indicating that it is reliant on the fluctuating natural gas market.

“I believe blue hydrogen is extremely dangerous for investors,” said Tom Baxter, co-founder of the Hydrogen Science Coalition.

Many experts and academics are doubtful about the economics and purity of blue hydrogen, in addition to their worries regarding CCS technology.

According to research published in Applied Energy in January, “we show that emissions from gas- or coal-based hydrogen generation systems might be considered even with CCS and that the cost of CCS is higher than generally anticipated.”

Finally, there are concerns that promoting blue hydrogen will have a lock-in – or lockdown – effect on fossil fuel infrastructure. “You’re locked in for 30 years once you invest in blue hydrogen,” Baxter added. Blue hydrogen, as a result, is “not a stepping stone.”

“When green hydrogen comes up, they’re not going to turn off blue hydrogen.”