In July 2023 the German Government presented an update of the National Hydrogen Strategy which was originally issues in June 2020 (our summary of the key aspects is available here). The update re-emphasises the significance of hydrogen for the energy transition and the need to focus on green hydrogen at all stages of the value chain. Below, we summarise the most important objectives and measures of the updated strategy plan.

Production capacity target doubled to 10 GW by 2030

The German Government has reconsidered its assessment of the expected annual hydrogen demand by 2030 from previously 90 to 110 TWh to now 95 to 130 TWh. To meet the expected increased demand, the updated National Hydrogen Strategy envisages broader measures to boost the domestic production.

Regarding the domestic production, the policy makers first agreed in the National Hydrogen Strategy on a 5 GW production capacity target by 2030. In the updated National Hydrogen Strategy the electrolysis target for the production of green hydrogen has now been doubled to at least 10 GW by 2030. The 10 GW expansion target will be reached through a mix of instruments, particularly through the direct promotion of projects for the production of electrolysers, both onshore and combined with offshore wind energy. Within the framework of the new EU funding programme for hydrogen technology, IPCEI Hydrogen, electrolysis projects with a total installed capacity of approximately 2.5 GW are expected to be approved in 2023. The German Government, furthermore, relies on the newly introduced auction scheme foreseen in the Offshore Wind Act according to which it is planned to put out 500 MW of installed electrolysis capacity for the offshore production of green hydrogen to tender per year between 2023 and 2028.

Import strategy and international cooperation

In addition to the domestic production, the updated National Hydrogen Strategy puts a huge emphasis on the role that imported hydrogen will play. The German Government estimates around 50 to 70 percent (45 to 90 TWh) of the expected demand of 95 to 130 TWh for 2030 to be covered by hydrogen imports from abroad. To meet the increasing demand, the German Government is developing an import strategy that is to be presented before the end of the year.

The import strategy will address both European and international cooperations in order to develop diversified import channels and to avoid dependencies as was last seen due to the war in Ukraine. For this purpose, the strategy focusses on sustainable production and transport options and the necessary import infrastructure, both for ship transports and for pipeline transports. The latter will be implemented by the development of a EU-wide hydrogen network, the so-called European Hydrogen Backbone (see below).

To further promote imports of green hydrogen from outside the EU, the import strategy suggests supporting further potential partners in their efforts to build a value chain for hydrogen. Prices and quantities for trading in green hydrogen derivatives are to be determined transparently via a specially founded trading platform, so-called H2Global, for green hydrogen and its derivatives.

Increased relevance of blue hydrogen

Whilst Germany seemed to be reluctant in considering so-called blue hydrogen as a means of ramping up the hydrogen industry, the updated National Hydrogen Strategy now contains a clear statement from the German Government: whilst criteria for the production of so-called green hydrogen are defined by the EU and specifications for blue hydrogen still need to be defined, the German Government will advocate uniform, practicable and ambitious criteria with the setting of a threshold value for greenhouse gas emissions for blue hydrogen, and establish a dialogue on the transport and permanently safe CO2 storage in the EU.

Hydrogen transport and supply infrastructure

With respect to the transport of hydrogen, the IPCEI Hydrogen programme foresees a hydrogen network of more than 1,800 km of converted and newly built hydrogen pipelines to be established in Germany for the first time (so-called start network). To create the legal basis for the establishment of such a network, the German Energy Industry Act is to be amended this year already.

The IPCEI Hydrogen programme is still at the very beginning. In the long run, it is envisaged to connect the German hydrogen network to neighbouring countries via a EU-wide core hydrogen network, the so-called European Hydrogen Backbone. As a first step, within the IPCEI programme, around 4,500 km of newly built and converted hydrogen pipelines, including cross-border connections, are to be installed across the EU by 2027/2028. Beyond this, the German Government is already in exchange with other Member States on the further expansion of cross-border infrastructures. The cooperation with Norway and Denmark is advanced, but talks have also been held with Finland, Sweden, Austria, Italy and France. According to the German Government, by 2032, more than 11,000km of pipelines will connect all major generation, import and storage centres within the EU with the relevant consumers.

Areas of hydrogen use

By 2030, the aim is to develop the hydrogen market further through an incremental expansion of the areas where hydrogen is used as a fuel, in particular in the transport and industrial sectors. The updated National Hydrogen Strategy specifically provides for the following measures and forecasts:

  • Industrial sector: the demand for hydrogen is expected to be between 290 and 440 TWh in 2045. The German Federal Ministry of Education and Research already funds various research and innovation projects to promote the conversion to hydrogen, especially in the steel and chemical industry. Besides financial support, the action plan considers measures for the marketing of climate friendly basic materials, e.g. green steel, including labelling, product standards and procurement quotas.
  • Transport sector: hydrogen and its derivatives are considered as important components for sustainable, climate-friendly mobility. Therefore, the German Government wants to implement minimum quotas for the use of hydrogen and e-fuels at national level. Further implementation of the amended RED II in Germany will create incentives for investments in electrolysers of at least 2 GW for applications in the transport sector.
  • Electricity sector: grid-connected hydrogen and its derivatives are important energy carriers for climate-neutral power supply. In the context of the general abandonment of power generation from fossil fuels, the annual hydrogen demand in the conversion sector (electricity and heat) is expected to increase from currently 0 TWh to up to around 80 to 100 TWh in 2045. For new combined heat and power and biomethane plants with an electrical output of at least 10 MW that are approved from July 2023, it must be ensured that the plants can later be converted to operate with hydrogen (“H2-readiness”).

Effective framework conditions

The individual measures in the areas of hydrogen use and transportation create the need for complementary framework conditions that are overall effective, coherent and transparent. The updated National Hydrogen Strategy foresees the following measures:

  • To remove regulatory barriers and to accelerate the development of hydrogen infrastructure, the German Government works on a Hydrogen Acceleration Act which will simplify the planning and approval procedures, inter alia, for the construction of hydrogen refuelling stations.
  • The sustainability standards and certification systems for the production, transport and distribution of hydrogen and its derivatives are to be harmonised. The basis for this is the development of general methods for the reliable determination of greenhouse gas footprints in the production, transport and use of hydrogen and its derivatives. The harmonisation procedure includes the development of new sustainability standards and certification systems at national, European and international level, international agreements on the mutual recognition of standards and certificates as well as the swift implementation of EU requirements, especially under the RED II.

Outlook

Just as the German Government announced back in 2020 that its National Hydrogen Strategy will be under review and subject to adjustment in 2023, it has also declared in its update to the National Hydrogen Strategy that there will be a continuous development around hydrogen in the future. In particular, the planned start network, which is an important impetus for the development of the hydrogen infrastructure, and financial support for relevant hydrogen consumers, e.g. in the steel industry, can be expected to trigger relevant investment decisions. Therefore, stakeholders are well advised to continue following the discussions around hydrogen in the political and legislative processes at domestic and EU level.