The National Hydrogen Strategy: a step towards a hydrogen economy?

In its fight against climate change, the German cabinet has approved a National Hydrogen Strategy. Adopted on 10 June 2020, it marks a new milestone in establishing a German economy primarily powered by hydrogen. This follows on from the federal government’s National Hydrogen and Fuel Cell Technology Innovation Programme and Energy Research Programme. This all ties in with the economic stimulus package of 3 June, tackling the consequences of the COVID-19 crisis.

The government is keen to cement hydrogen as the key source in Germany’s ambitious energy policy turnaround. Its strategy aims to provide a solid framework for establishing and expanding the hydrogen economy in Germany in terms of producing, transporting, using and reusing hydrogen. In turn, triggering new innovations and investments.

Hydrogen power: A climate-friendly technology

Hydrogen is seen as key to the successful transition from fossil fuels to renewable energies. Where there is an oversupply of renewable resources, they can be used to produce hydrogen by electrolysis. The hydrogen can then be stored, transported and, if required, converted back into electricity by using fuel cell technology.

The German government envisages that the National Hydrogen Strategy will enable it to meet its global responsibility for cutting greenhouse gas emissions. At the same time, it also believes it will significantly contribute to climate protection by opening a hydrogen market along the entire value chain. However, this can succeed only if hydrogen is competitive, which is not yet the case. This is why the National Hydrogen Strategyaims to help create a ‘home market’ for hydrogen technologies in Germany. Establishing hydrogen as an alternative source of energy will embed it into Germany’s mix of energy supplies.

There are also hopes that hydrogen will become a sustainable raw material in industry. For that to happen, though, a new transport and distribution infrastructure using both the existing gas network and new hydrogen infrastructures will have to be established.

Economic policy objectives are the driving force of these developments. After all, a hydrogen economy is seen as the engine for boosting the research sector, training skilled labourers, and further strengthening the German economic powerhouse.

Germany has the bold ambition to become the world’s leading producer of hydrogen plants, with capacities of up to 5,000 MW by 2030 and a further 5,000 MW by 2040.

The German government’s package of measures contains various starting points for implementing the National Hydrogen Strategy. For example, a stricter implementation of the Renewable Energy Directive (RED II) aims to replace grey with green hydrogen in fuel production. Other aims include reviewing the tender of electrolyzer services, exempting the production of green hydrogen from the EEG levy, and awarding investment grants.

Also up for review are a power-to-liquid quota for aviation fuel, a demand quota for green steel, and funding for hydrogen-ready plants as regulated by the German Combined Heat and Power Act. Finally, the regulatory basis for developing a hydrogen infrastructure is to be set up without delay. Here it will be appropriate to apply the regulatory framework for gas transport accordingly, with necessary adjustments – in particular considering the operating safety.

Establishing a governance structure

The German government has created a flexible, open-ended governance structure to enable the National Hydrogen Strategy to be implemented. This includes a new National Hydrogen Council, bringing together experts from the research sector, economics and civil society. Germany also plans to be at the forefront of a wider European hydrogen strategy during its EU presidency.

Conclusion

All this is expensive. The bare facts are that introducing a hydrogen economy is costly, and for the moment probably remains unprofitable. During an economic crisis caused by the COVID-19 pandemic this applies all the more. It therefore remains to be seen (as has been the case for months) whether the ambitious political objectives of the hydrogen strategy can be achieved.

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Christoph Sieberg ist Rechtsanwalt und Assoziierter Partner am Standort Bonn. Er berät Energieversorgungsunternehmen und Stadtwerke in Fragen des Energiewirtschaftsrechts sowie der Regulierung. Zudem vertritt er Mandanten in Genehmigungs- und Missbrauchsverfahren betreffend Netzzugang und Netzentgelte ebenso wie in energieverwaltungsrechtlichen Gerichtsverfahren und in Zivilrechtsstreitigkeiten. Strategische und Finanzinvestoren begleitet er bei Transaktionen im Energiemarkt.

T +49 228/95 94-208

christoph.sieberg@fgs.de