The ramp-up of the hydrogen economy in Germany is slowing down, although overall, positive development is continuing. This is indicated by the third ‘H2-Bilanz’ (H2 Balance) published on 15 November by E.ON. It is based on data from the Institute of Energy Economics at the University of Cologne, and shows that the hydrogen production capacity planned to be available by 2030 has increased from 8.1 GW in February 2023 to 8.7 GW in August 2023. Even though there is still a slight upward trend here, the rate of increase slowed down during the months July 2022 to February 2023.
The German government’s goal in the national hydrogen strategy is to have at least 10 GW of electrolysis capacity installed in Germany by 2030. In the case of H2 infrastructure, the number of pure hydrogen pipelines in operation in Germany has remained almost the same. There is a clearly positive development in the plans for a hydrogen network, the planned length of which has almost doubled: The construction of 5708 km hydrogen pipelines by 2035 is now planned, compared to only 2813 km that were announced back in February of this year. E.ON attributes this to the fact that the construction of a hydrogen infrastructure has gained momentum in recent months with the decision to create a hydrogen core network. For E.ON, this is a further indication that clear political and regulatory frameworks are directly accelerating the ramp-up of the hydrogen economy.
In many areas, however, these are currently not sufficient to limit existing technology, demand, and infrastructure risks nor to make the costs of producing green hydrogen, in particular, competitive. For this reason, E.ON has commissioned the consulting firm Frontier Economics to investigate various options for accelerating the hydrogen ramp-up in Germany. Patrick Lammers, member of the Board of Management of E.ON, commented: “Acceleration is something that we urgently need in the hydrogen ramp-up in Germany. The discrepancy between planned projects and final investment decisions is far too great. We need instruments to speed up the hydrogen ramp-up. That’s why we at E.ON have initiated a study that identifies various options. In this way, we want to provide concrete impetus and support policymakers in creating the necessary framework conditions for the success of the hydrogen economy."
The new study focuses on five different instruments. As the green gas quota is increasingly a subject of political discussion and since the EU already imposes quotas for hydrogen in industry and in the transport sector which must be met in the member states, Frontier Economics has analysed this instrument in depth. One argument in favour of a green gas quota is that it can be implemented without the use of direct public funds and enables a reliably plannable ramp-up of green gases. A green gas quota would also be a concrete political signal for the future of green gases as a sensible addition to electrification.
However, the study also points out some disadvantages. For example, the green gas quota creates only a relative certainty of quantity for green gases, as it is based on total gas sales. This is especially true for green hydrogen. In addition, a quota for obliged entities would entail the risk of not being able to procure sufficient hydrogen. In general, the introduction of a green gas quota – like other instruments – would be associated with additional costs. From E.ON’s point of view, the instrument should therefore initially be used cautiously in order to minimise financial burdens and risks and to promote acceptance.
The study shows that there is no one-size-fits-all solution for a rapid hydrogen ramp-up. However, E.ON and Frontier Economics were able to identify the advantages and disadvantages of the various instruments and how they would have to be designed to minimise the disadvantages. Which instrument is most appropriate depends on the specific premises and policy objectives.
The five instruments studied on the production or demand side are: a green gas quota; Carbon Contracts for Difference (e.g., climate protection contracts); fixed premiums (such as the H2Bank); variable premiums for green gas production; and tax incentives.