This week, German utility EnBW committed to spending one billion euros ($1.08 billion) to construct clean hydrogen pipes as part of a national grid that would begin to operate commercially by 2032.

Germany is placing its bets on green hydrogen as a replacement for fossil fuels. Green hydrogen is created by electrolysis using wind and solar energy.

While some view it as a risk, others see it as a global model.

The current state of progress is described here.

Why Does Europe’s Hydrogen Plans Centre on Germany?

Germany, the largest economy and exporter in the union, is driving the EU’s transition to greener energy sources. Industry accounts for one-third of Germany’s GDP.

Supporters of the fuel claim that it will make German goods—like steel and automobiles—more competitive as investor and consumer demand grows for products with significantly lower carbon footprints.

After the Ukraine war, Germany’s supplies of comparatively cheap gas from Russia were cut off, making the country’s energy transformation imperative.

Over the past 10 years, the nation’s research and development has resulted in several patents for hydrogen.

What Kinds Of Uses Are Broader?

The transport grid is only one component of a larger scheme that includes 10 GW of local production capacity as well as an import strategy that will use supply from other countries in Europe.

The Switch: Launching solar power initiatives into spaceThe Switch: Launching solar power initiatives into space

Bids for new gas-to-power plants that can convert to hydrogen will be opened by the end of 2024 or the beginning of the following year.

Companies involved in the steel and chemical industries intend to switch from hydrogen derived from coal and gas to green hydrogen, while utilities are expanding their investment portfolios to include electrolysis and import facilities.

The Protagonists: Who Are They?

Among the major participants are the steel producers Thyssenkrupp, Salzgitter, and ArcelorMittal, which want to wager billions of dollars on the availability of hydrogen in order to decarbonise the manufacture of steel.

Among the top are also utilities.

By the end of 2030, RWE intends to have 3 GW of hydrogen-ready gas-to-power capacity and 2 GW of electrolysis capacity. By then, it will have invested 55 billion euros overall, of which 25 percent will go towards producing hydrogen, batteries, and flexible electricity.

Salzgitter and Uniper have an agreement for Uniper to provide hydrogen from Wilhelmshaven’s ammonia cracker.

What Does This Affect Taxpayers And Consumers?

An estimated 19.7 billion euros will be spent on the hydrogen network, which includes 9,666 km of pipes.

PwC’s calculations for Reuters placed the overall cost of all of that, together with the addition of electrolysis plants and renewable energy to feed electrolysers and storage, between 65 and 80 billion euros until 2030.

Since private financiers have so far shown themselves unwilling, a large portion of the funding will need to come from the financial sheets of utility firms, consumer-paid network usage fees, and tax revenues.

The German hydrogen initiatives have a difficult business case. According to Dirk Niemeier, a director and Lead for Clean Hydrogen and Alternative Fuels at PwC in Germany, “the banks are asking for customers and secure returns.” “If there is no prospect, investments cannot be made.”

Why Do We Need Imports So Much?

Germany has a history of importing energy due to its lack of fossil fuel sources and existing network of partners.

In the case of hydrogen, it can capitalise on its current trading partnerships with the United Kingdom, Norway, and the Netherlands and is forming new connections with Australia, Canada, Chile, and other countries in southern and northern Africa.

Data provided to Reuters by McKinsey indicates that the cost of producing hydrogen in Germany might reach $10 per kilogramme by 2030, surpassing the $3–8/kg cost of imports. This is because nations with inexpensive renewable energy and low labour costs can produce green hydrogen at a comparatively low cost.

Indexes reveal that grey hydrogen, which is produced from gas that Germany uses around 42 TWh of year, costs about $3/kg.

What Are Other Nations Undertaking?                       

Green or blue hydrogen is anticipated to be supplied to Germany by Norway, Denmark, and Britain. The latter is created by a process that uses natural gas and captures and stores the CO2 that is generated during manufacturing.

The Netherlands, Spain, and Italy all have complex policies for both their own markets and those of their neighbours.

Both China and the United States are investing billions of dollars.

(Adapted from Reuters.com)

Categories: Economy & Finance, Regulations & Legal, Strategy, Sustainability