Hydrogen Economy in Germany

Biggest industries commit to decarbonization

The industrial sector is responsible for almost one quarter of all greenhouse gas emissions in Germany. Energy-and raw material intensive sectors – like the steel and chemicals industries – are taking important steps to decarbonize their production and the downstream value chain by 2050.

Steel and chemicals are the backbone of industrial production. The two industries - in the "hard to abate" sector - are moving to hydrogen. Between 90 TWh and 130 TWh of hydrogen will be required  by 2030. Germany is Europe’s leading chemical industry market and one of a few countries worldwide where the entire value chain – from basic chemicals to specialty chemicals – is present. It is also Europe’s leading steel production market and services Europe's densest automotive OEM landscape.

High hydrogen investment to meet high demand

The German government assumes that between 90 TWh and 110 TWh of hydrogen will be needed. Higher demand, subject to how quickly the use of hydrogen in industry, energy and mobility sectors is adopted, is to be expected after 2030. Demand for green hydrogen could increase massively, with forecasts ranging from 400 TWh to 800 TWh by 2050.

Thanks to hydrogen and new processes (including CCSU) many chemical products and hydrogen derivates could be produced without emitting C02. There is a large market in Germany as the country seeks to be climate neutral by 2045. The first client sector is the chemical industry, which uses most of the 55 TWh of hydrogen consumed annually to produce ammonia (2.4 million tons annually). The domestic steel industry will also become an important consumer of this decarbonized raw material in order to produce 42 million tons of crude steel annually.

For this to happen, investments of up to EUR 45 billions are expected in the chemical sector alone  between 2020 and 2050. Most of this investment will be made by 2040. Investment of EUR 30 billion is expected in the steel industry by 2050.

Hydrogen opportunities along the entire value chain

Hydrogen technology – and its use for industrial production – provides many opportunities for international investors as the entire value chain is located in Germany. This covers everything from hydrogen technology to the production of a wide variety of end products in the steel, chemical and petrochemical industries.

National Hydrogen Strategy

The National Hydrogen Strategy provides an action framework for the future production, transportation and use of hydrogen and related technologies and investments. The current government has doubled the original National Hydrogen Strategy hydrogen electrolyser target to 10 GW by 2030. 

The development of the national market for hydrogen and its derivatives will be achieved through a massive expansion of the domestic production of renewable energies – in particular offshore wind energy – and the creation of international partnerships.

The National Hydrogen Strategy envisages a coherent transition to hydrogen for industry as well as the mobility market. This includes importing hydrogen from abroad and installing up to 10 GW of electrolyser capacity by 2030. The National Hydrogen Strategy foresees a raft of funding measures including IPCEIs (strategic European projects involving German and European companies), federal programs (Hyland, Reallabore) and the development and implementation of compensation mechanisms (e.g. Carbon Contracts for Difference – CCfDs), which will be the starting points for the country's hydrogen economy.

Federal states turn to hydrogen

There are also many initiatives at the regional level. For example, federal states in northern Germany have a strategic plan to convert their industries to hydrogen and see potential for the establishment of new industries or new parts of the industrial value chain.

The production of onshore wind and offshore wind energy already plays a major role and will continue to be supported by government measures. Other factors relevant to investment at the regional level are storage capacities, the planning of a hydrogen pipeline network, connections to neighboring countries, and landing “hubs” for importing hydrogen and its derivatives.

Please contact us to find out more. Our industry experts look forward to answering your questions.

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Video: Energy storage in Germany

Green Hydrogen and Germany's Energy Future

2020 was the year Germany went all in on hydrogen as a key to its transition to the clean energy of future. We spoke with the German government's commissioner for green hydrogen, Stefan Kaufmann, about where Germany is coming from and where it's headed.

Germany currently produces 42% (2019) of electricity by renewable energy sources. A figure that will increase to at least 80% by 2050 according to Germany’s ambitious energy transition plan. Green hydrogen will play a fundamental role In the resulting energy storage challenge. Similarly, green hydrogen will also be essential in the process of decarbonizing industries.

As the demand for hydrogen in industrial applications is expected to increase from a current level of 55TWh to 90-110TWh by 2030, it will take significant investment to switch from grey to green hydrogen while increasing supply at the same time. The National Hydrogen Strategy therefore includes the establishment of 5 GW generation capacity by 2030 and an additional 5 GW by 2035 and 2040 at the latest. Government-funding programs for companies that deploy hydrogen-related operation are expected in the near future.

Hydrogen Utilization in Germany (in TWh) | © BMWi 2020; e.venture 2020

There are currently 30 small-scale pilot projects that use renewable energy to produce green hydrogen operating across Germany. Funding measures such as the National Innovation Programme for Hydrogen and Fuel Cell Technology (NIP), now continued under the National Hydrogen Strategy, will bolster similar projects.

In the framework for the government’s “Regulatory Sandboxes for the Energy Transition,” Germany is striving to scale up and quicken the innovation process. Demonstration plants enable technological testing under real-life conditions – permitting a speed up of innovation transfer from the lab to the market. Of the 20 projects, 12 deploy hydrogen technologies including “Westküste 100,” the first project to receive funding approval of EUR 30 million in August 2020. The electrolysis plant plans on  a green hydrogen production capacity of 700 MW by 2030.

Power-to-gas (P2G) technologies will play a fundamental role In Germany’s energy transition. This is due to an increased seasonal and geographical fluctuation in energy production as a result of higher share of energy from renewable sources. Power-to-gas technologies represent a method to cope with these fluctuations by stabilizing grid frequency and optimizing grid usage. Through electrolysis, surplus energy from fluctuating renewable sources can be stored as hydrogen gas in the extensive German gas grid. The extension of P2G facilities across Germany is inevitable as the German government seeks to meet its climate targets and reduce primary energy demand in the transportation sector.

Investment potential exists along the entire supply chain: from long-term storage, production and trading to electrolyser production, gas compression, and smart gas metering amongst other things. Within Europe, Germany alone has the majority of European fuel cell and hydrogen technology demonstration projects. Thanks to internationally recognized certification institutions, the large number of players, and regional and international activities, Germany is developing and setting tomorrow’s global technical framework and standards.

Hydrogen in Germany - New Funding Program | © BMWi

Michael Goldstein, CCO Ballard Power Systems | © Ballard Power Systems/GTAI

"Ballard Power Systems has been putting fuel cell products to work in applications throughout the European Union. The expertise we found at Germany Trade and Invest has led us to the best matched partners and investment opportunities in the German marketplace." (2011)