Germany takes more pragmatic approach to hydrogen imports [Gas in Transition]
The EU’s lofty targets for developing its green hydrogen market look increasingly unlikely to be reached, in the absence of enough domestic demand and supply projects in the pipeline and question marks about how much global supply there will be.
The European Commission wants to see the bloc producing as much as 10mn tonnes annually of the fuel by 2030, complemented by an equal amount of imports. However, the head of industry association Hydrogen Europe, Jorgo Chatzimarkakis, said in an interview with Euractiv in early September that his group forecast that obligatory demand would only reach 8.5mn t by the end of the decade, or less than half the commission’s forecast.
Some experts are far more sceptical. Thierry Bros, professor at Sciences Po Paris, sees a mere 2mn t/year as a more realistic forecast for the EU’s combined green hydrogen production and imports by 2030.
Blue hydrogen, derived from natural gas, was recognised in the commission’s 2020 Hydrogen Strategy as necessary for jumpstarting the European hydrogen economy, noting its lower cost versus green hydrogen and the capacity to scale up production faster. However, many national governments opted instead to push ahead with green hydrogen development as quickly as possible, largely leaving blue hydrogen on the wayside.
Among them was Germany’s government, despite it having among the most ambitious plans to build up the hydrogen market. But as green hydrogen fails to live up to past hopes, Berlin is now shifting its stance.
A more realistic approach
Germany’s updated national hydrogen strategy, released in July, can be seen as largely a recognition that green hydrogen alone will not be able to meet the country’s import needs for the fuel. The previously 2020 strategy only gave implicit acceptance of other low-carbon hydrogen types as necessary up until the end of the decade to scale up the hydrogen market – exactly what role they would play was unclear and there were no funding commitments. In contrast, the new plan confirms blue hydrogen’s place in Germany’s energy transition, while opening the door for the development of other options such as pyrolysis-based turquoise hydrogen and waste-based orange hydrogen, providing their use can curb greenhouse gas (GHG) emissions by the required 70%.
“Against this backdrop, we see upside for blue hydrogen producers looking to export to Germany and benefit from demand-side incentives such as climate protection contracts,” EU energy analyst Charlotte Bucchioni at Capstone wrote in a recent commentary. “These provide a payout to offtakers of green and low-carbon hydrogen (which includes blue hydrogen) based on the EU carbon price.”
The change in tack largely reflects a more realistic view on how much hydrogen Germany will need to import, and what the best options for these imports are in the near term. The new strategy estimates that the country will need to import around 50-70% of its hydrogen demand in 2030 – projected to be 95-130 TWh. The government has signed various cooperation agreements with African nations on potential green hydrogen supplies over the past two years – but these are long-term aspirations. In the shorter term, the country that is best-placed to serve Germany with low-carbon hydrogen is Norway, owing to its close proximity and the fact that pipeline infrastructure that could be used for hydrogen transport is already in place.
Norway’s state-owned Equinor agreed in January on supplying German utility RWE with 2 GW of blue hydrogen via pipeline by 2030, with deliveries expanding to 10 GW by 2038. The plan will see Norway only gradually replace this blue hydrogen with green hydrogen, with no specific timeframe set.
“In order to realise the fastest possible high-volumes of hydrogen with zero or low-emissions, we will jointly plan the use of hydrogen produced from natural gas with carbon capture and storage (blue hydrogen) for a transition period,” the Norwegian and German governments said, announcing the deal. “In this context, we will ensure environmental and climate integrity by establishing for example the highest possible standards for carbon capture and storage.”
Echoing this sentiment, Germany’s vice chancellor and minister for economic affairs and climate action, Robert Habeck stressed at the time that blue hydrogen would be critical for tackling CO2 emissions quickly, despite the fact his Green Party has traditionally shunned this option.
“As long as we have no other alternative, we can’t just ‘wait and see’ any longer,” he told a press conference. “If you ask me, I’d rather put CO2 in the ground than in the atmosphere.”
Further regulatory work is needed to ensure blue hydrogen’s deployment. The German government wants to define criteria for the storage and use of CO2 captured when the fuel is produced. Defined environmental standards currently only exist for green hydrogen at an EU level, and Germany and other member states want these to be expanded to cover blue hydrogen as well.
A lot of criticism of blue hydrogen concerns the methane emissions associated with the natural gas supply it is produced from. Fortunately, Norway boasts very low upstream emissions, due to stringent regulations that have led operators to electrify their platforms and employ great efforts to eliminate methane emissions. Rystad Energy estimated in a 2021 study that Norwegian gas had the lowest associated CO2 emission intensity for gas delivered to Europe.
Beyond Norway, Germany is also discussing potential hydrogen imports with other countries that want to focus initially on blue rather than green hydrogen, including Australia, Canada and the UAE. This can be seen as a more pragmatic approach, that recognises that blue hydrogen will be needed to create a German hydrogen market that it is ready for when green hydrogen is sufficiently cheap and available.