The pace of hydrogen project development in Germany has sparked concern within the industry that the country’s domestic goals could already be out of reach. Energy company Eon this week warned Germany could miss its 2030 production capacity targets, with little infrastructure set up to accommodate the massive increase in hydrogen use expected by that year.

Only 5.6GW of projects are due to come online by 2030—just over half of Germany’s domestic production capacity target for that year, according to data from the Energy Economics Institute at the University of Cologne (EWI), on which Eon based its analysis.

EWI also argues that, despite high natural gas prices throughout 2021 and 2022, green hydrogen is not yet competitive with grey. Green would be competitive only at an average gas price of €125/MWh ($129/MWh), assuming electricity and CO₂ prices remained constant—the former unlikely due to the link between gas and electricity prices in the wholesale market.

5.6GW – EWI estimate for German green hydrogen production capacity by 2030

Green hydrogen production using a power-purchase agreement currently costs €6.10–8.15/kg in Europe, owing to increases in wholesale power costs, according to price reporting agency ICIS. But industry association Hydrogen Europe estimates that green hydrogen produced by an electrolyser with a direct connection to renewable power sources could cost €2.9/kg—competitive with 2021 average grey production costs of €2.65/kg.

Most attractive

Despite the slow progress of projects, Germany is an attractive location to developers, says UK-based consultancy Aurora Energy Research. “We rank Germany as the most attractive country in Europe to invest in for clean hydrogen,” says Anise Ganbold, head of research for global energy markets and hydrogen at the firm. The country’s supportive policy environment, “especially incentive schemes for electrolysers”, and anticipated demand over the coming decades both contribute to this ranking.

Aurora forecasts German hydrogen demand in 2030 to rise from today’s 56TWh to 68.7TWh in its conservative, ‘central’ scenario and 96.1TWh in its ‘net zero’ scenario, which assumes that government climate targets are met. In particular, Germany’s refining, ammonia and methanol industries are expected to maintain constant demand from today, while new uses in industrial process heating, road transport and space heating could drive additional demand up to 2030.

Aurora has tracked 5GW of electrolyser projects due to be online in Germany by 2030, with a further 1GW of projects “in early planning stages, which means little detail on location, offtaker or construction milestones”, Ganbold notes. She adds that “all countries are in early stages in setting up a hydrogen economy, and Germany is not alone”.

Financial boost

The German government has this month boosted financial support for both domestic and export-focused projects. German chancellor Olaf Scholz announced an expansion of the H2Global auction scheme to €4bn from the initial €900mn promised on its announcement last year, with the first tenders to take place soon.

Earlier this week, Germany’s development and economic affairs ministries unveiled plans to provide an additional €550mn via two funds: the PtX Development Fund—worth €250mn—aims to foster hydrogen investment in developing and emerging economies, while the PtX Growth Fund—worth €300mn—will support German and European companies that have an office or production facilities in Germany.

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Author: Polly Martin