Germany to back €20 billion bid to build hydrogen pipe network

1 year ago 38

The German government is poised to put its weight behind a network of hydrogen pipelines stretching 9,700 kilometres and coming at a cost of €20 billion in a bid to solve the hydrogen economy’s ‘chicken-and-egg’ dilemna.

Germany’s hydrogen economy is set to make a major leap, with the government about to greenlight a comprehensive infrastructure plan: the 9,700 kilometre, €20 billion “hydrogen highway”, to be constructed by 2032.

On Wednesday (15 November), the German government will formally adopt their proposal to create a core grid of hydrogen pipelines, backed by state guarantees, explained the country’s minister of economy and climate action, Robert Habeck, on Tuesday.

The new hydrogen grid, proposed in July, would have a “really decisive influence on Germany and, perhaps, Europe”, he added.

“We are moving forward to solve the chicken-and-egg problem, namely first the infrastructure and then the ramp-up, and then to organise it accordingly,” explained Thomas Gößmann, head of the board of Germany’s gas transmission grid operators FNB, who spoke alongside Habeck.

Hydrogen’s chick-and-egg dilemma is a frequently cited challenge for the nascent hydrogen market where there are few new off-takers and next to no infrastructure.

To break the stalemate, Berlin is offering tax rebates in the ramp-up phase to ensure companies can recoup their investments, with guaranteed by state support provided until 2055. As of that date, the government will pull out of the scheme, whether the infrastructure is profit-making or not.

Asked about the cost of the scheme, the minister said there is no alternative.

Hydrogen is essential to achieve climate neutrality, Habeck explained, suggesting the clean burning gas will allow decarbonising hard-to-abate sectors like chemicals, which is a key part of German industry.

“The energy has to come from somewhere and be cheaper than fossil fuels. And that will be hydrogen,” he said.

Concrete next steps are expected to come quickly. “The first hydrogen must flow in 2025,” said Gößmann, who noted that construction is expected to begin next year.

Infrastructure at the heart of Europe

Germany’s European neighbours also stand to benefit from the German investment, Habeck pointed out, saying “Germany’s core network is also or can become the core of a European hydrogen network”.

When it comes to the “size and the type of financing”, Germany is first in Europe, he noted. Most hydrogen pipelines are slated to be retrofits from existing gas infrastructure, leaving industrial clusters best placed to receive hydrogen through the new “highways” he added.

According to the updated plan, Germany’s future hydrogen highways would connect the country to all of its European neighbours, including Denmark, Poland, Czechia, Austria, Switzerland, France, Belgium and the Netherlands.

Dotted lines are pipelines that will have to be constructed by 2032, straight ones are retrofits (map from 14 November 2023). Source: FNB

Storage unresolved

Meanwhile, another issue remains unresolved: storage.

According to forecasts, the country needs 74 terawatt-hours (TWh) of hydrogen storage capacity ready by 2045, starting from 2 TWh in 2030.

The industry estimates that Germany’s current natural gas storage capacity of 256 TWh could be convereted into 32 TWh of hydrogen storage – because of the two gases’ vastly different properties.

A significant storage gap would thus remain.

In Berlin, the government and the gas industry have started discussing ways of financing these additional storage facilities. An initial government paper, seen by Euractiv, envisioned that additional storage should finance itself – a proposal quickly dismissed by industry.

The cost of investments in storage far exceeds their ability to generate revenue by storing energy when it is ample and selling it when scarce, the industry argues.

“In this respect, there is an urgent need for an instrument to refinance investments because there is not yet sufficient demand and therefore the willingness to pay in the market,” said INES, the association of German gas storage system operators.