On 26 July 2023, the German government published the update of the National Hydrogen Strategy (NWS 2023). The NWS 2023 is intended to supplement the National Hydrogen Strategy from 2020 in order to meet higher climate protection targets and new challenges relating to the energy market.
The NWS 2023 sets ambitious targets and measures to be implemented by 2030, with plans to realise many measures in the short term (meaning in 2023) as well as in the medium term (by 2025).
Question: What lies at the core of the updated National Hydrogen Strategy?
The NWS 2023 aims to establish the foundation for investments in the environmentally friendly, economical, ecological and socially responsible production, transport and use of hydrogen and related technologies. The associated programme is intended to clearly spell out the mission statement for the year 2030. Key points are:
- Accelerated hydrogen market ramp-up
- Ensuring the availability of sufficient hydrogen
- Development of a hydrogen infrastructure
- Accelerating the market introduction of hydrogen
- Making sure that Germany will be the leading provider of hydrogen technologies by 2030
- Creating effective framework conditions
Question: How is the availability of sufficient hydrogen to be ensured?
The NWS 2023 specifies as a target for the year 2030 that sufficient hydrogen will be available to meet the demand in the various application areas. This obviously means that considerable quantities of hydrogen will be needed in the coming years. Not only will demand continue to increase among established hydrogen consumers, such as the chemical industry where consumption is currently approximately one million tonnes, but there will also be new consumers with a high demand for hydrogen, including steel producers. By way of example, the new steelworks operated by Germany’s largest steel producer is expected to consume 143,000 tonnes of hydrogen per year. Furthermore, air and sea transport, electricity generation and also everyday products such as cosmetics, packaging, etc will also depend on green hydrogen to become climate-neutral. To meet demand, the German government is relying in the NWS 2023 on both the development of domestic hydrogen production and imports.
Establishment of national hydrogen production
For the national installed electrolysis capacity, the NWS 2023 - as already agreed in the Coalition Agreement in 2021 - now sets the target of at least 10 GW of installed electrolysis capacity (instead of 5 GW previously). Achieving this will be an enormous feat and will require investment, as domestic electrolysis capacity in 2022 was only 0.057 GW. The 10 GW target by 2023 means an incredible increase in electrolysis capacity of over 17,000% within only about 6 years.
The backbone of the production of domestic hydrogen is not only the expansion of corresponding electrolysis capacities, but above all the expansion of the renewable energies necessary for hydrogen production. Germany has already set itself ambitious goals in this area as well. For example, the installed capacity in 2030 is set to be
- 30 GW offshore wind (2022: 8 GW, an increase of approximately 275%),
- 115 GW onshore wind (2022: 58 GW, an increase of approximately 98%) and
- 215 GW photovoltaics (2022: 67 GW, an increase of approximately 221%)
Import strategy
However, the planned domestic capacity for the production of hydrogen at a level of 10 GW will not cover the projected total hydrogen demand in 2030 of 95 - 130 TWh, meaning that 50 to 70 per cent (45 to 90 TWh) of the total hydrogen demand will have to be secured through imports from abroad.
Therefore, in addition to the development of domestic hydrogen production, a “hydrogen import strategy” is to be developed to ensure a permanent import demand for green hydrogen. The strategy should focus on broadly diversified import channels in order to avoid new dependencies. The strategy should provide for cooperation with both European and non-European countries and consider different transport methods, including pipelines and transport by ship.
With regard to European cooperation, the hydrogen network is to be “Europeanised” whilst the hydrogen production potential in Europe is to be maximised. Initially, hydrogen projects are to be developed within the framework of the IPCEI projects (Important Project of Common European Interest) in order to align the various national hydrogen projects. Cooperation with other European countries is also to be further intensified. An example of this is the “Ostend Declaration” which was recently adopted by the nine North Sea countries to promote the development of offshore wind energy and hydrogen production in the North Sea region. Also the cooperation between Denmark and Germany which is already in place for the establishment of a hydrogen pipeline is also worthy of a mention here.
With regard to international cooperation, the NWS 2023 emphasises the need to respect value creation and environmental protection in partner countries and to promote German technology exports, whilst respecting human rights and environmental standards throughout the hydrogen supply chain process. The existing “H2Global” platform is also to be further expanded to promote the global market ramp-up of green hydrogen and provide transparent trading mechanisms. Examples of this are the cooperation already entered into with Australia and Namibia to establish hydrogen supply chains. In view of the high demand for the required quantities, it is important to ensure that, despite all the declarations in the NWS 2023, no excessive dependencies on individual export countries are established.
Question: What measures does the NWS 2023 envisage for the development of a hydrogen infrastructure?
The NWS 2023 pushes for the development of a privately organised and efficient hydrogen infrastructure. In this respect, the federal government is attempting to solve the “chicken-and-egg problem” with the NWS 2023 by establishing a comprehensive and demand-oriented infrastructure at an early stage in anticipation of a future utilisation of the infrastructure.
The key to this is the development of a national hydrogen core network that connects consumers with production and import locations. For this purpose, existing natural gas transport pipelines are to be converted for hydrogen, for which facilitations have already been inserted in the Energy Industry Act (EnWG). In addition, framework conditions are to be created that enable the simultaneous operation of the gas and hydrogen grids. Although many natural gas pipelines are available, the future hydrogen grid will not be identical to today’s natural gas grid. Instead, in addition to pipelines, the supply in the area will also be ensured by so-called hydrogen hubs. Furthermore, ports will play a key role as import locations for hydrogen. A “national port strategy” is to be developed for this purpose, which is to promote the necessary development and expansion of the import infrastructure in the ports. In this respect, it remains to be seen whether the federal government will succeed in developing a correspondingly powerful strategy to establish Germany as a hydrogen hub and avoid dependencies on ports in other European countries and thus the loss of value creation. Unlike in the offshore wind sector, where despite decades of offshore wind energy production there is a lack of a corresponding port infrastructure in Germany, it would be desirable for Germany to take on a pioneering role here.
Another essential building block in the NWS 2023 is the development of a refuelling infrastructure, especially for heavy goods transport, as well as the development of hydrogen refuelling infrastructures for aviation and shipping.
European “Hydrogen Backbone”
The German infrastructure is also to become part of a European hydrogen backbone. The first phase comprises 4,500 kilometres of pipelines, including 1,500 km of new construction and the conversion of 3,000 km of natural gas pipelines. The aim is to ensure EU-wide hydrogen distribution and to establish connections to neighbouring countries as well as to potential generation centres in Scandinavia, Southern and Eastern Europe and North Africa. The NWS 2023 envisages here that the federal government will work for clear framework conditions and the rapid expansion of cross-border pipelines, including the conversion of old natural gas pipelines.
Concept for hydrogen storage
Another building block for the creation of a hydrogen infrastructure is the gradual conversion of existing natural gas storage facilities and the construction of new hydrogen storage facilities. The main aim is to ensure the temporary storage of (surplus) renewable energy in an electricity system based on fluctuating renewable energies, thus separating the generation of renewable energies from consumption in terms of time.
Question: How should hydrogen applications be established?
Hydrogen has many possible applications. In this respect, the German government does not plan to limit the possible applications of hydrogen, but at the same time wishes to promote only indispensable areas, i.e. those areas in which decarbonisation is not possible without hydrogen. In this context, the NWS mentions the sectors of industry, transport, electricity and heat.
Industry
In industry, hydrogen should offer a suitable decarbonisation solution especially where hydrogen is the only decarbonisation option (e.g. high-temperature applications such as in primary steel production). In these areas, financial incentives are needed in the short to medium term to promote the transformation in industry, accelerate the transition to climate-neutral production processes and strengthen Germany’s competitiveness. In addition to further financial support measures, such as the possibility of concluding climate protection contracts, the NWS 2023 also provides for the creation of framework conditions for the successful sale of climate-friendly products, such as the introduction of “green key markets” for climate-friendly basic materials such as steel and cement.
Transport
Another focus of the NWS 2023 is the transport sector, especially those transport sectors that cannot be electrified in the foreseeable future, such as air and shipping transportation but also heavy goods transport. Here, the development of electricity-based power-to-liquid (PtL) aviation fuels and the establishment of the refuelling infrastructure for liquid hydrogen are to be accelerated through the creation of regulatory framework conditions (e.g. PtL paraffin quota or sub-quota for green fuels in ReFuelEU Maritime) as well as funding programmes.
Electricity
In a climate-neutral electricity system, hydrogen is expected to play a significant role as an energy carrier because it enables the long-term storage and transport of energy from renewable energy sources. Furthermore, hydrogen power plants will be needed to compensate for short- and seasonal electricity deficits. This requires further investment in hydrogen power plants, the basic funding options for which have already been included in the Renewable Energy Act 2023 (sections 39p ff Renewable Energy Act).
Heat
In the context of decentralised heat generation, the use of hydrogen is currently considered less relevant, as alternative energy options are often available for buildings. Direct hydrogen use in supplying heat to buildings is therefore only envisaged after 2030, but should make sense in specific scenarios where efficient alternatives are lacking and hydrogen is cheaply available. In addition, waste heat from electrolysis is to be used.
Question: What framework conditions should be created to make the hydrogen market ramp-up successful?
The NWS 2023 pushes for the establishment of coordinated, transparent and efficient framework conditions for the hydrogen market ramp-up and pursues a comprehensive approach. The framework conditions should not only consider specific areas such as production, infrastructure and hydrogen applications, but also overlapping areas such as research and education.
Planning and approval procedures
Legal requirements are to be reviewed in order to simplify and accelerate the expansion of the necessary hydrogen infrastructure. To this end, the federal government is planning to draft a “Hydrogen Acceleration Act”. Furthermore, an amendment to the 4th BImSchV (Ordinance on Installations Requiring a Permit) is being examined following a change in the basis of European law in order to create faster approval procedures for hydrogen production plants. Already now, approval procedures for the construction of hydrogen filling stations are to be simplified and digitalised. A rapid and demand-oriented expansion of ministries, licensing authorities and the entire administrative structure is also to be undertaken in order to make the administration more efficient with regard to the hydrogen market ramp-up. Although these commitments are welcome, it remains to be seen which concrete measures will be adopted and whether the administrative procedures can actually be accelerated.
Sustainability standards and certification
Ambitious and uniform sustainability standards and certifications for hydrogen are necessary to establish an international standard and thus a uniform market for green hydrogen. Digital certification procedures in particular are to play a central role in this. In this respect, the NWS 2023 provides for the rapid integration of the Renewable Energies Directive (RED II) into German law in order to set uniform standards for the production of green hydrogen. Furthermore, regulations are planned for the detailed structure of the Guarantees of Origin Register Act.
Research, innovation and training of professionals
Finally, NWS 2023 focuses on strengthening research, innovation and education at national, European and international level. In this context, various policy areas are to be harmonised in order to efficiently guide research and development measures from theory to practical application and to secure the market leadership of German technology developers in the hydrogen sector. Further points are the needs-based training and further education of skilled workers (retraining and further education offers, promotion of university education, immigration of skilled workers), the strengthening of international cooperation in technology research and development (e.g. USA, Taiwan) as well as the continuation and expansion of existing funding.
Question: Does the NWS 2023 already foresee concrete measures?
Yes, the NWS 2023 not only describes (abstract) goals, but also contains measures to be implemented in the short term. Examples include the following:
- Tender for 500 MW of installed electrolysis capacity for the offshore production of green hydrogen between 2023 and 2028 (section 96 No. 9 Wind Energy at Sea Act). It will be exciting to see how this is implemented, e.g. whether energy islands, i.e. artificial islands in the sea on which both renewable energies and hydrogen are produced, are also planned and realised in Germany (as in Denmark, for example) or whether technologies will prevail that provide for the installation of electrolysers directly in the offshore wind turbine.
- Amendment of the energy industry law to create the legal basis for a first hydrogen core network.
- Development and publication of the import strategy for hydrogen.
- Drafting of a hydrogen acceleration law.
Question: How does the German hydrogen strategy compare to other hydrogen strategies?
The NWS 2023 fits into the EU’s hydrogen strategy, which was developed as part of the Green Deal and published in 2020. Here, too, financial support, the creation of a supportive legal framework, the expansion of the supply and demand side as well as international cooperation are to successfully implement the hydrogen market ramp-up in Europe.
Similar instruments are also envisaged by other EU member states. Denmark and the Netherlands, for example, are also pushing the expansion of the hydrogen economy, whereby Denmark, for example, is focusing strongly on the production of hydrogen, positioning itself as a pioneer and exporter in this area. The Netherlands, on the other hand, is not only concentrating on production, but also on the expansion of an import infrastructure in order to establish itself as a hydrogen hub in Europe in the future.
Outlook - Germany as the new “Hydrogen Valley”?
The update of the NWS 2023 does leave some questions unanswered; for example, a state hydrogen grid company is no longer mentioned, although the federal government had originally planned this. It is to be welcomed that, compared to the NWS 2020, concrete and timely measures are now listed on which the government will have to deliver. The NWS 2023 once again underlines the key role of green hydrogen for a climate-neutral energy and economy. The expected market ramp-up will require high investments and rapid government action as well as considerable efforts, but will also bring corresponding opportunities for all market participants. It would certainly be desirable for Germany to actually become a pioneer in the transformation to a green economy.
