Comment: Germany’s Ambitious Hydrogen Strategy Update: Summary and Considerations

Thought piece by Kirsten Stone, Research Associate for European Hydrogen Markets

In late July 2023, Germany unveiled its updated hydrogen strategy, building upon its existing roadmap to embrace more ambitious hydrogen goals by 2030. This renewed commitment is part of Germany’s broader aim to achieve net-zero emissions by 2045. The updated strategy includes a set of new targets in domestic production, imports, infrastructure, applications, and technology. This strategy update has been summarised and analysed, and implicates the following:

Boosting domestic hydrogen production

One of the pivotal changes in the updated strategy lies in Germany’s domestic renewable hydrogen production goals. Renewable hydrogen, or “green hydrogen” as it is commonly referred to, is a sustainable hydrogen produced using renewable energy and electrolysis.

To increase production, Germany has increased its domestic electrolyser target from its previous goal of 5 GW domestic renewable hydrogen capacity by 2030, to an impressive 10 GW. This shift signifies Germany’s determination to foster homegrown green hydrogen and stimulate economic growth in the sector. However, realising this goal is not without challenges.

The graph above shows Germany’s ambitious domestic goals within seven years. Currently, most of Germany’s hydrogen is grey, which is carbon intensive and produced from fossil fuels, but they want a significant portion to be green within just seven years. Meeting these goals in such a short time without an existing hydrogen market will be tough. Realistically, the deadlines will likely not be met due to power demand, electrolyser capacity issues, overall market uncertainties, and lack of projects achieving a Final Investment Decision, which is hard to achieve without support.

While delays might happen, it is still important to build out domestic production as evidenced by the recent gas crisis which highlighted the importance of domestic supply for energy security. Significant government support will be required for early-stage green hydrogen since it’s more expensive to produce than other, more common options, like grey hydrogen.

Imports as a strategic pillar

In addition to domestic hydrogen production, Germany’s updated strategy places a substantial emphasis on hydrogen imports to supplement domestic production efforts. The nation envisions importing 50-70% of its low-carbon and renewable hydrogen demand by 2030, an ambitious goal that requires a robust international supply chain.

To meet these targets, Germany will open support from just green hydrogen to now include low-carbon hydrogen applications. This includes blue hydrogen produced from natural gas with carbon capture storage. Expanding support to blue and other low carbon hydrogen will help speed up market growth in the short-term and is expected to expedite a faster transition to green hydrogen, especially as initial hydrogen imports are expected to be mainly blue.

However, according to our data at Aurora Energy Research, even by expanding to blue hydrogen, grey hydrogen will still likely play a significant role in Germany’s hydrogen mix in 2030, with more significant low-carbon and renewable hydrogen playing a role in 2035 and beyond.

Navigating Supply and Infrastructure Challenges

To meet the increased production and import goals, Germany has set new infrastructure targets. The country aims to build or refurbish 1,800 km of new pipelines in 2030 as well as build generation, storage, and import infrastructure. However, demand is still projected to outpace infrastructure growth and there will likely be supply chain bottlenecks and infrastructure delays. In the short-term ships are expected to be key for transporting hydrogen as new pipelines might not be ready by 2030.

Traditionally, discussions have focused more on production than the overall hydrogen ecosystem. Germany’s move to develop a hydrogen transport network alongside expanding imports and domestic production is a practical step forward, showing a broader and more tangible approach to achieving its goals.

Germany’s strategy model for future countries

Germany’s updated hydrogen strategy showcases its commitment to sustainability. The increased domestic production and import targets represent an important shift in energy policy, but achieving these goals requires careful consideration of challenges related to supply chain reliability, infrastructure development, and costs.

As the world observes, Germany’s efforts in the hydrogen sector could serve as a model for other nations heading toward decarbonisation and sustainable energy solutions.