European Green Deal and German National Hydrogen Strategy.

With a view to overcome climate change and environmental degradation, the European Green Deal (Fit for 55) is aimed at improving the well-being of citizens and generations to come by transforming the EU into a resource efficient economy and, more recently, is seen as a light at the end of the current COVID-19 tunnel. A major focus, among others, is directed at cleaner energy and innovative, clean technology. Hydrogen is therefore seen as key factor in this energy transition.

On 10 June 2020, in the midst of what we now refer to as the first wave of the COVID-19 pandemic, the German Federal Cabinet approved its National Hydrogen Strategy, at the heart of which is the goal to make hydrogen as a raw material sustainable by switching production to renewable energies. Hydrogen based on renewable energy sources such as wind or solar, so-called "green" hydrogen, is widely seen to be the future of developing energy transition – a change that is required due to Germany's ambitious climate goals. The introduction of the National Hydrogen Strategy is seen as paving the way for Germany to become the global leader in hydrogen tech with the development and export of hydrogen technologies.

In its efforts to successfully achieve energy transition, Germany is in the process of phasing out its nuclear energy and is well on its way in its planning to completely phase out its use of coal-fired power. While already 19.3% of its total energy consumption (including heating and infrastructure) is produced by renewable sources, Germany is in search of alternative methods of energy in order to achieve carbon neutrality by 2045 (current target 2050). Therefore, Germany is actively seeking energy sources that are environmentally friendly and in line with the ambitious climate targets it has set in the Climate Change Act 2021 and that offer long term alternatives to coal, oil, gas, and other fossil fuels.

Similar to how the oil industry was the past decades, hydrogen projects may be a rewarding investment in the decades to come. However, Germany would be unlikely to achieve its ambitious goals by relying solely on its somewhat limited local renewable energy capacities. Therefore, a large portion of its National Hydrogen Strategy is focused on forging global partnerships beyond European borders.

Why Hydrogen Investment?

Currently hydrogen accounts for less than 2% of Europe’s energy consumption.

Hydrogen offers many possible uses and is therefore widely regarded as a key element in advancing energy transition as it can be used as a climate neutral fuel for the production of so-called “Power-to-X-products” such as ammonia, aluminium or fertilizer. Hydrogen can also be compressed and stored or transported or converted back into electricity by using a fuel cell. It is this fuel cell that can run vehicles, which do not require recharging nor emit greenhouse gases, but provide most of the benefits related to a car equipped with a combustion engine. Another advantage of hydrogen is that it can be easily transported and injected in the existing gas infrastructure with manageable changes. For this reason, in areas where electricity cannot be adequately generated from renewable sources, hydrogen can be beneficial. Therefore, hydrogen is the perfect energy storing compound, yet missing to shift entirely to renewable energy sources.

Research has shown that the demand for hydrogen will soon significantly exceed the volume that can be locally produced in Germany and that, according to the Max Planck Institute for Chemical Energy Conversion, it will need to import at least five million tons of hydrogen in 2025, 23 million in 2040 and 45 million in 2050.

Within the European Union, the annual demand for hydrogen will increase sevenfold from approximately 325 terawatt hours ("TWh") in 2015 to 2,250 TWh in 2050.

This increased hydrogen demand will stem from new uses in the power, transportation, industry (heat and feedstock), and building sectors.

When considering locations offering a high renewable energy potential that can be used for the transformation into green hydrogen at low cost, Africa places itself in the middle of attention. Within the scope of the so-called Atlas of Green Hydrogen Generation Potentials in Africa ("H2Atlas"), a multilateral cooperation between Germany and West and sub-Saharan African states (ECOWAS and SADC) has been developed to evaluate the potential to generate green and climate-neutral energy in Africa using a joint venture between German expertise and African natural settings. The German Federal Research Minister Anja Karliczek has been quoted as saying that the Federal Research Ministry will provide up to EUR 40 million in funding from the economic stimulus package for cooperation within the framework of this partnership. It is calculated that hydrogen production in West Africa is at least twice cheaper than in Germany and West Africa is said to have the potential to generate approximately 165,000 terawatt hours of green hydrogen per year.

Case-study: German-Moroccan Partnership

Morocco specifically offers potential for foreign investors due to its significant experience with large renewable energy projects like, to name just one, the Noor Power Station – a solar power plant with a capacity of 580 MW and one of the largest and most modern solar power facilities in the world. Germany invested substantially both economically and by German companies contributing to the construction of the complex. In addition, Morocco is naturally ideally situated for the production of green hydrogen, its by-products and for the export of the same.

It was therefore not overly surprising that Morocco was chosen as the first to benefit from the international partnership component of the German National Hydrogen Strategy, a country whose political agenda ranks hydrogen production very highly, even having its own Hydrogen Roadmap. The German-Moroccan energy partnership has already realized many renewable energy projects and will do so for hydrogen production in the future. Morocco is, after South Africa, one of the African countries with the highest annual investment figures from Germany.

With its partnership with Morocco, German plans to import not only hydrogen but also its reaction products which will aid the reduction of fossil fuel usage in Germany and assist Germany in achieving its own climate objectives. The respective seaports of Tangiers and Hamburg will play a role in the transport of the hydrogen produced in Morocco back to Germany and they agreed to strengthen their cooperation in October 2020.

The German Morocco Green Hydrogen Cooperation Agreement was signed in June 2020 in Germany’s capital Berlin, between the Moroccan Ambassador to Germany, Zohour Alaoui, and the German Federal Minister for Economic Cooperation and Development, Gerd Müller. The partnership aims at the production of green hydrogen by developing the African continent’s first industrial green hydrogen production plant (estimated German funding of over approximately EUR 300,000,000) and at the implementation of research and investment projects on the use of this clean energy source. The agreement was part of the long-standing energy cooperation between Germany and Morocco. It is planned to build an initial project with a 100 MW electrolysis capacity to transform electric energy into hydrogen.

Outlook

Other African countries of interest particular to Germany include Namibia where there is huge potential for the green hydrogen industry not least of all because of its high winds and some 3,500 hours of sunshine per year. In Namibia the eventual cost of green hydrogen is estimated to become the most competitive in the world. There are significant possibilities for collaboration from a non-state actor’s end as well, for example Enertrag, a German energy company, which aims to deploy 20 fuel cell buses using green hydrogen.

With the EU and other regions around the world like California (USA), Canada and Japan already having Carbon Border Adjustment Mechanisms in place, exporting carbon products has become, and will continue to be, expensive especially if more regions implement similar mechanisms. Therefore, these partnerships will see African countries produce more carbon free products and thus making exporting into the EU and the abovementioned regions cheaper by avoiding the payment of carbon tax under the Carbon Border Adjustment Mechanisms.

Authored by Camilla Froehlich, Kristina Laewen.