Germany unveiled plans on Tuesday to allocate up to 3.53 billion euros ($3.8 billion) of public funds for the procurement of green hydrogen and its derivatives between 2027 and 2036, a strategic move aimed at spearheading the decarbonization drive in Europe's largest economy.
The Ministry of Economy affirmed the objective of the funding initiative as aligning supply and demand, both in terms of quantities and prices, as part of its broader agenda to transition towards sustainable energy sources. These funds will be sourced from the government's Climate and Transformation Fund, signaling a significant commitment to green initiatives.
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With a keen eye on curbing greenhouse gas emissions, particularly in highly polluting industrial sectors such as steel and chemicals, Germany is intensifying its focus on hydrogen as a pivotal energy source. Recognizing the limitations of electrification in certain sectors, Berlin aims to mitigate dependency on imported fossil fuels and bolster domestic production of green hydrogen.
Germany anticipates importing up to 70% of its hydrogen requirements in the future, as articulated in the government's updated hydrogen strategy unveiled last summer, which sets ambitious targets for achieving climate neutrality by 2045.
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The earmarked funds will serve to bridge the gap between supply and demand prices, with discussions underway with the European Commission to finalize the utilization specifics, as per the Ministry of Economy.
In a bid to catalyze global market expansion of green hydrogen and attract investments, the government initiated the H2Global project in 2021, employing a “double auction” mechanism. This innovative approach involves procuring hydrogen or its derivatives at competitive prices from the international market and subsequently selling them to the highest bidder.
Hydrogen experts, however, caution against overstating the immediate impact of this funding. Helge Barlen from AFRY Management Consulting views the allocated sum as a modest beginning, contingent upon the evolution of bid and ask prices. Barlen estimates that with a hypothetical price difference of 4 euros per kilogramme of hydrogen, this funding could support close to one million metric tons over a decade, translating to approximately 5% decarbonization of the German steel industry at current output levels.
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David Wenger, a hydrogen projects developer, expressed skepticism regarding the government's optimism regarding global green hydrogen production volumes and the pace of scalability. Wenger emphasized the industry's ongoing efforts to address cost reduction and technology enhancement, suggesting that the anticipated quantities by 2030 might be overstated.
