Industry criticizes current H₂ funding policies

“Two years ago, we were still discussing an ‘All Electric World’ in Berlin. Now it’s clear we need both – molecules and electrons.” With these words, the state of Niedersachen’s economy minister Olaf Lies summarized well at this year’s Hannover Messe where we stand today. At the political level, however, this seems to not have been reached by everyone. Otherwise, the quasi funding freeze for H₂ activities at present can hardly be explained. Reason enough for the Clean Energy Partnership (CEP) to send a pleading letter to Berlin (see p. 33) – and trigger for a palpable dispute among economic experts.

The state of Brandenburg’s economy minister Prof. Jörg Steinbach put it in a nutshell in Neuruppin May 2024: “We are currently heading partly in the wrong direction.” For example, fewer and fewer electric cars are being sold, so the discussion of whether removal of the combustion engine is the right thing has gained in momentum. The installation of heat pumps is weakening, with more oil burners being installed instead. And the CO₂ price, which was already over 90 euros per tonne in 2022, fell at the beginning of the year to around 55 euros (May 2024: about 70 EUR). So hydrogen would need a minimum price of around 100 euros to be profitable.

The hope of promise from year 2023 is gone. Instead, uncertainty reigns. One of the reasons for this is the 60 billion euro gap in the federal budget, which – as feared – has had impacts on various projects. On top of that was the Bonhoff scandal, which led to the German transport ministry putting a stop on subsidies, and since then only pure battery-electric vehicles have been on the road. And the overall economic situation with minimal growth does not exactly inspire confidence at the moment either.

Final investment decisions (FIDs) have therefore, especially in Germany, hardly landed (even if a number of framework conditions have improved significantly, see H2-international May 2024), which has consequences. Steinbach said on the matter, “Some of our companies have lost their market leadership.”

Appropriate funding instruments demanded
The German hydrogen association (DWV) therefore is demanding an “EEG for H₂” – a funding framework comparable to that of the renewal energies law (Erneuerbare-Energien-Gesetz) and also based on the US Inflation Reduction Act. DWV chairman Werner Diwald would like to use it to “bring the 10 GW of electrolyzer capacities onto the market” that the federal government has targeted, even if it is already clear today that even these will not be enough.

There are funding instruments, but they are either not enough or do not suit the industry. The IPCEI projects (Important Projects of Common European Interest) of the EU Commission have so far taken an extremely long time until approval, which is why some of the framework conditions at the time no longer apply and some projects no longer appear to be economically viable. Additionally, these are investment grants that are not considered sufficient for H₂ production with high operating costs. In addition to CAPEX funding, OPEX funding is also required, the industry has been saying for months.

Funds from the carbon contracts for difference could also be used, but some companies also view these critically. Kilian Crone from Energy Hub Wilhelmshaven told the newspaper Handelsblatt: “They do give customers, so energy-intensive industrial companies, security for their investments, but as a basis for the hydrogen suppliers, so for an investment in an electrolyzer, they are not sufficient.” In Wilhelmshaven, where 5.5 of the planned 10 GW of electrolyzer capacity is to be built, are therefore calls for “additional start-up funding for the operation of electrolyzers” in the amount of 40 billion euros.

Economy minister of Niedersachsen Olaf Lies passed the ball back to industry, however, stating that it lacked a stronger commitment from the business community. There is “real substance there now,” but it needs “a stronger focus.”

The industrial sector naturally sees this quite differently and is trying to make itself heard. For example, the Clean Energy Partnership (CEP), an association of various stakeholders, particularly from the automotive and energy sectors, initiated a joint statement with the DWV and on April 27, 2024 turned to the federal government with urgent words (see next page).

It is “normal for some projects to be canceled,” stated Peter Michael Holzapfel from Siemens in view of the prevailing uncertainty, but at this time Germany is in danger of squandering its starting advantage in the H₂ sector.

Economically grim against the council
The funding debate is also currently taking on a whole new dimension, as the German Council of Economic Experts (SVR) has publicly disagreed on this for the first time. Veronika Grimm recently cast a minority vote in favor of H₂ commercial vehicles, while four Council members jointly spoke out in favor of purely battery-electric funding. According to the newspaper TAZ, Grimm fears that a focus on battery mobility would mean that Germany in the development of fuel cells for mobility applications “may be irretrievably thrown back behind international competitors in terms of technology.”

This vote has nothing to do with the fact that she has taken on a supervisory board position at Siemens Energy or on the board of the Zentrum Wasserstoff Bayern (hydrogen center of Bavaria, H2.B), according to the Prof. who studied at TU Nürnberg. There have been minority votes before, but not in connection with such compliance allegations. She is only interested in a less risky, multi-track positioning for Germany, according to Grimm. And the German government, which the expert council is supposed to advise, has assessed the mandate as unobjectionable.

To the economics newspaper WirtschaftsWoche she stated: “The expansion of a nationwide charging infrastructure for battery-powered cars and trucks on freeways places demands on the electricity grid and requires a huge amount of space…. Whether the realizable infrastructures can meet the requirements of the traffic is in the stars.”

Cabinet agrees on H₂ acceleration law
Whether the hydrogen acceleration law (Wasserstoffbeschleunigungsgesetz) that was approved by the Bundeskabinett on May 29, 2024 can still help much remains to be seen. Because before this can actually come into force, the draft must be handled by the Bundesrat (federal council) and then also the Bundestag (federal parliament). The aim is to set the legal course for the accelerated development and expansion of the infrastructure for the production, storage and import of hydrogen.

Robert Habeck, federal minister for economy and climate protection, stated: “An effective hydrogen infrastructure is crucial for the decarbonization of industry; hydrogen pipelines will carry the lifeblood of industrial centers. Time is of the essence. In order for electrolyzers or import terminals to go into operation as quickly as possible, we need leaner and, above all, faster planning and approval procedures. With the Wasserstoffbeschleunigungsgesetz, the course is now set. The law removes obstacles to the approval of infrastructure projects that produce, store or import hydrogen. This is another milestone on the road to the hydrogen economy.”

The bill aims to make changes to environmental and public procurement law. Accompanying changes to the energy industry law, highway and regional development law and administrative court ordinance will come. For example, there are to be maximum deadlines for approval procedures under water laws, digital approval procedures, facilitation for the early start of measures, accelerated tender award procedures, shorter time to review court decisions and accelerated summary proceedings as well as reducing the amount of official testing required during the modernization of electrolyzers.

Very important: The infrastructure projects of the hydrogen acceleration law are then in the overriding public interest – similar to the acceleration of the expansion of renewable energies. Additionally, approval procedures for electrolyzers should be simplified by an amendment of the 4th ordinance for implementation of the emissions reduction law (BImSChV) and for some (< 5 MW) completely waived.

H2Regional concept of the BdWR
The Bund der Wasserstoffregionen (band of hydrogen regions, BdWR) called for special funding in mid-May 2024 to support the transformation process, particularly for small and medium-sized enterprises. This alliance of various political players who aim to implement regional hydrogen concepts see an imbalance in the current funding architecture. Because the few investment decisions made so far have primarily gone to big industry, so that they can decarbonize their energy supply. An “incorporation of hydrogen will not be possible for small and medium companies and the transport sector,” fear the mayors as well as district administrators of the now over 30 Hydrogen Regions as well as the German association for gas and water standards (DVGW).

Volker Wissing, Source: Nadja Wohlleben

The H2Regional concept submitted to federal transport minister Volker Wissing provides targeted incentives that enable regional economic players to make their own investments in the transformation. This impetus is intended to address both investment costs (CAPEX – primarily in the transport sector) and operating costs (OPEX – primarily H₂ generation and process heat supply).

Dr. Stefan Kerth, Landrat (district head) of Landkreis Vorpommern-Rügen, stressed, “SMEs rooted in the regions are not only the much-cited ‘backbone of the German economy,’ but continue to be a key engine of growth. It is also up to the German government to enable these players to participate in the ramp-up of the hydrogen economy in an economically viable manner.” Prof. Gerald Linke, chairman of the DVGW and one of the speakers for the BdWR, supplemented, “The ramp-up of the hydrogen economy in Germany can only succeed if it takes place regionally…. These companies now urgently need a support framework tailored to their needs…. By the strengthening of the regional players, the whole country benefits.”

Author: Sven Geitmann