Why Hydrogen?

Electricity from renewable energy is generally considered the main energy carrier of the future. However, many experts believe the transformation requires a second pillar consisting of low-carbon gases and fuels. Hydrogen is especially important because of its diverse applications. It also benefits the system as a whole: hydrogen and derivatives can be transported over long distances and, due to their storability, play a vital role in ensuring energy security.

The German government shares this perspective. As outlined in the coalition agreement, electrolysers with a total capacity of ten gigawatts are set to be established in Germany by 2030, hydrogen demand for basic material production and energy generation will more than double, and applications will become more widespread. Step by step, a complete value chain is to be established.

In Germany, there is a broad consensus that hydrogen as an energy carrier can contribute to climate protection and climate neutrality goals. However, opinions regarding the extent of hydrogen's role in the new energy system vary.

Hydrogen as an Opportunity for Germany's Industrial Landscape

Germany is debating which industries should adopt hydrogen, whether cars with fuel cells will be viable, and if buildings should be heated with hydrogen. Since hydrogen may be scarce during the transition phase, discussions about its distribution are unavoidable.

For successful and cost-efficient climate policy, it would make sense to implement pioneering measures compatible on an international scale. Hydrogen could then unleash its economic potential and become a driver of a competitive and innovative economic and industrial hub in Germany.

Manufacturers of machinery and equipment could develop new business sectors and enhance the strong global position of technologies "made in Germany" – also benefiting climate protection. But what is a product without a showcase? It is of utmost importance that Germany establishes an efficient and liquid market for the product hydrogen.

Creating the Framework for a Hydrogen Market

To enable companies to use hydrogen in production or energy generation, a market is required where CO₂-neutral hydrogen is offered as a high-quality, comprehensible, and safely manageable product. A crucial prerequisite is that hydrogen competes price-wise with fossil alternatives. Designing a cost-efficient market launch is key. On the demand side, explicit CO₂ pricing and a technology-neutral definition of CO₂-neutral hydrogen are pivotal drivers.

Manufacturers need to reduce investment costs through scaling. Policymakers can facilitate lower variable costs by keeping ancillary electricity costs low and ensuring high utilization rates for facilities. Expanding wind power and photovoltaics is essential, particularly since green hydrogen will likely set the manufacturing benchmark.

The product should prove itself in all application fields to boost its market roll-out. This includes domains where decisions aren’t solely based on economic considerations.

Buyers of fuel cell cars and heaters with high payment capacities can notably support the market roll-out. Especially in the building sector, hydrogen use is conceivable where gaseous energy carriers are needed for adequate heating.

There is significant interest in CO₂-neutral hydrogen as a resource for process heat generation. In industries requiring large amounts of hydrogen, such as for basic material production or refineries with low value-added shares, the economic gap is easier to bridge. A broad demand drive reduces the need for additional, often expensive, initial measures.

Germany also requires suitable transport infrastructure, such as pipelines and refueling stations, for successful implementation. Not every company will be immediately connected to a hydrogen network; policymakers could introduce certificate trading as a transitional solution.

The principle is familiar: A company buys a certificate for climate-neutral hydrogen but continues to use, say, natural gas until it connects to the hydrogen network. The hydrogen is then consumed elsewhere, such as in transport. This works similarly to green electricity, where the consumer buys renewable power in balance but initially receives the regional mix from the socket. Hydrogen tracking allows identifying high-demand locations, enabling infrastructure growth to align with demand.