How important is hydrogen for the energy transition?
Hydrogen and hydrogen-based synthetic fuels became essential when the EU set its goal of becoming climate-neutral. When the EU was aiming to reduce its greenhouse-gas (GHG) emissions by 85%, it would’ve been possible for parts of industry and the transport sector to continue to use fossil fuels. But the EU can’t become climate-neutral without hydrogen and synthetic fuels.
economist Veronika Grimm
Not all hydrogen is the same. Today, most hydrogen is grey: it’s produced from natural gas in a carbon-intensive process. The production of blue hydrogen involves capturing and storing the resulting GHGs. Green hydrogen, which is produced by renewable-powered electrolysis, is climate-neutral. Which color is right for Germany? Or the important thing getting the mix right?
By 2050 hydrogen certainly must be green. But how to get there is a matter of debate. I’d be cautious about deciding in advance exactly what type of hydrogen is right for any given time in the future. More important is reaching a public consensus as a precursor to gaining the public’s support for hydrogen later on. The discussion is still under way.
Where do you stand?
I’m pragmatic. I don’t think Germany should embrace blue hydrogen on a large scale. First, because the public is skeptical about it. Second, because investments in blue hydrogen shouldn’t hinder the transition to green hydrogen. But blue hydrogen could play a transitional role where it can be easily integrated into existing industrial processes and where the captured carbon can actually be used. In any case, Germany’s position won’t achieve EU-wide or global acceptance. A number of other countries, including Norway, are very committed to blue hydrogen. Thanks to its gas production business, Norway has large underground storage facilities that are already being used to store carbon-dioxide. Nevertheless, it’s important to invest now in green-hydrogen production capacity and to reduce costs by scaling up production. Green hydrogen has to become cheaper, which is typically the result of increasing the scale of production.
Is Germany positioned to play a leading role?
Germany is superbly positioned in terms of technological expertise. A lot of what German industry is good at is also needed for hydrogen. This includes capabilities in gas logistics, materials research, and other key areas. The important thing now is to create incentives for companies to make big investments in hydrogen technology. For this, industry will need to be sufficiently certain of the marketability of its hydrogen products. This, in turn, will require reliable government policies on carbon prices and a reform of energy taxes and levies.
Does this mean that hydrogen’s future will be determined primarily at the national level?
The national level offers many opportunities to design the right regulatory framework. So it’s important for Berlin to think about these issues. Yet it’s equally important for other member states and the EU as a whole to craft hydrogen strategies. The establishment of a hydrogen economy is an international matter that extends beyond the EU, since the best regions for producing green hydrogen are spread throughout the world. Many German states have their own hydrogen strategies. I was involved in designing Bavaria’s. I think this is also very sensible, because the federal states often have greater familiarity with regional players. Collaborative projects at the local level are also very important for gaining acceptance of hydrogen, by the participants themselves and by the general public.
Is expanding the hydrogen industry likely to face public opposition – namely, NIMBY – as wind power recently has?
We don’t know yet. Currently, hydrogen and hydrogen-based synthetic fuels are perceived as panaceas, in part because people have heard about their many advantage but haven’t really encountered them yet. Few people have seen the production plants and so there’s no discussion of possible concerns. I therefore think it’s important to involve local and regional players early so that issues surrounding acceptance can be identified and addressed promptly. When it comes to public communications, I really hope Germany can learn from its experience with renewables.
Finally, what do you think are Germany’s most urgent tasks relating to hydrogen?
First, Germany’s approach to regulation needs to be very ambitious. This means reducing electricity taxes and levies and increasing carbon prices. This alone would go a long way toward making hydrogen business models profitable without government subsidies.
Second, Germany needs to expand infrastructure, both for hydrogen transport and vehicle refueling. These are tasks for the rest of Europe as well. For example, who wants to buy a vehicle that can’t be refueled in another country?
Third, R&D must be enhanced and more closely coordinated with companies, which will speed up the knowledge transfer from the research lab to the business world. It will also help train tomorrow’s skilled workers.
Fourth, Germany needs to promote international projects. Germany will remain a net importer of energy, not only from other EU countries but from all over the world. It therefore needs to identify good locations and form partnerships. Finally, all levels of government – the EU, the German federal government, and the state governments – need to work together closely. It’s the only way this ambitious project will succeed.