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Germany earmarks up to $3.8 bln for future green hydrogen imports

Germany earmarks up to $3.8 bln for future green hydrogen imports

Wednesday, February 21, 2024, 10:19 GMT+7
Germany earmarks up to $3.8 bln for future green hydrogen imports
A new hydrogen fuel cell truck made by Hyundai is pictured at the Verkehrshaus Luzern (Swiss Museum of Transport) in Luzern, Switzerland October 7, 2020. Photo: Reuters

BERLIN -- Germany will earmark up to 3.53 billion euros ($3.8 billion) of public funds to procure green hydrogen and its derivatives between 2027 and 2036, the economy ministry said on Tuesday, as Berlin bets on the fuel to help decarbonize Europe's biggest economy.

"The aim of the funding measure is to bring together supply and demand, both in terms of quantities and prices," the ministry said in a statement, adding that money will come from the government's Climate and Transformation Fund.

Germany is seeking to expand reliance on hydrogen as a future energy source to cut greenhouse gas emissions for highly polluting industrial sectors that cannot be electrified such as steel and chemicals and reduce dependency on imported fossil fuel.

Berlin will have to import up to 70 percent of its hydrogen needs in the future as Europe's largest economy aims to become climate-neutral by 2045, according to the government's updated hydrogen strategy published last summer.

The earmarked funds will be used to compensate for the difference between supply and demand prices, the ministry said, adding that it was discussing the details of the use of the new funding with the European Commission.

In an effort to speed up the global market ramp-up of green hydrogen and boost investments, the government launched the H2Global project in 2021 by using a "double auction". Under the scheme, hydrogen or hydrogen derivatives are bought cheaply on the world market and sold to the highest bidder.

"It's a start. No more, no less," Helge Barlen, a hydrogen expert at AFRY Management Consulting said, adding whether this sum would be sufficient to boost Germany's hydrogen economy would depend on how large the difference between bid and ask prices would evolve.

To give an idea of dimensions, Barlen said that with a hypothetical price difference of the 4 euros per kilogram of hydrogen that was the cap in the first H2Global funding tranche, this funding amount would support close to one million metric tons over 10 years.

This could serve to decarbonize about five per cent of the German steel industry at its current annual output for example, he added.

David Wenger, a hydrogen projects developer, said Tuesday's announcement showed the government's "infinite optimism" regarding the volumes of green hydrogen produced globally in the near future and how quickly output will be scaled up.

"The reality is different to what politicians are currently imagining. The industry still has a lot of homework to do to reduce the cost and improve the technology, so I don't think that we will see the announced quantities in 2030," Wenger said.

($1 = 0.9244 euros)

Reuters

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