Reindustrialisation ?? via Hydrogen?

Hydrogen technology could give Germany a new leading industry. Jorgo Chatzimarkakis, CEO of the European hydrogen association Hydrogen Europe, explains how Germany can win this race and what challenges lie along the way.

How can Germany take a leading role in hydrogen technology and create a new leading industry?

With the update of the national hydrogen strategy at the end of July 2023, the chances that a leading hydrogen industry can be built from scratch in Germany have increased massively. Germany will also continue to establish itself worldwide in the field of leading hydrogen and fuel cell technologies. In nine years, Germany will also have the opportunity to use hydrogen not only in industry, but also in other sectors such as mobility and heat. But there are a few suggestions for improvement: Better integration of the H2Global Germany funding instrument into the EU hydrogen bank, which will be in place later this year. Purchase agreements for temporarily nationalized companies such as Uniper to ensure security of supply. Massive reduction in IPCEI (Important Project of Common European Interest) approval times at EU and federal level. Consideration of biogenic hydrogen and waste-to-hydrogen. Initiation of global sustainability criteria in the production of hydrogen. We must also move faster in the creation of a European harmonized system of certification of sustainable hydrogen.

What challenges stand in the way of Germany on its way to becoming a leading industry in hydrogen technology?

Before updating the hydrogen strategy , the federal government followed the all-electric illusion. A fallacy that has now been recognized – fortunately. Because Germany is in a process of creeping deindustrialization. In particular, the exodus of chemical companies in this area is worrying. Around 8,000 jobs in Ludwigshafen will be lost because BASF wants to expand its China business. The federal government still underestimates this de-industrialization. This poses a challenge. The course set by the new strategy for the hydrogen industry is a blueprint for preserving jobs: Green hydrogen production in combination with nitrogen from the air can replace the ammonia that BASF has so far based on natural gas and is now increasingly going to be produced in China. Green hydrogen could be imported, jobs in Germany could be preserved. The potential of hydrogen can therefore play an important role in the urgently needed reindustrialization of Germany. Hydrogen technologies are not only suitable for a green and clean chemical industry, the steel industry in particular will benefit, because this is where green hydrogen offers the greatest potential for decarbonization. The federal government should take full account of the diverse potential of hydrogen.

How can the federal government create the market for hydrogen and create a value chain?

There are different mechanisms here. This includes the flexibilization of the power grids in Germany. Due to a lack of grid capacity to store renewable energy at times of very high production, the costs for the curtailment amounted to 4.25 billion euros in 2022. Ultimately, these were paid for by the citizens via their electricity bills. Hydrogen would be the ideal electricity storage solution to reduce curtailment costs. To illustrate: 8.1 terawatt hours from renewable energy sources could not be used in 2022 due to curtailment. This amount could have produced 155,000 tons of hydrogen. This could have been used to produce three million tons of green steel or to fuel 22,000 city buses in Germany (about 25% of all buses in the Federal Republic). As a global player, Germany must also keep an eye on the development of an international hydrogen market: the H2Global funding instrument enables and promotes the import of hydrogen. In autumn, this instrument will be integrated into the hydrogen bank at EU level, creating a much higher leverage effect. German companies such as Siemens and Bosch, already world market leaders in the field of hydrogen technologies, will benefit from this, as will many suppliers. From an entrepreneurial point of view, there is a value chain in Germany that can be consistently expanded with the new strategy.

How can Germany use its leading position in hydrogen technology to promote medium-sized companies?

The production and use of hydrogen affects not only large companies but also small and medium-sized ones. You have to imagine that coal, oil and gas will be consistently replaced by hydrogen in the long term. Federal Minister Habeck now even wants to switch electricity production to hydrogen, as announced. This means that the usual integration of the strong German medium-sized companies in this complete realignment must be strategically considered. All funding measures should therefore be phased out in terms of a cross-sectional orientation towards hydrogen. Ultimately, one can imagine a strong industrial network, as we see from the automotive industry, with strong medium-sized suppliers and large global players in the context of hydrogen. In this way, Germany can rediscover and play to its traditional strengths.

How can Germany react to the US Inflation Reduction Act and strengthen its position in hydrogen technology?

The federal government should initiate an 'EU Tax Credit Club' at EU level - as a response to the tax breaks (tax credits) under the US Inflation Reduction Act. After all, tax legislation is the sovereignty of the member states. An 'EU Tax Credit Club' would be an appropriate response to US tax credits. This would support companies in the hydrogen sector in realizing their market ramp-up for a CO2-neutral future in Germany and Europe. Ultimately, however, we in Europe will never be able to compete with the very pragmatic subsidy policy of the USA. That is why we have to simplify processes, especially under the umbrella of the hydrogen bank, from which medium-sized companies in particular would benefit.?