In an article on the Euractiv website, Nikolaus J. Kurmayer discusses Germany’s plans to build a network of hydrogen pipelines by 2032. Is this the right approach for the energy transition?
Germany to back €20 billion bid to build hydrogen pipe network
The German government is poised to put its weight behind a network of hydrogen pipelines stretching 9,700 kilometres and coming at a cost of €20 billion in a bid to solve the hydrogen economy’s ‘chicken-and-egg’ dilemma.
Germany’s hydrogen economy is set to make a major leap, with the government about to greenlight a comprehensive infrastructure plan: the 9,700 kilometre, €20 billion “hydrogen highway”, to be constructed by 2032.
On Wednesday (15 November), the German government will formally adopt their proposal to create a core grid of hydrogen pipelines, backed by state guarantees, explained the country’s minister of economy and climate action, Robert Habeck.
The new hydrogen grid, proposed in July, would have a “really decisive influence on Germany and, perhaps, Europe”, he said on Tuesday.
“We are moving forward to solve the chicken-and-egg problem, namely first the infrastructure and then the ramp-up, and then to organise it accordingly,” explained Thomas Gößmann, head of the board of Germany’s gas transmission grid operators FNB, who spoke alongside Habeck.
Hydrogen’s chick-and-egg dilemma is a frequently cited challenge for the nascent hydrogen market where there are few new off-takers and next to no infrastructure.
To break the stalemate, Berlin is offering tax rebates in the ramp-up phase to ensure companies can recoup their investments, with guaranteed state support provided until 2055. As of that date, the government will pull out of the scheme, whether the infrastructure is profit-making or not.
Asked about the cost of the scheme, Habeck said there is no alternative.
Hydrogen is essential to achieve climate neutrality, Habeck explained, suggesting the clean burning gas will allow decarbonising hard-to-abate sectors like chemicals, which is a key part of German industry.
“The energy has to come from somewhere and be cheaper than fossil fuels. And that will be hydrogen,” he said.
Concrete next steps are expected to come quickly. “The first hydrogen must flow in 2025,” said Gößmann, who noted that construction is expected to begin next year.
Infrastructure at the heart of Europe
Germany’s European neighbours also stand to benefit from the German investment, Habeck pointed out, saying “Germany’s core network is also or can become the core of a European hydrogen network”.
When it comes to the “size and the type of financing”, Germany is first in Europe, he noted. Most hydrogen pipelines are slated to be retrofits from existing gas infrastructure, leaving industrial clusters best placed to receive hydrogen through the new “highways” he added.
According to the updated plan, Germany’s future hydrogen highways would connect the country to all of its European neighbours, including Denmark, Poland, Czechia, Austria, Switzerland, France, Belgium and the Netherlands.
Storage unresolved
Meanwhile, another issue remains unresolved: storage.
According to forecasts, the country needs 74 terawatt-hours (TWh) of hydrogen storage capacity ready by 2045, starting from 2 TWh in 2030.
The industry estimates that Germany’s current natural gas storage capacity of 256 TWh could be convereted into 32 TWh of hydrogen storage – because of the two gases’ vastly different properties.
A significant storage gap would thus remain.
In Berlin, the government and the gas industry have started discussing ways of financing these additional storage facilities. An initial government paper, seen by Euractiv, envisioned that additional storage should finance itself – a proposal quickly dismissed by industry.
The cost of investments in storage far exceeds their ability to generate revenue by storing energy when it is ample and selling it when scarce, the industry argues.
“In this respect, there is an urgent need for an instrument to refinance investments because there is not yet sufficient demand and therefore the willingness to pay in the market,” said INES, the association of German gas storage system operators.
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Energy in Demand - Sustainable Energy - Rod Janssen 
I (& business partner) have been having informal discussions with European Commission economists on this subject: “need for an instrument to refinance investments because there is not yet sufficient demand and therefore the willingness to pay in the market”. I’ll come back to this statement in a minute.
First, the tone of the article implies new H2-dedicated infra’. Nope. Most of Germany’s gas pipelines (the tubes) are H2 ready in the sense that the steel is of a quality that does not suffer from H2 embrittlement. The tough (and expensive) bit in H2 infra is the compressor and de-compressor stations plus control. Furthermore, unlike CH4, there is no line packing.
Moving back to the quote, as is known, the Commission is now doing collective gas purchases and will do the same for H2. This carries with it the implication that market prices will be more stable and homogeneous. It also means that the trading desks in banks & finance institutions will be able to play fewer games at the expense of Euro serfs. (yeah – it broke my heart to).
This raises a couple of questions. Working on the basis of large-scale electrolysers installations, probably located close to 380kV substations – who decides what they pay for the elec? The marginal market? No price stability there. PPA? But that is more expensive than – CfD (given CfD counter party = government). Starts to look like aggregate CfDs (who is the aggregator?) with a nice stable price. On the other side of the coin – who is the off-taker, the buyer of last resort – or would that be the org that stores the stuff?
Elements within the Commission want the ECB (high Christine yes we are talking about your little org) to step up to the plate. There needs to be a European Energy bank sitting there doing what markets can’t do & that is making sure that the lights stay on at minimum cost. As the Bloomberg article of last week showed (on Italy), sure the lights stayed on in Italy – but at maximum cost to Italian serfs – whilst the traders were kept in the styles to which they have grown accustomed to. If when reading this article you think electricity markets (or indeed energy markets) are the “solution” then you are asking the wrong question. Echoing Cato: “Euro electricity markets delenda est.”
& don’t confuse the light joshing tone of this article with the serious underling points and realities.
Really excellent points, Mike. Thanks.
Put simply, the T in the key EU: Emissions Trading Scheme has long trumped the E on almost all occasions.
So true