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A look at Germany: Progress on the development of the German hydrogen core networkHydrogen core network and network development plan The draft integrated gas and hydrogen network development plan provides a revised overview of the German hydrogen network up to 2037. Network operators are planning a total of around 9,200 km of hydrogen pipelines, of which approximately 2,000 km form the already approved core network; construction or conversion of this section is scheduled to begin predominantly by 2027 and be completed by 2030. However, the investment volume has risen significantly compared to the approved core network to around €24.9 billion, with cost increases resulting in particular from new construction sections and already factored into the ramp-up fee set by the Federal Network Agency. Only a few pipelines from the core network confirmed in 2024 have been omitted from the current draft NEP; at the same time, numerous projects are being extended to adapt them to new scenarios and feasibility studies. The network development plan is based on several scenarios – ranging from a hydrogen-intensive pathway through a highly electrified energy system to a security of supply scenario. For the hydrogen network, core network lines are included as soon as they are required in one of the long-term scenarios; additional lines beyond the core network must be necessary in all three long-term scenarios to be included in the proposal. By mid-2026, the consultation, additions to market-based instruments (e.g. ‘spread product’ as an alternative to physical grid expansion) and the modelling for 2045 are to be completed by mid-2026, and the NEP is to be approved by the Federal Network Agency. Stalled hydrogen ramp-up and political pressure to act Despite the ambitious infrastructure planning, the actual market ramp-up lags significantly behind the political targets set out in the National Hydrogen Strategy, REPowerEU and the EU Green Deal. Numerous projects along the value chain are being delayed, put on hold or withdrawn despite promised funding – triggered by high costs, regulatory uncertainty and a lack of off-take and financing models. The BDEW therefore warns of a “policy-reality gap”: the political ambitions (including 95 – 130 TWh of H₂ and derivative demand by 2030 and 360 – 500 TWh of H₂ plus around 200 TWh of H₂ derivatives by 2045) stand in stark contrast to the sluggish pace of project implementation. Against this backdrop, the BDEW is calling for a central Hydrogen Act (“H2G”) that brings together expansion targets, standardised definitions, infrastructure planning (including production, terminals and storage) and support mechanisms. The law is intended to act as an “enabler” of the ramp-up, similar to the EEG for renewable energies, including through clear targets, Contracts for Difference to close the cost gap with fossil fuels, state guarantees and supporting instruments such as (temporary) grid fee relief. Individual instruments such as green gas quotas in the heating market are considered sensible but “insufficient” to support the hydrogen ramp-up systemically. Key risks in the German hydrogen ramp-up A Capgemini study commissioned by the BDEW paints a nuanced picture of risks along the entire hydrogen value chain in Germany. Particularly critical are: Off-take risk: A lack of long-term, reliable off-take contracts, low willingness to pay and uncertain lead markets prevent projects from becoming bankable and final investment decisions from being made. Financing risk: High equity requirements, limited project financing and a heterogeneous funding framework make it difficult to secure debt capital; even with CAPEX funding, weighted average cost of capital often falls only to a limited extent. Regulatory risk: Complex and, in some cases, unclear requirements (particularly RFNBO criteria, RED III implementation, changing framework conditions) threaten investment protection and act as potential ‘showstoppers’. Market price and production cost risk: The cost gap between RFNBO-compliant hydrogen and fossil fuel alternatives, high electricity prices, the expiry of grid fee exemptions and technological uncertainties are driving up production costs. In addition, market liquidity and infrastructure risks (lack of standardised products, low trading depth, time-critical expansion of the core grid, storage facilities and distribution networks) as well as supply chain and contractual risks (concentrated OEM structures, single-sourcing, lack of standard contracts) are weighing on project momentum. Labour market and technical product risks, by contrast, are seen as causing delays rather than acting as structural barriers, but they do increase coordination and cost burdens. Recommendations for action: From the core network to a functioning hydrogen economy The study concludes that isolated, individual measures do not address the multitude of underlying causes and are therefore insufficient to achieve the ramp-up at the pace desired by policymakers. What is required is a coordinated package of measures across the entire value chain that simultaneously strengthens bankability, infrastructure and demand. On the upstream side, the focus is on relaxing or extending the timeframe for RFNBO requirements, investment protection through grandfathering rules, and an extension of the grid fee exemption for electrolysers, in order to avoid artificial bottlenecks and cost spikes. In the midstream, the rapid roll-out of the core hydrogen network along industrial clusters and import corridors, the standardisation of hydrogen products and contracts, as well as CfD models and government guarantees, are intended to strengthen the role of ‘midstreamers’ as risk buffers. Downstream, the focus is on binding lead markets (e.g. green steel, basic chemicals), usage quotas, targeted public procurement and OPEX funding to create demand anchors and temporarily cushion the cost gap for industrial customers. Above all, there is a call for a central H2 Act that brings these instruments together, sets priorities and ensures reliable, transparent framework conditions – so that infrastructure plans and studies actually translate into pipeline projects, investments and climate-effective applications. Source: 260211-BDEW-Broschure-Risikominimierung_entlang_der_Wasserstoff-Wertschöpfungskette.pdf (German only) |
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