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On 10 June 2020, the German Federal Government adopted the long-awaited national hydrogen strategy (Nationale Wasserstoffstrategie – “National Hydrogen Strategy”).41 The National Hydrogen Strategy is intended to create a coherent framework for the production, transport, consumption and further use of hydrogen in Germany, as well as for innovation and investments in the hydrogen sector.
The National Hydrogen Strategy identifies all three key sectors (industry, transportation, heat) as potential areas for increased future use of hydrogen, but foresees that the use cases do not become viable at the same time. In the short to medium term, priority will be given to areas in which the use of hydrogen is close to economic viability and in which no major path dependencies are created or in which no alternative decarbonisation options exist. Initially, therefore, the National Hydrogen Strategy posits that hydrogen should be used where there are no easier, climate-neutral alternatives, where hydrogen is needed in large quantities and where transport is relatively easy to organise.42
Broadly, the stated aims of the National Hydrogen Strategy are to: (a) achieve the German climate targets, (b) create new value chains for the German economy by developing a domestic market for hydrogen technology, and (c) develop international energy policy co-operation to secure market opportunities for German companies and secure sufficient hydrogen imports.
“ELEMENT EINS” is a joint project of the gas grid operators Thyssengas and Gasunie Deutschland as well as the electricity operator TenneT. “Hybridge” is a project of the electricity grid operator Amprion and the gas grid operator Open Grid Europe. Both projects aim at developing a power-to-gas plant that converts up to 100 MW of electrical power into hydrogen in 2023 in the area of Lingen (Hybridge) and in stages by 2030 in Eastern Friesland (ELEMENT EINS). Both projects are about to enter the approval phase.
With “GET H2 Nucleus” BP, Evonik, Nowega, Open Grid Europe and RWE Generation intend to build the first hydrogen infrastructure accessible by public customers. Therefore, an electrolysis plant with a capacity of more than 100 MW shall be built at the RWE power plant site in Lingen to produce green hydrogen from wind power. Subsequently, the hydrogen will be transported to the chemical parks and refineries in Lingen, Marl and Gelsenkirchen via a 130-kilometre-long pure hydrogen network, consisting mainly of converted and upgraded natural gas pipelines. Production of the green hydrogen and delivery to customers is scheduled to start as early as 2023. The precursor of this project was “GET H2 Lingen”.
The “H2ORIZON” project concerns the generation, storage and availability of green hydrogen from wind power at the Lampoldshausen site. The project partners ZEAG Energie AG and the German Aerospace Center (DLR) plan to install a PEM electrolysis plant with a capacity of 880 kW. A hydrogen production of up to 100 tons per year is expected. Part of the production will be used directly on site. Among other things, the rocket engines of the Ariane launch vehicles are tested there. The remaining volumes are available for regional mobility applications.
The National Hydrogen Strategy has generally been received positively by industry as an important signal of the Government’s support for clean hydrogen. However, some industry participants have called for clearer policy proposals to develop the hydrogen market and greater certainty around regulatory changes required to integrate hydrogen into the energy system.43
The National Hydrogen Strategy states that in the Government’s view, only green hydrogen is sustainable over time. At the same time, the Government assumes that within the next 10 years, global and European hydrogen markets will evolve, and that CO2-neutral hydrogen will be a transitional technology over this period. Industry has expressed a preference for a technology-neutral approach to policy levers, though CCS projects have tended to lack public support in Germany in the past and prior to the release of the National Hydrogen Strategy, the German Federal Ministry for the Environment, Nature Conservation and Nuclear Safety (Bundesministerium für Umwelt, Naturschutz und nukleare Sicherheit) and the German Federal Ministry of Education and Research (Bundesministerium für Bildung und Forschung) have been sceptical about the use and promotion of non-green hydrogen, even if only on a transitional basis.
The National Hydrogen Strategy contemplates considerable financial support for the rollout of a hydrogen economy over the next few years, including:
The Federal Government currently foresees two policy phases:
The market rollout and the foundations for a functioning domestic market for hydrogen are to be achieved by the following measures:
The implementation of the strategy is accompanied by a National Hydrogen Council of 26 experts from industry, science and civil society and a committee of state secretaries for hydrogen, supported by a hydrogen co-ordination centre set up by the Government.
The actual funds available for the direct financial support programmes mentioned above shall, according to the National Hydrogen Strategy, all be set out in the budgets of the respective ministries.61 They fall within the responsibility of the competent ministries and will be financed by these in the framework of the applicable budget and financial programmes.62
The €7bn foreseen for implementing the National Hydrogen Strategy will first become part of the Energy and Climate Fund reserve (Energie- und Klimafonds-Rücklage).63 For 2020, liquid funds (Barmittel) in the amount of €200m have been made available. In addition, up to €800m has been foreseen in the budgets for future years (Verpflichtungsermächtigungen).64 For international co-operation, liquid funds in the amount of €200m have been made available for 2020, and further funds have been foreseen in the budgets for 2021 (up to €390m), 2022 (up to €700m) and 2023 (up to €700m).65 The exact distribution of funds is still under discussion.
Regarding other support measures, such as a potential exemption from surcharges or payments in the context of a potential CfD regime, the National Hydrogen Strategy does not yet contain any information on funding. The Government makes the general statement that in principle, hydrogen and the electricity required for hydrogen production should be financed by the sector that consumes the hydrogen. The economic viability of hydrogen can, however, be improved by support measures.66
Regarding infrastructure development, the BnetzA Assessment contains some additional information. In order to cover the costs of setting up a hydrogen network, BnetzA considers payment obligations for transport customers, additional charges for all energy customers, freely negotiated contracts, taxes, levies, etc., or separate surcharge mechanisms. Overall, there is still a need for political clarification. In addition, it is currently unclear who will bear the costs of converting the gas infrastructure into a hydrogen infrastructure.
On 13 July 2020, the German Federal Network Agency (Bundesnetzagentur – “BNetzA”) adopted an assessment (Bestandsaufnahme) of current regulatory conditions for hydrogen infrastructure and potential future changes (“BNetzA Assessment”).74
Currently, power to gas plants are granted one major privilege: currently, they are exempted from electricity and gas network access fees. Hydrogen falling under the definition of the German Energy Industry Act (Energiewirtschaftsgesetz – “EnWG”) also benefits from biogas privileges. In addition, if hydrogen is produced using exclusively renewable electricity, and is later re-electrified, the renewable electricity required to produce the hydrogen is granted a renewable energy surcharge reduction. Under the same conditions, it is eligible for a reduction of the cogeneration surcharge.
Since according to BNetzA, unbundling rules prevent grid operators from producing hydrogen covered by the EnWG definition and feeding it into an existing natural gas grid, grid operators currently may not become active in this field.
As there is considerable interest from grid operators to use power to gas plants to stabilise the electricity grids, it is currently being discussed whether the unbundling requirements could be less strictly applied in this regard. The National Hydrogen Strategy (measure no. 2) also mentions this as a possibility. The outcome, however, is open.
In the BNetzA Assessment of current regulatory conditions for hydrogen infrastructure and potential future changes, BNetzA anticipates that due to the limited possibility to feed additional hydrogen into natural gas grids, a separate hydrogen network structure will eventually develop in addition to the existing gas network. The basis for this will be converted and upgraded natural gas pipelines or newly constructed hydrogen pipelines.
According to the BNetzA Assessment, in principle, dedicated hydrogen networks are currently not subject to the EnWG, i.e. the law that governs network-bound energies. The usual regulatory provisions applicable to gas (and power) grids, such as access regulation, network fee regulation and unbundling rules therefore do not apply to dedicated hydrogen networks. Instead, such dedicated hydrogen networks would only be subject to competition rules prohibiting, for example, abusive market behaviour.
The only exception would be distribution (not transmission) networks for hydrogen that meet the definition of “biogas”. This is the case if the hydrogen has been produced by electrolysis using predominantly renewable energy sources (in practice, at least 80%).
Unbundling rules, however, apply if a producer of hydrogen that falls under the definition of the EnWG also operates a gas grid. The BNetzA concludes that grid operators may not produce hydrogen covered by the EnWG definition and feed it into an existing natural gas grid. The EnWG definition of hydrogen, however, is very narrow, requiring that hydrogen (i) has been produced from water using electrolysis and (ii) has either been fed into a gas grid or has been produced using predominantly renewable energy (biogas, cf. above).
The recently adopted EU electricity directive stipulates that in principle, transmission system operators shall not own, develop, manage or operate “energy storage facilities”, which may potentially cover certain electrolysers. Member States may grant derogations from this rule if, inter alia, the energy storage facilities are fully integrated network components and the regulatory authority has granted its approval. Depending on how this will be transposed into national law, BNetzA may thus potentially have some room for manoeuvre in the future.
Beyond this, transmitting or distributing hydrogen is only covered by the EnWG if the hydrogen supplements natural gas in a conventional gas grid. Such hydrogen feed-in must comply with the requirements of the regulations of the German Technical and Scientific Association for Gas and Water (Deutscher Verein des Gas- und Wasserfachs e.V. – DGVW). Due to sensitive consumers, particularly natural gas fuel stations, the potential for feeding a hydrogen share into natural gas grids is currently very limited. According to the BNetzA Assessment, hydrogen may in fact only account for 2%, which may not be exceeded anywhere in the entire network. Various tests, however, are currently being carried out, exploring the possibility of higher hydrogen shares of up to 20% and 30% in real network operation.
BNetzA has not yet come to a final conclusion on what regulatory measures will be required to adequately cover hydrogen and to ensure non-discriminatory behaviour in any future dedicated hydrogen networks. BNetzA discusses, however, the following key measures:
Finally, the National Hydrogen Strategy points out that sustainability and quality criteria for hydrogen will be required in the future. It does not, however, recommend any concrete regulatory steps to be taken in this regard.
Production
For hydrogen production plants (onshore), a permit from the relevant local authority might be required under the German Federal Emmission Control Act (Bundes-Immissionsschutzgesetz – “BImSchG”). The BImSchG and the related Federal Ordinances (Bundes-Immissionsschutzverordnungen – “BImSchV”) implement the requirements of Directive 2010/75/EU of the European Parliament and of the Council of 24 November 2010 on industrial emissions (integrated pollution prevention and control) (EID), which regulates the production of hydrogen by virtue of Annex 1. Installations where hydrogen is produced on an “industrial scale” are classified under Annex I to the 4th BImSchV, 4.1.12, requiring a formal permit procedure with public participation and possibly an environmental impact assessment (EIA). The term “industrial scale” is not defined by law; however, the federal states have produced a common interpretation aid for the administrative practice, in which an “industrial scale” of production is defined by the internal organisation of the plant, rather than the produced quantity of hydrogen. Therefore, currently, an individual assessment for each production site is mandatory. Against this background, special interest groups call for a legal definition of the term “industrial scale” or even for a general exception for hydrogen production plants of Annex I to the 4th BImSchV to create legal certainty for investors.
In this context, the National Hydrogen Strategy provides that for offshore production of hydrogen/PtX:
“potential adjustments (…) will be discussed [including] the designation of additional areas that can be used (…), the infrastructure necessary for this, and the potential for additional auction rounds for the production of renewables”.
There are various safety regimes which apply to the production of hydrogen and which impose obligations on producers in relation to health and safety management, namely the Hazardous Substances Ordinance (Gefahrstoffverordnung), the Ordinance on Industrial Safety and Health (Betriebssicherheitsverordnung) and various Technical Regulations for Industrial Safety (Technische Regeln für Betriebssicherheit) as well as regulation by the German Social Accident Insurance (Deutsche Gesetzliche Unfallversicherung).
Transportation: Pipelines
As described above, hydrogen may be injected in the existing German natural gas network, however, due to technical requirements only in a small amount. Thus, a separate hydrogen network may be developed, possibly requiring modifications of existing natural gas pipelines and/or the construction of new ones. The permitting of such modifications or the construction of new gas supply pipelines with a diameter greater than 300 millimetres would be subject to a plan approval procedure pursuant to sec. 43 EnWG. The corresponding permitting process would include, amongst others, an Environmental Impact Assessment as well as an assessment of the project’s compatibility with other nature conservation issues (such a “Natura 2000” nature protection areas and species protection etc.). Furthermore, as set out in the Regulation on High-Pressure Natural Gas Pipelines (Verordnung über Gashochdruckleitungen - GasHDrLtgV), the competent permitting authority would also be responsible for the technical examination and acceptance of the project.
Transportation: Road
International regulations govern the carriage of dangerous goods by road, via the European Agreement concerning the International Carriage of Dangerous Goods by Road (Accord européen relatif au transport international des marchandises Dangereuses par Route - ADR). Furthermore, the Transportable Pressure Equipment Directive 2010/35/EU (TPED) regulates the technical requirements for pressure vessels.
Both the ADR and the TPED are transposed through various national regulations, namely:
Those regulations restrict the trailer payload and the size of pressure vessels used for transport. Amendments to increase those parameters are currently being made on an international, European and national level, which will reduce the cost of transportation. In addition, the National Hydrogen Strategy states that a robust quality assurance infrastructure for hydrogen transport (as well as production, storage and use) needs to be built up on a national, European and international level.
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