Part 2

Hy-Politics – political considerations shaping the evolution of clean hydrogen policy

Summary of the use case in Germany

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

  • Industry as short to mid-term use case
  • Transport as short to long-term use case
  • Heat as long-term use case

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.

Examples of demonstration/feasibility projects in Germany

“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.


Industry response

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.


Part 4

Hy-Achieving – creating a suitable incentive regime

The National Hydrogen Strategy contemplates considerable financial support for the rollout of a hydrogen economy over the next few years, including:

  • 2016-2026: up to 1.4bn for the National Innovation Programme Hydrogen and Fuel Cell Technology;
  • 2020-2023: 1bn for technologies and large industrial installations which use hydrogen for decarbonising production processes in the context of the national decarbonisation programme;
  • from 2020: 7bn for the domestic market rollout of hydrogen, decided in the context of the “future package”, i.e. the post-Covid recovery plan; and
  • from 2020: 2bn for international hydrogen partnerships, also as part of the “future package”.

The Federal Government currently foresees two policy phases:

  • 2020-2023: The National Hydrogen Strategy includes an action plan with 38 measures in total. These represent the first phase of the National Hydrogen Strategy, in which the market rollout and the foundations for a functioning domestic market will be initiated by 2023. Parallel to this, pioneering topics such as research and development and international issues are being promoted by the Government.
  • from 2024-2030: In the next phase from 2024, the emerging domestic market will be consolidated, and the European and international dimension of hydrogen will be shaped. In this context, the idea of continuous further development is an integral part of the National Hydrogen Strategy.

The market rollout and the foundations for a functioning domestic market for hydrogen are to be achieved by the following measures:

  • With regard to the production of hydrogen:
  • the Government will examine whether electricity required for producing green hydrogen can be exempt from taxes, levies and surcharges; in particular, it intends to exempt electricity required for the production of green hydrogen from the surcharge under the German Renewable Energy Sources Act (Erneuerbare-Energien-Umlage) without increasing this surcharge;
  • in addition, CO2 attributable to fossil fuels in the areas of transport and heat will in the future be charged;
  • the production of green hydrogen may be supported through tendering models, e.g. for the decarbonisation of the steel and chemical industries, and additional tenders for renewable energy generation; and
  • model projects shall examine the extent to which electrolysers and electricity and gas network operators can cooperate in the production of hydrogen (subject to unbundling rules).
  • For the use of hydrogen in the transport sector,
  • the minimum quota of renewable energy (including hydrogen) to be used in the transport sector shall be significantly increased, going beyond EU requirements;
  • the use of green hydrogen in the production of fuels shall in the future count towards the greenhouse gas reduction quota;
  • a potential obligation to use electricity-based aircraft fuels shall be examined; and
  • incentives in the form of investment support for climate-friendly means of transport (including, but not limited to, hydrogen-based technologies) and support of fuel station/charging station network.
  • For the use of hydrogen in the industrial sector, especially in the chemical and steel sectors,
  • investment support programmes for the conversion to hydrogen as a basic material are to be set up;
  • support shall be provided via the so-called Carbon Contracts for Difference (“CfD”) (this includes state support in the amount of the cost difference between: (i) the actual cost of avoiding emissions by using decarbonisation technologies, expressed as a contractually agreed CO2 price per avoided amount of greenhouse gas emissions, and (ii) prices according to the emissions trading system); and
  • the demand for climate-friendly products should be strengthened, e.g. by introducing a demand quota for climate-friendly materials such as green steel; as a precondition, a labelling system would be required.
  • For the use of hydrogen in the heating sector, the application of fuel cell heating devices in buildings shall be promoted.
  • At European level and within the context of the German EU Council Presidency in the second half of 2020, the EU hydrogen strategy by the EU Commission and the strategy for Smart Energy System Integration are to be further developed. In addition, the Government aims to establish a European hydrogen society.

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.


Part 5

Hy-ly Volatile? making it safe, sustainable and transportable

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

Power to gas plants

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.

Infrastructure regulation

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.

Current regulatory context

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.

Future regulatory changes – outline

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:

  • the current narrow definition of hydrogen will have to be broadened. It should, in the future, also cover hydrogen produced by pyrolysis or reforming. Hydrogen regulation would, however, ideally not be governed by the EnWG, but by a specific hydrogen law.
  • BNetzA is considering introducing a network access regulation regime in order to prevent the refusal of transit and the refusal to accept third-party hydrogen. For green and possibly blue hydrogen, BNetzA considers privileged network access possible, comparable to the privilege for biogas. This would be justified by the goal of a CO2-neutral energy economy.
  • in addition, BNetzA is considering the regulation of hydrogen network fees in order to prevent monopoly returns for network operators. This will be particularly necessary if hydrogen grids reach a stage where they turn into closely meshed distribution networks connected by transport lines. BNetzA does not yet have a clear position on whether the incentive regulation regime that governs electricity and gas networks should then apply to hydrogen as well, or whether it would be preferable to establish a simplified regime.
  • BNetzA also briefly discusses a hydrogen-specific unbundling regime that would ensure the implementation of possible network access and network fee regulation.
  • another potential change may be necessary regarding balancing systems. It is doubtful whether balancing systems for natural gas on the one hand and biogas on the other hand will be sufficient in the future. It is conceivable to introduce just one separate hydrogen balancing system, or even multiple balancing systems to account for different hydrogen production methods.

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.

Planning and permitting aspects/safety regulation


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:

  • the ADR Act (Gesetz zu dem Europäischen Übereinkommen vom 30. September 1957 über die internationale Beförderung gefährlicher Güter auf der Straße (ADR));
  • the Ordinance on the international and cross-border carriage of dangerous goods by road, railways and inland waterways (Gefahrgutverordnung Straße, Eisenbahn und Binnenschifffahrt - GGVSEB);
  • the 26th ADR Amending Ordinance - 26th ADR (26. ADR-Änderungsverordnung – 26. ADR); and
  • the Ordinance for Transportable Pressure Equipment (Ortsbewegliche-Druckgeräte-Verordnung - ODV).

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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