Amendments cut clean energy surcharges on hydrogen

Experts agree, German parliament has scored an important hydrogen economy victory. EEG,amendments exempt hydrogen from a good portion of clean energy surcharges. What we need now is a renewable capacity to match.

The Bundesrat, Germany’s version of the Senate, passed an amended EEG at its last 2020 session shortly before the Christmas holidays. Most importantly, the EEG now holds a 2050 GHG-neutrality goal throughout powerhouse Germany. The Bundestag had already approved the bill the day before with 357 votes in favor of the amendments and 260 against them. Unfortunately, politicians have still not agreed on the volume of renewable capacity additions by 2030, albeit crucial to hydrogen economy’s success. Nonetheless, the governing coalition postponed pertinent debates until 2021.

The new Special Compensation Rules, known as BesAR, will exempt clean electricity electrolyzers from the EEG surcharge, an important milestone for the industry. Regulations offer both partial and full exemption. Partial exemption allows businesses with large electricity needs to apply for BesAR funding, possibly reducing their surcharge payments by 85 percent, the overall minimum being 0.1 Euro cents per kilowatt-hour. Initially, electricity sources will not be relevant, although the government could later insist on clean hydrogen. While there is no minimum electricity consumption threshold, most of a company’s added value must come from hydrogen production. Eventually, the law could even allow full exemption for green hydrogen producers contingent on an administrative order spelling out specific green hydrogen requirements. In light of the EU’s Renewable Energy Directive – RED II and at the time of this writing, the government was still waiting to kick off national and European debates and implementation measures. Expectations are that the market will be able to go it alone by 2030, so exemptions will be granted only to systems coming online by then.

“A good step forward”

Lobby organization Zukunft Erdgas claimed the “government has taken a good step forward,” not only demonstrating the administration’s belief in hydrogen’s significance, but also highlighting the gas grid’s role as a giant battery to power Germany’s energy market transformation. Not to mention the grid option of storing renewables for future energy systems integration. Zukunft Erdgas now hopes the coalition will take “further decisive action to bring hydrogen to the fore,” i.e., when transposing RED II into national law.

Power-to-X, a multi-industry alliance of associations and businesses, also welcomes the amendments, calling on the EEG’s role as an essential tool for growing renewable capacity. Having already changed the face of the electricity market, the EEG could now “jump-start a green hydrogen economy.” Alliance spokesmen – Christian Küchen, head of the German petroleum association, and Gerald Linke, chairman of gas and water industries association DVGW – are calling for additional measures to roll out power-to-X’s full potential for supporting climate action, growth and jobs.

Energy and water industries association BDEW said the envisaged green hydrogen exemption constitutes “real progress.” Removing electricity surcharges would give the country a much-needed boost, laying fast tracks to a hydrogen economy. BDEW also made clear that this is “only a starting point” for a successful transformation, that the German energy industry needs profound change, a “radical restructuring of all fees and charges.” Going further, the association recommended, clean energy incentives should be free of technological bias – a criterion particularly important for climate-neutral gases such as biomethane or hydrogen produced from decarbonized natural gas. Both could also greatly reduce carbon dioxide emissions from energy production and support power-to-heat.

Market incentives for smart choices

Equally important to the BDEW are climate-neutral hydrogen incentives for industries. A central association demand, however, is equal opportunities for all network operators, sectors and sizes, regardless of whether they benefit from BesAR funds or not. As Germany’s largest energy industry association, the BDEW substantially supports two options for cutting electricity costs, BesAR and a full exemption.

… Read more in the latest H2-International e-Journal, Feb. 2021

Author: Michael Nallinger