Things had quietened down on the Bonhoff front. But then new information surfaced in February 2024 which prompted German transportation minister Volker Wissing to take action. On Feb. 15, he released Klaus Bonhoff, head of the policy issues department, from his duties with immediate effect and also moved a divisional head. The reason behind the decision lies in a discrepancy uncovered during an internal review undertaken by the transportation ministry, also known as the BMDV. The affair gained added force when German news magazine Der Spiegel reported on Feb. 20 that Wissing had stopped “completely the approval of hydrogen funding.” Yet in reality funding is not being axed. The ministry is merely carrying out reassessments that could lead to a delay.
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But one thing at a time. In this article we’ll attempt to shed light on who did what to whom as well as how and when it all happened.
It started back in summer 2023 when German business paper Handelsblatt published an article about a questionable friends and lobbying network. The suspicion of nepotism that was raised on various sides was based on the alleged existence of an overly cozy network of contacts linking a number of different political and industry figures. Bonhoff was reproached for his reported friendship with Werner Diwald, chairman of the German hydrogen association, and its president, Oliver Weinmann, both of whom he allegedly joined on a ski trip. What’s more, it was claimed that Bonhoff helped the German hydrogen association, abbreviated to DWV, to gain funding in 2021.
Stefan Schnorr, state secretary at the German transportation ministry, was tasked with clarifying the facts and, according to Der Spiegel, gave the all-clear a few weeks later, stating there was “No trace of favoritism.” At the same time, Bonhoff received broad support, particularly from the hydrogen sector.
Everything bubbled up again in early 2024 when Der Spiegel quoted parts of an email exchange between Bonhoff and Diwald (see freedom of information website www.fragdenstaat.de). This apparently substantiated a high degree of closeness and familiarity between the two men.
Inconsistencies and contradictions
In fact, what the disclosed emails show is that certain wishes and views regarding funding measures had been articulated on the part of the DWV. For example, Werner Diwald wrote in September 2021: “In view of the upcoming elections it would certainly be good for grant approval to be given before the end of this legislative period.” (Der Spiegel, Feb. 6, 2024)
This prompted Bonhoff to forward the email to the appropriate specialist department at the transportation ministry where he inquired after the state of affairs, according to the statement he gave to H2-international. As Der Spiegel and Tagesspiegel Background, another German publication, both reported, he also “orally supported” the project. However, given this expression of support was previously denied, this admission could now cause no end of trouble for the ministry.
LobbyControl then took it as proof that favoritism was indeed at play. On Feb. 16, 2024, the online platform stated that days before the ministry had conceded there were “inconsistencies and contradictions” in the allocation of funding and that is why minister Wissing relieved department head Klaus Bonhoff from his duties.
“The necessary relationship of trust between the minister and the head of department no longer exists.”
Stefan Schnorr, state secretary at the German transportation ministry, in the Frankfurter Allgemeine Zeitung (FAZ)
Furthermore, LobbyControl criticizes what it sees as the inadequacy of compliance rules at the transportation ministry and Bonhoff’s lack of a clear-cut separation between his personal and official contacts when it comes to grant allocation.
Overly cozy network?
Klaus Bonhoff, who is also known as “Mister Hydrogen” due to his extensive experience in leadership roles in the H2 and fuel cell sector, had previously worked for many years on fuel cell cars at Daimler before becoming managing director of Germany’s National Organisation Hydrogen and Fuel Cell Technology, or NOW, in 2008 (see HZwei, April 2011 & H2-international, October 2019). From there he transferred to his post at the German transportation ministry. His successor at NOW since May 2020 has been Kurt-Christoph von Knobelsdorff (see H2-international, February 2021).
Thanks to his considerable expertise, he was a popular and long-standing contributor at numerous industry events since he was well known as an adept public speaker with a skill for highly diplomatic and precise wording. It’s understandable that the DWV in particular wanted to get close to him given that the association comprises many major German industrial corporations from the H2 community and Bonhoff, in his role as NOW spokesman, was the main point of contact for funding applications in the hydrogen sector. However, the responsibility for awarding funds, both then and now, lies with the project management agency Jülich (PtJ).
The DWV’s role
Over the years, the DWV has developed – especially under the leadership of Werner Diwald – from a highly committed body of motivated idealists to an industrial lobbying group. Because of this change, some of the original members who prefer an idealistic approach have turned their back on the association in the past few years. Some of them have urged repeatedly for less dependency on industry and greater levels of transparency. Most recently, Johannes Töpler, who was a long-serving chairman of the DWV, resigned from his post as the DWV’s education officer at the turn of the year. Among the reasons for his resignation was that he no longer thought education and training, a crucial area in his view, was receiving the appropriate attention and appreciation it deserved within the work of the association.
In terms of legal form, the DWV is officially a registered association. Over the years, Diwald has worked to set up various expert commissions to which participating companies pay high-level contributions. This enables the DWV to represent their interests, including on the political stage in Berlin and Brussels. As such, political evenings and business talks are organized on a regular basis where political and industry representatives can meet, as commonly occurs in associations nowadays. One of these expert commissions, HyMobility, was awarded millions of euros in funding in 2021 via the PtJ, i.e., from the transportation ministry’s budget, something which Bonhoff is now being reproached for.
The ministry confirmed to H2-international: “The HyMobility innovation cluster is supported by the Federal Ministry of Transport and Digital Infrastructure as part of the national hydrogen and fuel cell innovation program. The grant is up to €1,438,600. The calculation is based on actual expenditure up to the maximum grant level. […] The HyMobility cluster is financed through grants, contributions for cluster membership, and a proportion of the membership contributions of the DWV. […] The funding project facilitates cluster management, cluster coordination, the support and guidance of the expert commission’s work as well as the preparation of findings from the expert commission and from the expert committees and the provision of recommended courses of action to meet further development needs. In addition, the funding covers the venues for cluster meetings, the creation of studies and analyses as well as technical and legal reports. […] The funding is allocated for specific purposes.”
HyMobility’s aims, according to its project outline, include: “Involvement in the formulation of relevant policy and legal conditions at a national and European level for the market preparation and introduction of low-carbon mobility based on renewable hydrogen. […] the creation and strengthening of understanding for and trust in innovative and low-emission vehicle technology based on renewable hydrogen within transport and national and European politics.”
In connection with this, the DWV confirmed to H2-international that the goals of the expert commissions are to “attract attention for the particular topic, raise awareness, bring together stakeholders from the relevant areas and sectors, prepare joint positions and recommend courses of action to policymakers.
LobbyControl makes the following criticism in relation to this: “It is unusual and questionable that an industrial lobbying association such as the DWV should receive a state subsidy for work that it would carry out regardless: maintaining networks and lobbying.”
“The HyMobility project is supported by the Federal Ministry of Transport and Digital Infrastructure through a total of EUR 1.8 million in funding as part of the national hydrogen and fuel cell innovation program. The funding guidelines are coordinated by NOW GmbH and executed by the project management agency Jülich (PtJ).”
https://dwv-hymobility.de/organisation/
Bonhoff told H2-international: “HyMobility is funded in the same way that the environment ministry funds the HySteel project which was approved prior to HyMobility.” Tagesspiegel Background reported on this very subject on Feb. 7, 2024: “The ministry [German environment ministry; editor’s note] is satisfied with the project. ‘Such networking is effective and successful, is conducive to the sharing of best practice and the establishment of horizontal and vertical partnerships in research, testing and production.’”
Among the 22 members of HyMobility are NOW and H2 Mobility Deutschland. H2 Mobility is a consortium of various automotive, industrial gas and petroleum companies plus an investment fund focused on the construction of hydrogen refueling stations in Germany. Practically every station that is built and managed by this Berlin-based company is subsidized to the tune of nearly 50 percent from European funds or the funds of German central or regional government. One of the three directors is Lorenz Jung (see H2-international, October 2023), who took up the role in April 2023. According to information from LobbyControl, he is the son-in-law of Oliver Weinmann. Jung, whose wife (Weinmann’s daughter) works at NOW in the communications department, has been a manager at the company virtually since its inception.
The roles of Weinmann and Diwald
Weinmann is a founder and board member of what was then the German hydrogen and fuel cell association (see HZwei, October 2010). Born in Hamburg, he had initially worked for city’s electricity company (Hamburgische Electricitäts-Werke or HEW) which was taken over by Swedish corporation Vattenfall Europe when it became the majority shareholder in 2001. Weinmann held the position of managing director at Vattenfall Europe Innovation GmbH from 2010 to July 2023, followed by head of innovation management at Vattenfall Europe AG. From 2020 onward he has also worked in a voluntary capacity as the president of the DWV. In addition, he is chairman of the NOW advisory council, vice chairman of the hydrogen body Wasserstoffgesellschaft Hamburg and holds or has held – according to his own HyAdvice website through which he offers freelance consulting services on matters including funding – further leadership positions at various organizations, among them Hydrogen Europe and the Energy Storage Systems Association or BVES.
Oliver Weinmann at a parliamentary evening in Berlin in 2022
Similar to the way Weinmann operates with his HyAdvice consulting business, Diwald offers his services through PtXSolutions, formerly known as ENCON.Europe. The company is the vehicle through which the DWV chairman provides consultation as a sideline to institutions such as the DWV, Encon Energy EOOD (ENCON subsidiary), Enertrag (former employer), NOW, Performing Energy (DWV think tank) and Vattenfall Europe Innovation. Originally, ENCON.Europe had undertaken some work for the DWV (see H2-international, October 2020). According to a statement by Diwald, ENCON.Europe at the time played a considerable part in increasing the visibility of the DWV without itself appearing in the limelight. He says the company positioned the DWV and the Performing Energy expert commission exclusively as brands in the political sphere and negotiated in the interests of the association. From 2017, the company’s staff included Dennitsa Nozharova, Werner Diwald’s wife, who at the same time also worked for the DWV and is also involved in Encon Energy EOOD.
Fig. 3: Werner Diwald has been DWV chairman since 2014
Performing Energy was the first expert commission that the DWV initiated in 2015 on the back of Warner Diwald’s efforts; Diwald himself had previously created this alliance for wind-based hydrogen systems in 2011 and taken up the position of its speaker (see HZwei, January 2012). Participating organizations include Enertrag and Vattenfall as well as other companies which are also involved in other groups within the network.
Werner Diwald addressed the situation regarding some association members by stating in an email seen by H2-international: “The media’s assumptions about a possible breach by the DWV of compliance rules in relation to the funding application made by the HyMobility innovation cluster are unfounded. […] There was no improper influence exerted by the DWV. The DWV does not accept funding to carry out its statutory activities. […] By virtue of the funding of the HyMobility innovation cluster by the BMDV, the DWV has clearly not placed itself in a position of dependence on the government.”
Furthermore, the DWV has yet to issue a public statement, with the exception of a communication disseminated to association members (as seen by H2-international). The message sent, at the end of February 2024, outlined that “initial measures” have been “immediately introduced” that “go beyond the content of the DWV’s ‘Code of Compliance’ in order to make a comprehensive review of the situation.” It goes on to say that the DWV executive committee has “immediately commissioned a comprehensive review of the DWV’s compliance rules and of external and internal processes and procedures in the context of funding applications and funding allocations.” This is to be carried out by Berlin law office Redeker Sellner Dahs.
H2 funding frozen?
The saga then reached its peak after Der Spiegel reported that the transportation minister had allegedly frozen all funding for H2 projects. According to the article, no more funding is to be approved for the sector for the time being and no further agreements are to be concluded. Even amendment notices will require approval at state secretary level, it said.
However, a press spokeswoman for the ministry clarified the issue at a press conference on Feb. 21, 2024, by stating that the ministry had “not stopped hydrogen funding per se” but is carrying out more thorough assessments of funding applications. These “are currently focused on the approvals procedure for the DWV’s HyMobility funding project.” Should relevant evidence be produced during the investigation, further funding projects will also be examined more closely if necessary.
The reason for this tightened approach seems to be the Brunner affair. It relates, among other things, to the email exchange that took place via a personal GMX account through which Klaus Bonhoff and others communicated with Bavarian businessman Tobias Brunner, managing director of Cryomotive and Hynergy and a key figure in establishing the hydrogen technology application center WTAZ in Pfeffenhausen. LobbyControl disapproves of this “use of a private email account for official communication” since it meant this email exchange was not known to the ministry’s internal review department and therefore could not be taken into consideration in its final report. In all, there are 14 gigabytes of data that require sifting, which explains why there is a delay in the processing of further approvals.
Interview with Jorgo Chatzimarkakis, CEO of Hydrogen Europe
There is a lot that needs sorting out at a political level: A large number of industry representatives are waiting for politicians in Brussels and Berlin to put regulatory safety nets in place so they can make appropriate decisions about their investments. H2-international asked Jorgo Chatzimarkakis, Europe’s “Mister Hydrogen” and CEO of Hydrogen Europe, about the European Union’s revised Renewable Energy Directive (RED III) and its Important Projects of Common European Interest (IPCEIs). The interview also touched on Germany’s 37th Ordinance on the Implementation of the Federal Immission Control Act (37th BImSchV) as well as the recently revealed problems with fuel cell buses and their refueling stations. His guest article about H2Global appears on page 48.
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H2-international: Mr. Chatzimarkakis, fortunately the adoption of RED III didn’t take as long as RED II. What do you think of the outcome?
Chatzimarkakis: The adoption of RED III is a positive step for the hydrogen industry in Europe. It provides clarity and the basis for funding and developing hydrogen projects and applications. That said, it’s important that it’s swiftly implemented so that the sector has the necessary planning certainty to make investment decisions.
The extremely arduous procedure for IPCEI projects has been a massive headache for the H2 industry. Apparently there should now be some movement. Can you confirm that and shed some light on it?
Yes, the delays in IPCEI projects have troubled the industry, caused by bureaucracy at either a European or national level. The consequence has been that funding recipients have to wait too long and then they back out. That harbors the risk that projects could be carried out in the USA, for example. We can’t afford to lose any time as the creeping deindustrialization process is accelerated by such unnecessary delays. To counteract this, I was able to get things moving for one process or another. The IPCEI initiatives are crucial for the development of the hydrogen economy and the funding of innovation. It’s important that the bureaucratic hurdles are surmounted so these projects can move forward.
What feedback do you get from your members? Do they regret having applied in the first place?
Some of our members have expressed concerns about the long delays for IPCEI projects. They have invested considerable resources in the applications and are waiting for the green light in order to move their projects forward. It’s understandable that they are frustrated by the continuing uncertainties.
What’s your advice? To forgo funding and start something quickly themselves or to continue to wait?
The decision whether to forgo funding and start independently or to wait depends on each company’s individual circumstances. However, it’s important that funding is released as quickly as possible to support urgently needed hydrogen projects and accelerate rollout.
Sadly, the production of green hydrogen is still associated with high capital expenditure and financial risks. Despite funding, the long-term operation of a plant for producing green hydrogen on an industrial scale is often not viable. That’s why we still need alternative hydrogen production pathways which can produce more competitively.
Let’s turn our attention to Germany: Many have been waiting a number of years for the 37th BImSchV. To your knowledge, when will there be a new ordinance and what, to your knowledge, will it contain?
It’s regrettable that the revision of the 37th BImSchV is taking so long. Unfortunately, I don’t have any precise information on when a new ordinance is expected or what it will contain exactly. However, it’s essential that the ordinance takes into consideration the needs of the hydrogen industry and the requirements for reliable and efficient hydrogen production.
Allow me to ask two or three questions about the open letter that Hydrogen Europe recently received (H2-international has a copy). In it, various high-ranking industry representatives from the JIVE, JIVE 2 and MEHRLIN project consortium ask for an “improvement to the hydrogen refueling infrastructure for FC buses.” Did you receive this letter?
Yes, we received the open letter. We take the concerns of the industry representatives very seriously. Improving the hydrogen refueling infrastructure for fuel cell buses is of critical importance to support the spread of eco-friendly means of transportation. Waste-to-hydrogen, in particular, could be a piece in the puzzle. That’s because the costs of production, for example from biogas, are two to three euros per kilogram. Combined with the GHG quota, that quickly becomes viable.
The letter also says: “The members of the consortium are convinced that FC buses can be a practicable option for public transport throughout Europe. They have proven themselves to be reliable and have been well received by both passengers and bus drivers. However, the consortium is of the opinion that the technical readiness and the capabilities of hydrogen refueling stations (HRS) fall well below the requirements for the operation of an FC bus fleet. The consortium believes that this represents a huge obstacle and a limitation for the commercialization and proliferation of FC buses and could in fact represent a challenge for FC vehicles across Europe and perhaps, indeed, the world.” You are urged in this letter to recognize the significance of this problem and to conduct talks with industry about possible solutions as a matter of urgency. What’s your response to this?
The consortium’s concerns are justified. We’re supporting efforts to improve the hydrogen refueling infrastructure for fuel cell buses. For instance, we and our member companies are actively involved in standardization in this area – for example with ISO and UNECE. It’s important that industry and political decision-makers work together to find solutions to this challenge and to ensure that fuel cell buses are able to realize their full potential.
What’s more, AFIR [Alternative Fuel Infrastructure Regulation] is sure to have a very positive effect on the ramp-up in refueling. It obliges EU member states to build hydrogen refueling stations at central European intersections and in city hubs. We’ve calculated that up to 600 refueling stations in total will need to be built within the EU by 2030. That will give a considerable boost to users of fuel cell buses.
Does that mean you will address this problem – including in the interests of your association members?
Yes, Hydrogen Europe is actively addressing this issue and is advocating for the improvement of hydrogen refueling infrastructure. We are committed to representing the interests of our association members and driving forward the development of the entire hydrogen economy in Europe.
Interviewer: Sven Geitmann
Extracts from the open letter
“If there is something needed for the commercial operation of buses in public transport systems, then it is an HRS that is reliable and available for operation. This basic standard is frequently unmet at current refueling units. Almost all sites in the JIVE, JIVE 2 and MEHRLIN projects experienced considerable downtimes for the refueling unit, meaning that vehicles were not deployable.”
“It took many months to achieve a reliable and robust refueling process, and during that time numerous faults occurred in the course of the refueling process which took considerable time to be remedied by the supplier – and this despite the inherent redundancy of the station.”
“Consortium members report problems with a range of essential hydrogen dispensing equipment. These problems are surprising given the extensive experience of hydrogen handling in industry.”
“Furthermore, the problems and comments are similar to those reported in numerous projects in the early 2000s. It is remarkable and extremely disappointing that the performance of compressors for the refueling of FC buses has clearly not yet reached the level necessary for the operation of a commercial fleet.”
“The project sites have reported that data transmission is often interrupted which causes refueling to stop or leads to refueling taking longer than necessary. The sensor in the nozzle is not robust. If it fails, the entire fuel nozzle unit has to be replaced at a cost of EUR 10,000.”
“Significant problems occurred in buses when tanks were converted from Type 3 to Type 4. At least in some cases, this appears to be due to information from the bus manufacturers not being passed on to the HRS OEMs.”
“Indeed, the HRS availability targets of above 98 percent had already been met, e.g., by some sites in the CHIC project; yet this level of performance was only achieved with considerable deployment of staff and financial input, in other words with higher costs.”
“Commercial operators require their vehicles to be available whenever and wherever they are needed (and at reasonable operating costs). This is perhaps the most important variable considered by operators if they are contemplating investments in new or additional vehicles. If they cannot be certain that the vehicles can be refueled when needed, none of the plans for expanding the fleet of FC buses will go ahead.”
“It is our opinion that the continuing refueling problems must be resolved if the EUR 407 million that have been invested in FC buses over the past 20 years from EU public funds as well as funds from industry, bus operators, SMEs and research partners is to result in the long-term commercialization of the buses. We are convinced that they can be quickly resolved if they receive the necessary attention and the requisite resources.”
Guest article by André Steinau, CEO of GP Joule Hydrogen
After all, the Ampel Coalition leading the German federal government did reach an agreement shortly before the end of the year. And the ramp-up of the hydrogen economy will – again after all – not be completely slowed down, but will continue. But: Among others, the subsidies for erecting refueling and charging infrastructure (“Zuschüsse zur Errichtung von Tank- und Ladeinfrastruktur”) will sink in the climate fund Klima- und Transformationsfonds 2024 by 290 million euros (from 2.21 to 1.92 billion euros), and – the second but – the framework until now was and is for the ramp-up of the hydrogen economy in Germany simply not sufficient.
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This is particularly incomprehensible in view of the enormous relevance that hydrogen production has for achieving the expansion targets for renewable energies and thus also for achieving the climate targets. The generation of electricity from wind and sun is in any case dependent on the weather. Accordingly, everything that helps to integrate renewables into our overall energy system, temporarily store their energy and transport it to consumers must be promoted. Electrolysis has a particularly high value here, as it makes the energy in the form of hydrogen usable independently of time and then enables the distribution of the energy through transport on the road, by rail or in pipelines.
A gigantic market is growing here. Sustainable and at the same time vital if we want to avert the worst consequences of the climate catastrophe. In the USA, this has been recognized. There, in the framework of the Inflation Reduction Act (IRA), many billions will be invested in the development of the green hydrogen economy and thus also in the transformation of the industrial sector.
And here? Here, subsidies are still too often viewed as if they were gifts for risk-free entrepreneurship. The opposite is true. For the hydrogen projects alone that GP Joule is just implementing, a good 30 million euros in funding applied for or approved spurred nearly 60 million euros in private investments.
But uncertainty scares off investors, whether banks, entrepreneurs or other financiers. Financing green hydrogen projects is becoming increasingly difficult. Banks are demanding higher risk premiums. At the same time, subsidies are falling – see above – rather than attracting. The German government behaves hesitantly. Previously announced funding programs are a long time coming. All not good signals.
The promised calls of funding for electrolyzers, hydrogen refueling stations and, above all, fuel cell trucks should swiftly be put on the road, because the ramp-up of hydrogen production requires security of purchase. Hydrogen producers, infrastructure operators and truck manufacturers only have this security if vehicles are subsidized.
However, with a coherent policy, the state would need to be not only a giver of consumption security but also investment security as a guarantor. If the financing of hydrogen projects – also due to the international crises from Ukraine to the Middle East – becomes increasingly impossible, it will also become increasingly difficult to produce green hydrogen competitively and cheaply. Banks and companies from the world of capital and finance are indeed looking for ways to finance H2 projects. However, in the current market ramp-up phase, the state is also urgently required to provide financial impetus through industrial and economic policy.
There are plenty of suggestions as to what these impulses could look like, how the state can become a guarantor: instead of pure investment funding, a type of fixed remuneration on the basis of the capacity of the hydrogen refueling station that is payed out over a period of eight to ten years under the condition of a consistently high performance of the refueling station, which makes the now needed infrastructure establishment commercially possible.
The state could also really be a guarantor and provide cheap credits for hydrogen projects, for example through a loan program of the public fund KfW.
For the ramp-up of the hydrogen economy in Germany, strong incentives are urgently needed. The instruments are on the table. If they are not used, Germany could, after the relocation of the solar and wind turbine industries, be facing the collapse of the next crucial pillar of the energy transition. It would not only be bad news for the climate, but also for the country’s economic status.
Author: André Steinau, GP Joule Hydrogen, a.steinau@gp-joule.de
Progress is being made at EU level – albeit extremely slowly. This was the case with RED II (Renewable Energy Directive), this is the case with the IPCEI projects and even more so with the 37th BImSchV. RED III also took a long time, but now it’s here. On September 12, 2023, the European Parliament approved the amended Renewable Energy Directive (RED), and on October 31, it was published in the Official Journal of the European Union.
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What must now follow is the transposition into national law. The hope is that this will lead to a significant acceleration in the expansion of renewable energies – mandatory 42.5 percent by 2030 – and a faster reduction in greenhouse gas emissions.
“[…] reduction of net greenhouse gas emissions by at least 55 % compared to 1990 levels by 2030. […] Renewable energy plays a fundamental role in achieving those objectives, given that the energy sector currently contributes over 75 % of total greenhouse gas emissions in the Union.”
The German government has shown that it is willing to pick up the pace. For example, federal economy minister Robert Habeck during the German worker’s day event called for acceleration of the expansion of the hydrogen economy. Stefan Wenzel, parliamentary secretary of the federal ministry for economy and climate protection (BMWK, see photo) stated in Berlin that the motto of the BMWK is “faster, more digital, simpler.”
Also Dr. Christine Falken-Großer, department head at the BMWK, explained at an EEX workshop in Berlin: “We have achieved an incredible amount in recent years. There may be little in the ground, but we have funding instruments, strategies, etc.” Furthermore, an H2 acceleration act (H2-Beschleunigungsgesetz) is on the way. This legislative package will “contain things that will bring about substantial acceleration.”
There has been a reform backlog in many areas for years, for example in the revision of the ordinance on the implementation of the emissions reduction law (37th BImSchV). Werner Diwald, chairman of the German hydrogen and fuel cell association DWV, has long pointed out the enormous importance of this ordinance. “We have been waiting twelve years for the 37th BImSchV,” said Diwald.
Commission adopts 6th PCI list
Not quite as long, but also too long, many companies have been waiting for notification of their funding applications for IPCEIs (Important Projects of Common European Interest). Only with this explicit “go” may the EU member states approve subsidies that go beyond what is normally permitted under competition laws. There are now individual cases of pre-approval for an early project start, but the risk then lies with the companies. Only a handful of companies have already received a funding decision; the majority of players are still waiting for positive feedback from the EU.
Alexander Peters, managing director of the Neuman & Esser Group, said recently in Berlin: “I know many companies that have since left the IPCEI procedure.” Similarly, it has been reported from other sources that a number of players would no longer submit their funding applications in the same form today in view of the higher prices. Stefan Wenzel holds the view, however, that at least for the infrastructure projects the commitments from the EU should turn up at the turn of the year.
Nevertheless, at the end of November 2023, the news came from Brussels that the European Commission had adopted the sixth PCI list (Projects of Common Interest). Among the total of 166 infrastructure projects it contains are 85 projects for an offshore and intelligent electricity network as well as 14 for a CO2 network – and 65 hydrogen-related projects, most of them in Western Europe.
A total of 179 applications for hydrogen were submitted. However, as activities such as the continued operation of natural gas projects are no longer supported, the overall success rate was “only” 37%.
Daniel Fraile, head of policy at the association Hydrogen Europe, said: “The adoption of hydrogen projects in a PCI list for the first time is a big step forward and shows the commitment of the EU to laying the foundations for a European hydrogen backbone. This first selection process is also a valuable lesson that we have learned. We will work with our members to ensure that the next list includes more diversified projects (both in terms of type and geographical distribution).”
Now, a corresponding delegated act with the 6th PCI list lies before the European Parliament as well as the European Council. The vote should then take place two, maximum four months from now.
For a long time the public has held a deep fascination for solar power and hydrogen. Around the world, both of these technologies have been described as great opportunities and the solution to our energy problems. Indeed, hydrogen is regarded within the current public debate as a cure for all ills. What’s the latest on these solutions? Where does the green power they need come from? And how can (green) hydrogen and photovoltaics more rapidly leverage their huge shared potential?
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When we started designing and building solar power plants in 1992, the fascination with hydrogen and solar energy was already immense. However, photovoltaic or PV plants were extremely expensive. In Germany they were only bought by enthusiasts, and even these purchases were dependent on (massive) grants. These (lost) grants came and went, just as the new pilot schemes and flagship projects did. The only relatively stable markets to be found globally were in space flight (no concern about cost) and off-grid, where suitable. Grid-connected photovoltaics didn’t make much progress in terms of scaling up production, and therefore the plants remained expensive and practically irrelevant for energy supply purposes.
In 2000 (global PV market then: 200 megawatts), photovoltaics started to evolve into a mass-use technology, a development that was largely down to the huge international boost provided by Germany’s renewable energy law EEG. In 2023, the global market is expected to reach 380 gigawatts of new installations. The electricity generated around the world by this newly installed capacity would be enough to cover Germany’s current electricity demand.
PV plants have the lowest power-generating costs of all new facilities. These costs have fallen by 95 percent since 2000. It is anticipated that the global PV market will grow tenfold by 2035 – accompanied by further efficiency increases and cost reductions. All this has been made possible through the creation of a market in the earlier stages that can also now in Germany generate solar power without the need for any subsidies.
In our view, we don’t yet have a comparable approach to confidently realize those same (necessary) scaling effects in the hydrogen sector in a way that provides planning certainty for industry. That said, there are hydrogen regions, pilot projects and initial marketplaces springing up all over the place and there is a great deal of goodwill within politics and the media. But when it comes to the market for new hydrogen, things quickly become difficult or just downright impossible. It’s no wonder that large off-takers (e.g., steelworks that have started the conversion to hydrogen) as well as small- and medium-size enterprises are hesitant about purchasing hydrogen, if they are indeed interested at all.
Some can’t get sufficient quantities; others don’t want to pay today’s high prices. For the expectation is that hydrogen will get cheaper. Plus, virtually every day that passes there are fantasies of some – unrealistic – hydrogen import. Or of a bridging technology: blue hydrogen with carbon capture and storage. But nobody has yet stuck a price tag on these potential sources.
The massive success of photovoltaics was previously in having solved this chicken-and-the-egg problem through the EEG. Each energy producer (regardless of size) had a guaranteed off-take over the required payback period along with a price guarantee. Electricity buyers, on the other hand, paid the relevant market prices. As the support scheme was highly degressive, the desired cost reduction was taken into account or given a huge push.
These days, this form of support is barely needed, if at all, and in many areas and countries it is now being aligned with market conditions through the process of tendering. Similar systems for ramping up hydrogen are under discussion in the European Union or are being announced in the form of EU tenders. Just as in the solar and wind industries, contracts for difference or CFDs could be introduced for hydrogen with the establishment of hydrogen exchange prices as a reference point.
Why is that a key issue?
Whoever invests in an electrolyzer (together with storage etc.) can be certain that much cheaper and more efficient equipment will be available to purchase in three to five years’ time. Reliability will also have improved. It’s thus foreseeable that both CAPEX and OPEX, or put more simply, the price per kilogram of hydrogen, will decrease massively. Unless there is a guaranteed off-take at the price needed today, the project quickly becomes bankrupt.
By contrast, the hydrogen buyer from a steelworks or indeed from a municipal energy supplier, for example, will surely refuse to sign a long-term hydrogen purchasing agreement right now when it’s clear that prices will fall massively in the coming years. If an attempt is made to get around this, e.g., through “lost” subsidies or one-off grants, there is the possible threat that, after these measures have been applied, bankruptcy will occur or the electrolyzer will be shut down since the support is indeed “lost.”
What’s more, this type of approach has in the past proved to be highly difficult to get right in terms of how the support is structured. But more than anything, it has always been dependent on the particular budgetary situation of the funding organization.
A “hydrogen CFD” or a similar instrument can incentivize a diverse range of players and also encourage rapid market expansion as well as a quicker pace of innovation.
Application assumptions
If 15 years ago hydrogen-driven cars were the only promising technology for real distances over 100 kilometers (60 miles), then the technological evolution of battery storage has now already superseded this, i.e., prior to mass use. And this has happened despite the fact that the development of battery-based vehicles and their batteries is in its infancy.
By as early as 2025, Germany, too, is likely to witness the price of battery electric vehicles dropping below that of their combustion engine counterparts. Whether you like this reality or not, that proverbial ship has already sailed. If you also take a look at the trend for trucks, the race here will likewise go in favor of batteries.
How things will pan out for commercial vehicles or rolling stock remains to be seen. However, all these categories have a powerful competitor in the form of hundreds of millions of new batteries that are coming on the market globally every year. That’s because these batteries also cushion the grids and make “mass charging” possible. And railroad electrification using common overhead wires is also another real rival when it comes to purchasing and operational costs, as a battery or hydrogen train is not an end in itself.
In my opinion it’s important not to hold onto applications that simply have no real chance of making it big, since it just frustrates people when these promised technologies don’t then materialize. What’s more, using hydrogen for heating in ancient condensing boilers is so nonsensical and expensive that the hydrogen sector should, as a matter of urgency, distance itself from the natural gas sector, which has been pushing this very agenda, so that it can maintain its own credibility and, above all, control the narrative around its own technology.
Applications such as the production of hydrogen-based aviation gasoline or marine fuels and all the other fuel applications as well as hydrogen storage applications – an aspect that desperately needs redefining – are such an enormous future market that there is no need to lament it.
Why do hydrogen storage applications need to be redefined?
In the various long-term scenarios presented to governments by research institutes, there isn’t a single scenario which reckons on the already burgeoning wave of millions of (bidirectional) energy stores in vehicles and the already highly cost-effective medium and large decentralized energy stores. From 2024, no solar farm will be built in Germany that doesn’t have its own storage facility to allow power to be sold at night – and that’s without the need for any funding.
Millions of smaller energy stores are being set up too and these are all significantly extending the actual grid options on offer locally. International developments are taking place at a much faster pace than they once did for PV. Battery storage is making solar energy available “during the night” and “bringing wind to windless days” – for a few hours, then days, then weeks. And this mass availability costs just a few euro cent per kilowatt-hour. This will considerably change all previous scenarios outlined for hydrogen’s use as an energy store.
Off-grid also an option
Hydrogen can also be produced off-grid on a gigawatt scale, provided it is possible to transport the product (hydrogen or an e-fuel) reliably and at a reasonable cost. This is an extremely interesting aspect that is achievable all over the world, with differing proportions of solar and wind power (or, where feasible, other renewable sources). These forms of renewable generation complement each other locally and can, with back-up storage, enable very high running times for electrolysis without costly and time-consuming connection to the power grid. Since their end product is not electricity but hydrogen-based substances. Projects along these lines are happening in various countries, and this has become a realistic option for Germany as well.
Distancing from costly “bridging technologies”
There is a serious ongoing discussion within associations and the media about carbon capture and storage, otherwise known as CCS, and its use in Germany as a bridging technology to obtain blue hydrogen from natural gas by the start of the 2030s. In this case, a technology that is still at the prototype stage after decades of political discussion is being pushed onto a totally unfeasible timeline. And that’s without any discussion of the overall costs of such an option, assuming that (at some point) it is indeed available for large-scale deployment.
Ultimately, CCS has been repeatedly sold as an option for coal power plants since the 2000s and has never come to fruition – for cost reasons. Plus, with such ideas, all the problems of security of supply, costs and the finiteness of natural gas still remain. CCS is a dangerous, insubstantial distraction from the long-term and quickly scalable technology pathway of renewable electrolysis in the EU.
Underrated opportunities
Hardly a day goes by when there isn’t a public discussion of all manner of ideas for the hydrogen economy. It almost doesn’t matter where the German Chancellor or the minister is traveling, it’s nearly always about importing hydrogen. And of course it’s hydrogen at a “bargain price,” with a total absence of debate about the costs or prices. It’s already the case today that a veil is drawn over the massive existing political tensions and risks of potential supplier countries. In fact it’s terrifying how little discussion there is in political and media environments about the EU’s own potential and, especially, the cost of hydrogen options. That’s why I want to make a simple “back-of-the-envelope” comparison, taking into consideration hydrogen minimum costs:
If I want to produce hydrogen “in the desert,” I have to…
– pay (higher) costs than in the EU for electrolyzers, plant engineering, security etc.
– desalinate seawater (CAPEX costs and electricity consumption).
– use wind and solar power at a minimum cost of 1.5 euro cent/kWh, with battery stabilization for high electrolyzer utilization levels on top, albeit the prices will generally be above the costs.
– calculate the losses due to waste heat (20 percent to 40 percent of the electricity used) since the thermal energy will not be used in the local climate.
– calculate the expense of equipment such as the compressors for transportation.
– assess the costs of the pipeline or tanker and their losses in operation.
– adopt a calculated risk strategy for unstable regions.
– …
If I want to produce hydrogen in Germany or in the EU, I have to…
– pay lower costs than in the desert for electrolyzers, plant engineering, security etc.
– pay for water.
– use wind and solar power at a cost of 4 to 7 euro cent/kWh, plus a bit more for stabilization, whereby avoided curtailments from the power grid can lower the price.
– transfer waste heat for the purposes of district heating or process heat. Then I would have 20 percent to 40 percent lower electricity costs because this can be sold as heat – or equally “written off.”
– calculate the expense of equipment such as the compressors for transportation.
– ensure direct consumption locally or short tanker/pipeline routes (lower losses and costs).
– dispense with the need for a risk strategy for unstable regions.
– …
Finally, I think it would be necessary to refine the above back-of-the-envelope calculation by inserting real figures that take into account the expected massive decline in cost. First and foremost, this would enable realistic assessments to be made (at last) about what green hydrogen can cost in 2030/2040 and which prices are reached based on it – in the EU and beyond – thus staying well clear of outlandish buzz phrases like “hydrogen is the Champagne of the energy transition” or “hydrogen will make heating affordable.”
Coordination was hard enough when there were “only” four German ministries dealing with hydrogen – now there are six involved in updating the national hydrogen strategy, plus the chancellery. This participation of so many different departments is surely conclusive proof that hydrogen has become a key plank in the energy transition.
“Being a versatile energy carrier, hydrogen will assume a key role in achieving our ambitious energy and climate targets.” This statement shows the German government’s recognition of hydrogen’s immense importance in the future energy supply and in tackling the climate crisis. It’s for good reason that, three years after the national hydrogen strategy was adopted in June 2020, a redraft has now been approved with content and targets adjusted to match changed conditions.
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The update to the national hydrogen strategy, which was enacted by the federal cabinet in July 2023, has, in the government’s words, “created a coherent framework for action for the entire hydrogen value chain – from production to transport through deployment and reuse.” The strategy, also referred to as the NWS, is designed to ensure certainty in financial planning, which provides the foundation for future investment, so that the market for green hydrogen technologies can be successfully ramped up.
At the same time, the NWS recalls that the creation of a hydrogen economy is “a task for the whole of society” whose success “requires contribution from all stakeholders.”
“Hydrogen technologies are not only an important instrument for climate change mitigation. They can enable the creation of new branches of industry with a large number of viable long-term jobs and extensive export opportunities. […] The NWS will thus also help German industry retain and further expand its strong position in hydrogen technologies.”
German government
Specific targets defined
The main 2030 targets outlined in the NWS focus on achieving an accelerated ramp-up of hydrogen and securing sufficient availability of hydrogen and its derivatives. Accordingly, the previous goal of 5 gigawatts of electrolyzer capacity has been raised to at least 10 gigawatts. Remaining demand will be covered by imports which will be the subject of a specially developed import strategy.
What’s more, effective hydrogen infrastructure is to be put place. According to the plans, a hydrogen starter network stretching across more than 1,800 kilometers (1,120 miles) will be got underway by 2027/2028 and supported by funding from Brussels. The network will be composed, in part, of repurposed natural gas pipes as well as newly constructed hydrogen lines. It will form a key part of the European Hydrogen Backbone which will involve hydrogen pipelines covering a total length of around 4,500 kilometers (2,800 miles).
In addition, various hydrogen applications are to be established in different industries – in the power and industrial sectors, in heavy-duty vehicles as well as in aviation and shipping. To allow this to happen, the intention is to create suitable framework conditions, specifically planning and approvals procedures, appropriate standards and certification systems. The stated aim is for Germany to become the leading supplier of hydrogen technologies by 2030.
“We have once again significantly upped the level of ambition.”
German economy minister Robert Habeck
“Hydrogen is the missing piece in the energy transition puzzle. It offers a huge opportunity to join up energy security, net-zero and competitiveness.”
German education and research minister Bettina Stark-Watzinger
“The global market for hydrogen must be fair and different than how the global fossil fuel industry once was.”
German development minister Svenja Schulze
The German government has now departed from its original approach of only financing green hydrogen through tax revenue, a move that has been particularly welcomed, unsurprisingly, by the gas lobby. Other colors of hydrogen are now also set to receive subsidies, albeit only to a limited degree and under certain conditions defined in the small print.
The update to the NWS states: “We also intend to fund the use of green and, insofar as it is needed in the ramp-up phase, low-carbon blue, turquoise and orange hydrogen on the deployment side to a limited extent while taking into account ambitious greenhouse gas limits, including emissions in the upstream chain and the ability to meet statutory net-zero targets.”
Bettina Stark-Watzinger, German education and research minister, called this a “pragmatic and technologically unbiased” decision that allows initial use of “all climate-friendly types of hydrogen.” This, she explains, will help Germany on its way to becoming a hydrogen nation.
Her colleague, German development minister Svenja Schulze, went one step further by saying: “Wherever wind and solar power is produced for hydrogen, momentum will be given to the energy transition at ground level and the local population will be supplied with electricity. And wherever seawater is desalinated for hydrogen, the nearest town will be supplied with drinking water. From a development perspective it’s clear: Hydrogen from renewables is not only the best choice for the environment, it is a cost-effective domestic energy source that also leads to better development in the Global South. We will therefore help our partner countries have a fair share of involvement in the new international market for hydrogen.”
Existing structures remain
To allow all this to happen, recourse is being made to existing institutions. For example, a “hydrogen guidance center” has already been set up that enables inquirers to receive advice on funding by phone or email. The committee of state secretaries for hydrogen acts as a decision-making body for the NWS and takes corrective action where necessary. It meets on a case-by-case basis as and when needed, which in the past was only rarely. The central body is the National Hydrogen Council, an independent, cross-party advisory committee with 26 high-ranking experts from industry, academia and civil society. The council is supported by the Coordination Office for Hydrogen.
Chair of the National Hydrogen Council, Katherina Reiche, explained: “It is an important milestone that the German government is ambitiously extending its national hydrogen strategy. […] Only hydrogen allows us to maintain value chains and ensure that key industries remain in Germany. […] Companies only invest if they have long-term planning certainty. We must therefore already look beyond 2030. According to council forecasts, the need for hydrogen and hydrogen derivatives will, by 2045, have risen to between 964 and 1,364 terawatt-hours. The Inflation Reduction Act in the USA and similar regulations around the world will accelerate the development of comprehensive value chains on an industrial scale. In view of rapid progress made in other countries, the German government should move away from exclusively focusing on flagship projects. What is more important is to create effective incentives to quickly scale the hydrogen economy and the development of new business models.”
On the subject of the – at times – fierce debate about the use of hydrogen in the heating sector, the council said that it endorses municipal heating plans as a crucial planning tool for encouraging the heating sector to shift away from fossil fuels. In its view, a successful transformation of the heating sector would require all technology options: heat pumps, heating networks, renewable heat and hydrogen. Thus all technologies should be granted equal footing as compliance options in Germany’s building energy law and be considered when undertaking infrastructure expansion.
The council added that rigorous training is needed for the specialist workforce required, both at university level and within the area of vocational training and continuing education.
Criticism and ideas for improvement
While the German government proudly unveiled the NWS update, the opposition, as expected, deems the 34-page document to be a flop. The CDU’s vice chairman, Andreas Jung, explained to German newspaper Tagesspiegel: “Hydrogen is so important for the economy and net-zero that it now needs a double-whammy.” Here Jung apes the “double-whammy” expression used by Chancellor Scholz when announcing his EUR 200 billion relief package to help with the cost of living. Jung’s criticism that the government was acting “halfheartedly” and would operate on the basis of “centrally controlled allocation” falls flat, however, since the targets set are highly ambitious and the NWS is ultimately only putting a framework in place – and does not include technical guidelines.
For example, it is understood that a “hydrogen acceleration law” will get off the ground this year to enable the installation of “further terminals only for hydrogen or its derivatives” as previously with LNG terminals. A “national port strategy” is expected to pinpoint the relevant hubs for the future hydrogen economy.
Jorgo Chatzimarkakis, CEO of Hydrogen Europe, therefore believes Germany is on the right course to be able to achieve “the broad use of green hydrogen in industry and the heating sector within nine years.” However, he thinks specific improvement measures are necessary, for instance better integration of H2 Global into the EU’s hydrogen bank in order to leverage European Union tendering processes as well as off-take agreements for temporarily nationalized companies, such as Uniper, that can contribute toward security of supply.
Additionally, Chatzimarkakis sees the need to shorten the IPCEI approval times at EU level and in Germany. He also suggests launching an “EU tax credit club” for hydrogen – as a semi-response to the Inflation Reduction Act in the USA, which cannot be introduced in the EU in a similar form due to tax regulations.
Contributions to the NWS 2.0 were made by the following German government departments: the economy ministry, the transportation ministry, the education and research ministry, the environment ministry, the development ministry as well as the foreign office and the chancellery.
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