Hydrogen — study.gen in the future. A realistic price for the import of hydrogen for Germany in...

Hydrogen — study.

Opportunities, potentials & challenges in the global energy system.

Introduction 6

Transition to a zero-emissions economy 10

Seeing the path to the energy system 2050 as an opportunity 14

Modelling of a future energy system 16

Results of the simulation 17

Hydrogen supply – a global market 32

A zero-emissions energy system is achievable 40

The transformation – what does the German economy think? 44

Industry opinions at a glance 58

Pioneers in hydrogen 70

USA (California) 72

China 73

Japan 74

Europe 76

Germany 78

Bibliography 88

Contents

3

Intro

—

duction.

Germany’s total energy consumption of approxi-mately 2550 terawatt hours (TWh) has scarcely changed over the past 30 years. Just 10 per cent of this consumption is produced through rene-wable energies. One of the reasons for this low number is that, at 68 per cent, most of our ener-gy requirements is imported - in the form of coal, mineral oil and gas.

Currently, the decarbonisation of energy applica-tions is being driven primarily by the expansion of renewable energies in the power grid. Although the proportion of electrical energy in total energy consumption is constantly increasing, it currently accounts for just 24 per cent. Assuming the target of an 80 or 95 per cent decrease in greenhouse gases by 2050 in comparison with 1990, one question arises: Is this goal achievable only by swapping conventional primary energy carriers for renewable energy? In the heating, transport and industry sectors specifically, it is still not clear which technologies will be used, since there only a few zero-emissions solution options here.

Looking at the cost of achieving the target by 2050 based on technologies known today, and the associated development scenarios in terms of price, efficiency and capacity utilisation, there is one clear conclusion: hydrogen will need to play a considerable part if a zero-emissions energy system is to be achieved! In the scenario with a 95 per cent reduction in greenhouse gases, the annual consumption of hydrogen will increase by more than ten million tonnes by 2050. The inten-sive integration of hydrogen in the energy system and industries is therefore the economically cost-optimal option for achieving the climate targets set. For this, approximately 62 GW of electrolyser capacity would have to be built up. But realisti-cally, Germany will probably not be able to fully supply itself with sustainably produced hydrogen. Accordingly, more than half of the hydrogen re-quired but need to be imported from abroad.

100% “Energiewende”

Production & logisticsHydrogen will in future be produced in countries rich in solar and wind-resources and traded globally. This exceptional gas, which has been providing our sun with energy for around 4.5 billion years, thus has the potential to become the new energy medium of the energy transition and replace oil and coal trade flows. It will drive the global transition to renewable energies further forward. In addition to Germany, virtually every large industrial country will need to import hydro-gen in the future. A realistic price for the import of hydrogen for Germany in 2050 would be 3.6 euros/kg - based on current purchasing power. One kilogram of hydrogen currently costs 9.5 euros/kg at the filling station.

The necessary infrastructure for the use of green hydrogen does not have to be completely esta-blished from scratch. Logistically, much of the existing infrastructure for the transport of natural gas can be used. Tankers are also a good option for the transport of gas. The salt caverns in

northern Germany are perfect to be used for hydrogen storage, and for storing seasonal rene-wable energies. Virtually no other country in Europe has this opportunity, so Germany could even act as the hydrogen storage for Europe.

The use of hydrogen as a sustainable energy carrier should not be viewed exclusively from the point of view of mobility, since a large proportion is also used in other areas. Hydrogen as a fuel will nevertheless make a major contribution to de-carbonisation in the transport sector, for example in freight transport. For cars, conversely, the focus is more on battery electric drives. However, hyd-rogen will be used in a comparable proportion here too, like the parallel use of petrol and diesel today. Vehicle architecture will not differ greatly from this, because the drive is always electrical. In terms of fuel consumption, hydrogen is projec-ted to account for 36 per cent of car transport and 72 per cent of freight by 2050.

6

Introduction Introduction

7

clean energy carriers. With increasing demand, an enormous capacity for hydrogen production and applications will be needed.

Unfavourable regulationsThere is an opportunity to exploit the efficiency and experience of German companies in mechanical engineering and plant construction as well as the chemical sector and position themselves as a global technology leader in hydrogen. Companies survey-ed by umlaut confirm this tremendous potential for Germany as a business location, and rate German industry’s position in an international comparison as quite good, even though this lead is dwindling.

Traditional representatives of the energy sector will need to adjust to the new requirements with new business models. Expertise in plant engineering and in gas handling, however, also offers new players along the H2 value chain the opportunity to grow. In

addition, sector coupling is blurring existing boun-daries between sectors and the entire energy indus-try will need become more closely connected.

Despite all the benefits of using hydrogen as a green energy carrier, its further development will be hampered by unfavourable regulations. The companies consider lower taxes and levies for electrolysers and creating demand through large-scale projects as crucial elements in establishing hydrogen technology.

With ever more demanding challenges in respect of global climate change by the middle of the century, the scale of hydrogen needs to become even more significant in benefiting society. Sustainable hydro-gen offers enormous long-term potential as a uni-versal energy carrier and as a chemical base product to replace fossil resources and facilitate CO2-free emission-intensive processes.

For aircrafts, no long-term alternatives to traditional propulsion with kerosene via jet engines are fore-seeable because here in particular, high energy densities with respect to the energy carriers are crucial. Rising air passenger numbers, however, are increasing pressure on governments and companies in the sector to find a sustainable alternative to fossil fuels. As a raw material or the production of synthetic fuels, hydrogen will also play a crucial role in this respect.

Enormous potentialHydrogen technology has enormous potential to reduce costs across the entire energy transition and, like photovoltaic and wind energy, needs start-up financing. Subsidies for these renewable energies mean the technologies today produce energy at competitive prices. Major industrial countries such as China and Japan, as well as the US Federal State of California, plus Canada, are increasingly focusing

on the integration of hydrogen in industry and mo-bility. Despite having different approaches, the countries named have two things in common: a roadmap and a clear government position.

A survey carried out by umlaut among participants in the future hydrogen industry in Germany paints a clear picture. Company representatives agree that sustainably produced hydrogen is unavoidable in the long-term if our energy system is to be transformed in line with the energy transition. The international hydrogen production will fundamentally change dependencies in global energy trade, and support Germany and Europe in meeting their demand for

Hydrogen 1,0079

1

8

Introduction Introduction

9

At the 2015 United Nations Climate Change Con-ference in Paris, 175 states declared their inten-tion to reduce greenhouse gas emissions by 80 to 95 per cent compared with 1990. An interim target was set to reduce emissions by at least 40 per cent by 20301. At the UN Climate Change Summit in New York at the end of 2019, 77 states - including Germany - agreed to achieve a green-house-gas-neutral status by 2050. This means these countries’ greenhouse gas emissions should move towards ”net zero”. This target was set based on the assumption that this will allow global warming to be limited in the long-term to below 1.5 degrees Celsius compared with pre-industrial levels.

Achieving the medium-term targets for CO2 re-duction calls for an almost complete shift in global final energy consumption. One challenge is to shape the transformation of the energy system and the introduction of new technologies in a socially acceptable way. At the same time,

however, it is foreseeable that preventing and reducing greenhouse gas emissions is also the economically more favourable path compared with adapting to the harm caused by climate change. The 2006 Stern Review on the Economics of Climate Change2 already demonstrated that the transition to a sustainable energy system can be estimated at around one per cent of global gross domestic products, whereas the effects of

Transition to a zero-emissions economy

climate change would entail costs in the region of five to 20 per cent of gross domestic product.

The world’s biggest database of harm caused by natural catastrophes, MunichRe’s NatCatService, shows an increase in the number of natural disas-ters just in the course of recent years. In response to these clear indications of climate change, se-veral major reinsurance companies have announ-ced the withdrawal of financial investments rela-ted to the use of coal3.

It is self-explanatory that to minimise and prevent greenhouse gas emissions, the use of fossil, car-bon-containing primary energy carriers will in-creasingly need to be reduced, and in the long-term be completely replaced by CO2-free energy carriers. Together, oil and coal account for appro-ximately 60 per cent4 of the global primary ener-gy demand. At the same time, these hydrocarbons have ideal properties for the global energy mar-

ket because they are good for storage and easy to transport.

Internationally, the challenge is to establish a sustainable energy system that facilitates the exchange of today’s fossil primary energy carriers for ”green” energy carriers across all relevant in-dustries and sectors.

In a zero-emissions energy economy, hydrogen is essential in optimising the overall costs and safeguar-ding system security.

10

Zero-emissions economy Zero-emissions economy

11

Energy —

system

— 2050.

Seeing the path to the energy system 2050 as an opportunity

Building Industry Transport

500

1500

2500

1000

2000

3000

TWh

01990 2017 2050

The transformation to a sustainable energy system may present a challenge, but there is no alterna-tive in terms of achieving the target of CO2-neu-trality. Furthermore, it opens economic opportu-nities for countries with high potential in terms of solar or wind energy, or for technology-driven nations, of which Germany is one. The opportuni-ties come in relation to the production, management and maintenance as well as the export of plant technology.

Status quo: Energy consumption in GermanyFinal energy consumption in Germany has changed only marginally since 1990. On the one hand this is good news, because despite increased economic output and greater mobility, efficiency measures have taken effect. On the other hand, however, it

is also a challenge to meet this high consumption with renewable energies. Although renewable energies now account for 46 per cent of electrici-ty consumption in Germany, their share of total final energy consumption is still less than 12 per cent. The task ahead is therefore to replace more than 2550 TWh with renewable energy in the trans-formation of the entire system.

Hydrogen technology thus offers enormous global sales potential for Germany as an economic centre.

Final energy consumption in Germany by sector5 Fig. 01

14

Energy system 2050 Energy system 2050

15

The results in Fig. 02 show that for the future, the-re will be stronger demand for electrical energy. In

”Scenario 80” (CO2 reduced by 80 per cent com-pared with the base year of 1990), net electricity consumption increases to 726 TWh, and in ”Sce-nario 95” (CO2 reduced by 95 per cent compared with the base year of 1990) is rises to as much as 1008 TWh. On the one hand this is due to new consumers who do not use the electricity imme-diately (e.g. electromobility or Power-to-Heat), and on the other hand the production of new energy carriers (e.g. hydrogen, synthetic fuels)6.

Despite the increase in electricity use, final energy use falls virtually identically under Scenario 80 and Scenario 95, to approx. 1600 TWh. This illustrates the importance of implementing energy-efficient measures as a crucial component in achieving the targets. In a simulation where there is complete openness to technology, the supplementary and in some ways intensive use of hydrogen represents

the most economical variant for achieving the CO2 reduction targets. in ”Scenario 80”, hydrogen supports this by reducing the overall costs. Indeed in ”Scenario 95”, hydrogen is a main pillar in achie-ving the targets, and is indispensable.

The model is used to calculate energy-related demand for hydrogen, such as the use of hydrogen for vehicles powered by fuel cells, for example. The potential need for hydrogen in steel production is depicted as a further hydrogen demand.

To achieve the climate change targets, green-house gas-neutral solutions will have to be found for electricity, heating, mobility and industrial processes. Various technologies are available in this respect, some of them showing consi-derable potential in terms of cost reduction. To make efforts in research and innovation, as well as private sector investment in the transforma-tion of the energy system, sustainable, the question therefore arises as to what mix of technologies is needed to create economically the best development path.

Given the variance and complexity of a future energy system, a technical analysis model is ap-propriate. If the energy supply continues to function stably, the optimal energy system design

is thus established based on the target value for CO2 reduction.

Using a novel model family developed by the Jülich (IEK-3) research centre enabled German energy supply to be depicted in all its interactions and pathways. In concrete terms, this means that all sectors (energy, transport, household and in-dustry) are incorporated into the model from a technical and economic perspective, and their energy needs assessed. For optimisation purpo-ses, the model selects neutrally from all current-ly available technologies and primary energy carriers. Meeting the reduction targets and the foreseeable energy needs of the sectors allows the most cost-efficient measures and strategies to reduce greenhouse gases to be identified.

Modelling of a future energy system

Results of the simulation

The sales potential for hydrogen in Germany will be 12 million tonnes by 2050.

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17

200

600

1000

400

800

0Today

520

726

1008

2050 2050

Buildings & commerce, trade and services Industry

Sector coupling = Transport (e-mobility), PtX (measures), heating of buildings & hot water, process heat

Scenario 80

Scenario 95

TWh

In the technology mix that is optimal in terms of costs, hydrogen consumption under ”Scenario 80” is around 145 TWh. This converts to four million tonnes of H2. Half of this hydrogen is extracted by means of natural gas reforming, and the other half through electrolysis. Because under ”Scena-rio 80”, 20 percent CO2 is still permitted in the energy system in 2050 compared with 1990, the model pushes cheaper natural gas reforming over electrolysis as far as possible. In concrete terms, this means plant capacity of 10 gigawatts for natural gas reforming, and 22 gigawatts of in-stalled electrolysis capacity. This involves opera-ting the electrolysers for on average 2600 hours per annum at full, load.

Hydrogen extracted from fossil energy carriers such as natural gas or coal is known as grey hydrogen. If the process is of CO2 capture and storage, which avoids the greenhouse gas emissions of conven-

tional hydrogen production, this is known as blue hydrogen. Zero-emissions green hydrogen is gene-rally produced in electrolysers using renewable electricity.Under ”Scenario 95” the required volume of hydro-gen, at 399 TWh – which converts to 12 million tonnes of H2 - is already three times the hydrogen demand under ”Scenario 80” (cf. Fig. 03). For this, domestic electrolysis capacity is expanded to 62 GW operating at an average of 2900 hours per annum at full load. The electrolysers’ huge energy demand underlines the need to install them at network nodes close to locations with considerable potential to produce renewable energies - predo-minantly in the north of Germany.Germany in theory has great potential to produce hydrogen – particularly when involving the use of offshore wind power. The analyses show, however: Particularly in a comparison with other countries, it is not possible to produce the entire hydrogen

Net electricity consumption in Scenario 80 and 95 in 2050, in TWh6

Fig. 02

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19

requirement in Germany at optimal costs. Further-more, the generation capacity that would have to

be installed would be so high that, given the cur-rent challenges, it cannot be assumed that there will be enough expansion of renewable energies for Germany to supply itself. The reasons for this are the lack of acceptance among the population, and the immense space that would be needed.

Under ”Scenario 95”, domestic hydrogen production accounts for 45 per cent of hydrogen consumption. This means that more than half the hydrogen needs would have to be imported. On the one hand this increases resilience throughout the entire system since energy carriers can be used even in poor years for wind and solar; on the other hand, it re-duces the total costs of the energy system. The reason: fewer uneconomical RE plants need to be involved in hydrogen production in Germany. De-spite the relatively high import ratio, there would be a higher level of self-sufficiency in terms of primary energy consumption compared to 2019.

Mio t

Scenario 80

Scenario 95

2

6

10

4

8

0Today 2030 20302040 20402050 2050

Buildings Industry Energy Transport

Demand for green hydrogen under Scenarios 80 and 95 in the support years 2030, 2040 and 2050. Current ”grey” hydrogen is not depicted under ”Today”.

The ”dark doldrums””Cold dark doldrums” is the term used to describe the combination of unpredicted weather events which may result in low renewable electricity production, and even complete a shut-down in production. At the same time, it is assumed that the outside temperature is low, fuelling high demand for heating consumption. This study is based on a period of two weeks in the month of January dominated by the dark doldrums.

Demand for green hydrogen for energy production6 Fig. 03

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21

However, the 45 percent proportion of hydrogen demand produced in Germany also demonstrates that hydrogen produced nationally can compete even with the top international locations.

In a virtually zero-emissions economic and energy system under ”Scenario 95”, the remaining CO2 emissions are generated in industry, where the conversion costs are highest. Given the relatively high cost of converting industrial processes, de-mand for hydrogen will develop here later than in comparison with other sectors.

Steel manufacturing, for example, is currently one of the biggest producers of industrial CO2. The processes within this industry cannot be repre-sented by electricity consumption alone. Never-theless: the so-called direct reduction process for steel manufacturing using hydrogen represents a promising zero-emissions alternative to the traditional furnace route. Thus under ”Scenario 95”, the conventional furnace route will be fully replaced by the hydrogen direct reduction process by 2050. For this alone, an annual hydrogen volume of 46 TWh is required. Hydrogen direct reduction and the electric steel production pro-cess are the technical processes on which entire steel production must be based in the future.

A further 88 TWh of hydrogen will be needed by 2050 to provide process heat in industry. Demand for hydrogen will increase further if the scope of the scenarios is expanded. The use of hydrogen as a chemical base product is conceivable, in ammonia production, for example.

Salt caverns

Natural gas pipeline

Distribution pipeline

1160 – 1425

894 – 1160

628 – 894

363 – 628

97 – 363

Transmission pipeline

0 100 200 300 km

Future hydrogen pipeline in ”Scenario 95”6

The comparable courses of natural gas and hydrogen pipelines highlight the repurposing potential

Fig. 04

The use of hydrogen is a technology to reduce CO2 across sectors – not just for individual transport.

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23

Efficiency chains in the hydrogen economy in 2050 Fig. 05

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25

FCEV: Fuel Cell Electric Vehicle ICE: Internal Combustion Engine

BEV: Battery Electric VehicleW2W: Well-to-Wheel

W2Wapprox.

51 %

W2Wapprox.

46 %

W2Wapprox.

21 %

W2Wapprox.

13 %

W2Wapprox.

23 %

W2Wapprox.

77 %

W2Wapprox.

30 %

W2Wapprox.

22 %

100 % 96 % 79 % 77 %

73 %

65 %

68%

57%

90 %

36 %

83 %

69 %

RE electricityCar

FCEV70 %

AircraftICE

35–45 %

Otto engineICE30 %

Battery & e-motorBEV85 %

Truck & BusFCEV70 %

Otto engineICE23 %

Crude oilDiesel engine

ICE26 %

Battery & e-motorBEV85 %

Transformer & rectifier

96 %

Electrolysis82 %

Sabatierprocess90 %

Fischer-Tropsch- synthesis

73 %

Pipeline- compression

80 bar97 %

Pipeline- compression

80 bar97 %

Extraction & refinery

85%

Transport99 %

CH4

Transport99 %

E-Fuel

Transport98 %

Power grid90 %

Power grid90 %

Compression 700 bar

85 %H

2

Compression 350 bar

95 %H

2

71 %

58 %

79 %

79 %

100 %

CoalMining and

PowerStation 40 %

100 % 40 %

85 %100 %

Increasing expansion of volatile renewable energies is raising demand for energy storage systems. They key storage requirement in terms of system secu-rity is in long-term storage. This enables the seasonal balancing of the supply of solar and wind energy as well as the provision of energy to com-pensate for an unforeseen period of ”cold dark doldrums”. To bridge the period of cold, dark dol-drums - the stress test for the energy system - a high volume of energy must be retained for this period under ”Scenario 95”. In Germany, the only storage capacity of sufficient size is in the form of caverns and pore storage facilities.

Due to its very good long-term storage properties, the reconversion of hydrogen in ”Scenario 95” is an important option in terms of maintaining a secure power supply. This means that in 2050, approxi-mately one quarter of the hydrogen used will be for reconversion.

For this, approximately 67 TWh of natural gas cavern storage will become hydrogen cavern storage. For reconversion into electrical energy, an additional back-up capacity of 13 GW of hydrogen-powered gas or gas and steam combined cycle power plants and 33 GW of hydrogen-powered fuel cells must also be considered.

To supply mobility, under ”Scenario 95” hydrogen will be used to produce synthetic fuels as well as for direct use. Hydrogen can be used directly in trains, cars and trucks powered by fuel cells; in terms of fuel consumption, it accounts for around 36 per cent in private car transport and around 72 per cent in freight traffic. Conversely, cars powered by synthetic fuels account for 9 per cent, and freight traffic 20 per cent. Air transport is entirely powered by synthetic fuels.

The use of hydrogen on a large scale requires the development of appropriate domestic transport and

distribution infrastructure. During the market intro-duction phase, this can be achieved with the help of truck transport. There is potential for early conver-sion from natural gas to hydrogen pipelines, however. Fig. 04 shows a pipeline infrastructure for ”Scenario 95” where only the construction of new hydrogen pipelines is assumed. The new pipelines would follow a very similar course to the existing natural gas pipe-

lines. Converting existing natural gas pipelines could again bring a significant reduction in infrastructu-re costs compared with building new pipes.

In summary, the future scenario modelled for Germany results in the infrastructure concept of storage facilities (salt caverns) and transport and distribution pipelines for hydrogen, as shown in Fig. 04. Geologically thanks to the salt caverns, and because of the existing gas pipelines, Ger-many is in an excellent starting position to expand the use of hydrogen.

To save process costs particularly at the start of the transformation process, it makes sense to introduce hydrogen in applications where it can be used directly and will quickly be competitive. The initial deployments are in direct feed-in into the natural gas network or in the transport sector (trains, buses, trucks).

70 per cent of freight traffic will be powered by hydrogen from fuel cells in the future.

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The demand-oriented development of a hydrogen infrastructure for trains (diesel propulsion), trucks and/or buses is recommended initially, since this gene-rates a predictable and high demand for hydrogen. This high capacity utilisation allows the construction and operating costs incurred to be distributed over a high volume of hydrogen, enabling an early tran-sition to economic operation. Feed-in to the natural gas network must take account of connected con-sumers. Calorific value-based billing is recommen-ded here, rather than volume-based billing. In certain circumstances, however, technical supply installations may need to be modified accordingly.

Although the topic of ”hydrogen” should not be considered exclusively in the context of mobility, an analysis of the resulting efficiencies for vehicles in 2050 is nevertheless appropriate.

Fig. 05 shows the efficiency curve from the rene-wable energy source through to the storable ener-gy carriers: hydrogen (H2), synthetic natural as (CH4) and e-fuels. Based on the respective fuels, the Well-To-Wheel values are calculated for the sub-sequent consumers.

Even though the Well-To-Wheel value for Battery Electric Vehicles (BEV) is over 70 per cent, it must be considered that the energy density of the fuel for a car with fuel cells is considerably higher. Shor-ting fuelling times and longer ranges result in greater convenience and practicability on long-dis-tance journeys. Furthermore, the overall infrastruc-ture costs from around 10 million vehicles86 are higher for BEV than for cars with fuel cells.

Summary• In cost terms, the intensive integration of sustainably generated

hydrogeninto the energy system is the optimal way of achieving Germany’s climate targets.

• The infrastructure for the distribution of green hydrogen is relatively easy thanks to the existing natural gas network.

• The sales potential for hydrogen in Germany is 12 million tonnes per annum from 2050.

• To achieve a net zero economy by 2050, approximately 62 GW of electrolysis capacity will need to be installed in Germany.

• Up to 55 per cent of the demand for renewable hydrogen will be imported in the future.

• In a zero-emissions energy economy, hydrogen is essential for system security.

• 70 per cent of freight traffic will be powered by hydrogen from fuel cells in the future.

• Hydrogen offers high Well-to-Wheel efficiency in comparison with other renewable fuels.

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Hydrogen —

— market.

The comparatively high specific energy content and the ease of transport and storage have a conside-rable influence on the fact that oil and natural gas (in the form of LNG) are traded worldwide and cover 60 per cent7 of global primary energy demand. But because conventional energy carriers will all but disappear in the long-term due to their green-house gas emissions, the following question arises how could global energy exchange be achieved in a future energy system? ”Power-to-X” is currently the most promising option for producing energy

carriers based on renewable energy and trade these globally8.

Importing part of the hydrogen needed is for many reasons also an economic and geopolitical options for Germany: on the one hand, acceptance prob-lems regarding expanding renewable energies in Germany will cause the expansion paths of wind and solar energy to lag those for hydrogen pro-duction. On the other hand, the import of rene-wably produced hydrogen enables a long-term global hydrogen market, and thus considerable opportunities for cost reduction. These develop-ments towards a global hydrogen market will also enable Germany not only to import hydrogen, but also to export technologies and expertise, for example in the field of electrolysers or plant engineering.Because hydrogen production costs are signifi-cantly influenced by electricity generation costs, the potential of renewable energies and the avai-lability of water are central aspects when it comes to selecting locations. Accordingly, in addition

Hydrogen supply: A global market

Average wind speed in m/s

Average global radiation in kWh/m²·d

2,6 4 5 6 7 8 9 10,3

2,4 3 5 6 6,5

USA

Mexico

Peru

Chile

West SaharaAlgeria

Marocco

Saudi Arabia

Libya Egypt

Oman

China

NamibiaAustralia

South Africa

Iceland

British Columbia

UK + Ireland

Norway

Inner Mongolia

Chile

Patagonia

Newfoundland+ Quebec

Potential production locations for hydrogen from PV, and solar radiation based on global radiation10

Future production locations for hydrogen from onshore wind, plus wind potential based on mean wind speed at an elevation of 50 m9

Abb. 07

Fig. 06

Hydrogen production locations

Regions with plenty of wind or sunshine such as, for example, Oman or Patagonia, will become major producers of green hydrogen.

32

Hydrogen market Hydrogen market

33

to some countries that are already involved in energy trading through oil and natural gas exports, some new countries with high levels of wind are also appearing on a list of potential hydrogen ex-porters. The global distribution of hydrogen-expor-ting countries is thus increasing, which is boosting security of supply, and will result in competition in terms of production and export costs.

Fig. 06 shows the mean wind speeds at an eleva-tion of 50 metres above sea level. In highly simpli-fied terms, high average wind speeds mean low electricity generation costs from wind turbines and so low hydrogen production costs. If existing ice cover, coastal access and altitude as well as the maximum wind speeds are considered, the eight regions shown in the figure result as future produc-tion sites for hydrogen from wind energy.

Applying the same conditions results in the 15 regions named in Fig. 07 for hydrogen production based on photovoltaic electricity. The total of 25 countries analysed here are characterised by ex-ceptionally low production costs for hydrogen. These are mainly influenced by the full load hours of the renewable energies, which determine the

electricity costs and the resulting costs of the electrolysis process. Technical and economic mo-dels with high spatial and temporal resolution were used to simulate the entire path - from renewable electricity generation and hydrogen infrastructure (electrolyser, pipeline, liquefaction and storage) through to the export port in the country analysed, and transport to Germany. Fig. 08 shows the results of these calculations.

Even considering transport of the hydrogen by ship from e.g. Patagonia to Germany, hydrogen costs of €4.0/kg at the import port in Germany are achievable (cf. Fig. 08). On the one hand this de-monstrates that regardless of the production route (wind onshore, offshore or PV) in the 25 countries identified, hydrogen export costs at the port in the country of between €3.3 €/kg and €4.6/kg are achievable. On the other hand, these 25 countries alone are today able to produce a total of around 1.4 billion tonnes of hydrogen per year. Remember: the total hydrogen demand for Germany under ”Scenario 95” is approximately 12 million tonnes per year, which means that the potential of the countries examined is around 115 times higher than demand from Germany.

H2

imp

ort

cost

s in

to G

erm

any

EUR

/kg

H2

H2 Production costs in the export country EUR/kg H2

3,5

4,0

4,5

5,0

5,5

3,0 3,5 4,0 4,5 5,0

Export potential in Mt/a

Preferred region for PV

Preferred regions foronshore wind energy

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20

50

OmanIceland

Saudi Arabia

Chile

USA

Inner Mongolia

Norway

British Islands

Canada

China

Australia

Algeria

Patagonia

100

200

500

Fig. 08Hydrogen production costs and potential

Hydrogen production costs and potential at the export port in each country and at the import port in Germany (Graphic source: Forschungszentrum Jülich)

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Chile, Patagonia and Oman should be highlighted in particular because of the low hydrogen export costs at the ports there of between €3.3/kg and €3.6/kg. To these can be added Saudi Arabia, with slightly higher costs of €3.7/kg. Viewed as a who-le, however, it should also be considered that Saudi Arabia, with 517 million tonnes of hydrogen per year, has enormous production potential. If

there is high international demand for sustainably generated hydrogen in the future, Saudi Arabia will continue to be a major hydrogen exporter. Cur-rently, for example, hydrogen is sold at hydrogen filling stations for fuel cell passenger cars in Ger-many at a standard price of €9.5/kg. At this price, the cost of running a fuel cell car is comparable to that of a car with a combustion engine.

0,25

0,75

1,25

0,5

1

0

1,67

0,85

0,11

0,33

0,60,54

Electricity Electrolysis Pipelines LiquefactionLH

2

StorageLH

2

Transport

Fig. 09H2 proportion of costs in €/kg

Cost contributions of hydrogen production, transport and storage from the export port in Patagonia to the port in Germany; in 205011

Summary• In the medium term, hydrogen will become the key energy

carrier in global energy trade.

• Regions with plenty of wind or sunshine, such as e.g. Oman or Patagonia, will become major producers of green hydrogen, and trading partners of the future.

• Importing hydrogen from abroad reduces overall costs and increases and increases the energy system’s resilience.

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Zero —

emissions energy

— system.

A completely emissions-free energy system requires a multi-faceted adjustment of the current infras-tructure - both for the broader direct use of elect-ricity, and for the use of new energy carriers. This includes the development of a value chain for green hydrogen as depicted in Fig. 10. This chain, which can also be widely developed in Germany, is funda-mental to the national use of green hydrogen, and so this is explained in more detail below

ProductionOverall, the number of energy carriers is decreasing compared to today’s energy supply due to the abolition of nuclear energy, natural gas, coal and oil by means of Federal Government decrees. Instead, a large part of energy consumption is based on the generation of electricity from renewable sources, and the products that can result from this. This in turn means that coupling of the energy sector and end consumer sectors is increasing significantly. This

”sector coupling” plays a key role in achieving clima-

te targets. The production structure for the use of hydrogen is still in its infancy. For use on an indust-rial scale, it requires above all powerful electrolysers with high efficiency and high dynamics.

Depending on the existing infrastructure, the pro-duction of green hydrogen will mainly take place in the vicinity of wind turbines, solar parks and large grid nodes for the feed-in of renewable energies. The electricity required for the electrolysers is then not transported in the transmission grid, which means that the operator potentially does not have to pay network charges. This saving will be reflected directly in the cost of hydrogen. Furthermore, with high renewable generation capacity, the energy can be stored in the form of hydrogen, thus reducing the load on the grid. In the best-case scenario, this could limit the need to extend routes for the transport of electricity. A further source of supply is the import of hydrogen from countries with low production costs for electricity from renewable sources6.

A zero-emissions energy system is achievable

Electricity production

FCproduction

Operation of P2Gplants

Electrolysis plant

engineering

H2Import

H2-Filling

stations

H2 Trucks

H2Transport

H2Pipelines

Storage SalesH2

consumption

Energy economy

Industry

Mobility

Buildings

Vision of a value chain for the hydrogen market

Fig. 10

40

Zero-emissions energy system Zero-emissions energy system

41

TransportThe connection between generation plants and consumers is established by different transport structures. Trucks are currently being used to sup-ply filling stations. Their advantage lies in the re-latively low costs in terms of small-scale use, the possibility of fast implementation, and their high degree of flexibility for short and medium-dis-tance journeys. Cost efficiency can be further improved in the future by adapting technical specifications to the current state-of-the-art and changing needs. National implementation will re-quire the construction of a pipeline network, and the wider use of natural gas pipelines.

The structure is thus also like that of the natural gas network, where transport network operators are responsible for operation and maintenance, and grant users’ access to the network for a fee. Transport ships

are used for international sea transport, carrying the hydrogen in liquid or chemically bound form. This also requires an appropriate port infrastructure, including a liquefaction plant and loading facilities in the exporting and importing countries.

Storage facilitiesFor optimal technical and economical use, various intermediate storage options are necessary. Sea-sonal, or even daily fluctuations in the production of hydrogen can be offset by large storage facilities, or by using the gas network’s storage volume. This due to the possibility of variable electricity feed-in from renewable sources. One such application is the generation of hydrogen using surplus solar power in summer. The hydrogen can then be stored until required for winter heating, and then be used to generate space heating by means of combined heat and power. At filling stations, smaller storage

facilities, e.g. gas pressure tanks, liquid or cryoge-nic storage, cover local and short-term demand. For mobile applications, special composite tanks enable gas to be stored at high pressure without diffusion losses for mobile applications, e.g. in vehicles12. A series of key technologies is used for storage, as well as for transport and tanking: lique-faction facilities and compressors increase the energy density of the hydrogen.

SalesHydrogen is no longer used only as an industrial chemical gas; it now also plays an important role as an energy carrier. Until now, there has not real-ly been an efficient and liquid market. Most of the hydrogen produced is not traded freely. The emer-gence of any such market is subject to an increase in demand. A further stimulus could come from the trading of green hydrogen as a product on the

stock exchange, like what is common today for oil, gas, coal and electricity. This requires the standar-disation of product properties, however, and a high level of transparency about production and con-sumption volumes. This will enable market-driven, transparent pricing.

ConsumersAt the end of the hydrogen value chain are all the consumers for whom green hydrogen repre-sents a suitable energy carrier. Related sectors include mobility and the provision of heating. The chemical industry, for example, often produces hydrogen locally for its own use - although not with zero emissions. Depending on the type of end user, the hydrogen must be treated at the point of use. This is particularly important for mobility, where hydrogen must be supplied at a pressure of up to 700 bar13.

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Zero-emissions energy system Zero-emissions energy system

43

The intensive use of hydrogen in German industry and the energy system is often equated with a fundamental shift. Although some processes do indeed need to be changed significantly, it is precisely at the beginning of the transformation that existing structures and experiences can be tapped into. The transformation into a zero-emis-sions economy is therefore not synonymous with a fundamental shift. Nevertheless, the success of such a transformation is highly dependent on the

close cooperation of all those involved in science, politics and business. As part of this study, inter-views were conducted with representatives of companies from the relevant sectors of the hyd-rogen value chain. The aim of the interviews was to obtain views from industry representatives on the increased use of hydrogen technologies. Furthermore, the intention was to record the needs of companies as a result of the transition to a sustainable energy system.

Overall view of hydrogen technology As Fig. 12 shows, most of the companies sur-veyed rate the significance of hydrogen techno-logies for the decarbonisation of their industry as high to very high. Indeed, more than half of the interviewees rate the relevance of hydrogen technologies as highly significant. Including Dr.

Tobias Pletzer who represented Schleswig-Hol-stein Netz AG in the study.

Comparing sectors, it is notable that represen-tatives of the gas industry rate the importan-ce of hydrogen technologies for the decarbo-nisation of their sector particularly highly.

The transformation – what does the German economy think?

Results

57 %4 %

4 %

35 %

The importance of hydrogen:for decarbonisation in general &

for the future of companies

Global hydrogen development, and Germany by

international comparison

Challenges to the increased use of hydrogen, and approaches to

promoting hydrogen technologies

1 21 – Low

2 – Not very high

3 – Neither high nor low

4 – High

5 – Very high

3

Structure of the interviews Fig. 11

Fig. 12Evaluation of the significance of hydrogen

44

What does the German economy think? What does the German economy think?

45

Of the companies surveyed, 23 per cent are in the gas industry, these being distribution network operators, transmission system operators and stakeholder organisations. Within the gas indus-try, 80 per cent consider hydrogen technology to be of very high significance, with 20 per cent considering it to be at least of high significance.

On the other end of the scale, just 8 per cent of company representatives consider the significan-ce of hydrogen technologies for decarbonisation to be not very significant, or of neither high nor low significance for their industry. These views come from companies whose core business is energy production. However, the electricity com-panies surveyed see green hydrogen as an energy carrier with the help of which the elect-ricity industry can contribute to the decarboni-sation of other sectors.

What opportunities do hydrogen technologies present?Many of the company representatives interviewed have a fundamentally positive attitude to the in-creased use of hydrogen technologies. In the course of the interviews, it became clear that the benefits for these companies could extend far beyond the decarbonisation of their own activities. Fig. 13 shows the opportunities most frequently identified by the companies surveyed in connection with the increa-sed use of hydrogen technologies.

In the interviews, 68 per cent of companies refe-renced the import of renewable energies in the form of green hydrogen as an opportunity. Import will initially be an economic opportunity for Germany. Benjamin Jödecke of H2-Mobility Deutschland, for example, emphasises that the import of renewable energies is crucial for sustainable energy supply.

100 4020 50 7030 60

Number of references as [%]

Import and transport of renewable energies

Tap into new business areas or markets

Secure long-term existence of the industry

Form new partnerships

Decarbonisation of other sectors/industries

”Hydrogen technology is one of the potential key technologies with respect to fulfilling the goals of the Paris climate agreement.“

Dr. Tobias Pletzer, Schleswig-Holstein Netz AG

Opportunities presented by hydrogen technologies Fig. 13

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47

Furthermore, 18 per cent of the companies see the import of green hydrogen as an opportuni-ty to expand their own portfolio of services. Half the companies surveyed think hydrogen techno-logies are an opportunity to tap into new business areas. As well as manufacturers of electrolysis facilities, components for fuel cell applications and electricity companies, these include organi-sations that are expected to act primarily as consumers of hydrogen.

For 32 per cent of the companies, it is about securing the long-term existence of their own industry: All re-presentatives of the gas economy sectors mentioned see in hydrogen technology the opportunity to secu-re their own business for the long-term. The other mentions are from representatives of the mineral oil industry. In addition, 27 per cent of the companies surveyed cited forming new partnerships and support for decarbonisation in other sectors as an opportunity for the increased use of hydrogen technology.

100 4020 5030

Number of references as [%]

no/few FCEV from German manufacturers

high power costs for electrolysers (fees, levies, taxes)

regulatory framework conditions (approvals, unbundling, uniform framework, etc.)

lack of sales market for green hydrogen

high investment costs for electrolysis facilities and hydrogen applications

lack of acceptance in society

no subsidy for the use of green hydrogen

Challenges associated with the increased use of hydrogen technologies ”For the energy transition to succeed a sustainable

energy carrier will be needed to facilitate the continued import of energy. We will not be able to meet our entire energy requirements with our own production of renewable energies. In this context, hydrogen will become a very important energy carrier.“

Benjamin Jödecke, H2-Mobility Deutschland

Fig. 14

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49

There are, however, numerous challenges standing in the way of the opportunities which the increased use of hydrogen technologies might yield. Fig. 14 shows the sticking points from the perspective of the companies: most frequently mentioned are the high electricity costs associated with the opera-tion of electrolysers. In particular, the companies say that the full payment of levies, taxes and net-work fees mean it’s virtually impossible to operate electrolysers profitably. Half the companies sur-veyed see this as a major obstacle to the deploy-ment of hydrogen technologies. Ilona Dickschas,

Head of Strategy and Business Development Hy-drogen Solutions at Siemens Gas and Power explains the cost structure in view of the current mood among potential buyers of electrolysis facilities.

It is notable that manufacturers of electrolysis facilities and plant operators see the high electri-city prices as a major barrier to establishing hydro-gen technology. Of the approximately 50 per cent of the companies that specified the high cost of electricity as a major challenge, 55 per cent are already operating electrolysers or can imagine

doing so in the future. A further 28 per cent of the companies manufacture electrolysis facilities.

45 per cent see a key challenge in the regulatory framework conditions that go beyond the com-position of the electricity price. Examples cited include lengthy approvals processes for establishing electrolysis facilities and the construction of hyd-rogen filling stations. Restrictions on the operation of electrolysers due to the unbundling of energy supply and the lack of a uniform legal framework for renewable gases are also criticised, however. In contrast to the high electricity costs, the regula-tory framework conditions are regarded as a challenge by companies with w very wide range of

market roles. For example, 40 per cent of the men-tions come from company representatives assigned to different market roles on the consumer side.

Overall, 32 per cent of the companies see the lack of a sales market a major challenge for green hydrogen. In this context, approximately 9 per cent of the companies point out that the green pro-perties of sustainably produced hydrogen are currently not rewarded on the market. Almost 10 per cent of the companies cite both the lack of a sales market and the absence of a premium for green hydrogen as an obstacle.23 per cent of the company representatives sur-veyed see a problem in the high investment

„Investment costs are not the decisive factor in the realisation and operation of electrolysers. Far more important are the operating costs, and specifically the price of electricity – driven by the payment of levies and charges on the economic operation of electrolysers.“

Ilona Dickschas, Siemens Gas and Power

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5 18 234113 5

costs for electrolysis facilities, and the lack of ac-ceptance and education among the population and businesses. Furthermore, they consider the small range of fuel cell vehicles by German vehic-le manufacturers to be a considerable barrier to the increased use of hydrogen technology in Ger-many. With respect to this latter point, the per-spective of Jens Conrad who heads up the Depart-

ment for Alternative Drives at Regionalverkehr Köln GmbH is particularly interesting. It is noticeable that the interviewees scarcely consider the availability of hydrogen technologies and other technological aspects to be a major challenge. Several compa-nies mention only expected scaling effects in the production of technologies, in connection with high investment costs.

1 – Ineffective 2 – Not very effective 3 – Neither effective nor ineffective

4 – Effective 5 – Very effective

Reduction of electricity procurement costs for electrolysers

5 5 77

Investment security with a political roadmap

5 18 689

Gradually increasing CO2

pricing

29 389

Government investment programme

27329

Regulatory measures

all figures as a %

13

24

32

”From our perspective, German industry is not cur-rently presenting a good picture of the range of fuel cell electric buses. We would of course love to see a German manufacturer of fuel cell electric buses. It would be nice if the taxes paid to promote purchase stayed within German industry.“

Jens Conrad, Department for Alternative Drives, Regionalverkehr Köln GmbH

Potential solutions for establishing hydrogen technologies

Fig. 15

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Promotion measures To promote the use of hydrogen technologies in Germany, various possible solutions are under discussion among expert circles. Prior to the start of the round of interview, current publications were analysed, and five measures selected which are particularly frequently requested in a similar form.

1. The creation of investment security through a political roadmap for the topic of hydrogen.

2. The reduction of electricity procurement costs for electrolysers through exemptions from levies, taxes and grid fees.

3. The introduction of gradually increasing CO2 pricing of non-sustainable energy carriers.

4. The enforcement of regulatory measures. Exam-ples cited included a ban on internal combus-tion engines and a quota system for the feed-in of renewable gas.

5. The launch of a government investment pro-gramme to expand the H2 infrastructure and convert public fleets to fuel cell vehicles.

Fig. 15 provides an overview of the interviewees’ opinion of the measures. It is evident that the companies consider measures 1 and 2 to be the most effective. Well over half the respondents rate these two possible solutions as ”very effective”. Exemptions from levies, taxes and grid fees to reduce the electricity price to be paid received the highest approval, achieving an average score of 4.6 on the evaluation scale. Promoting hydrogen technologies by means of regulatory measures meets with the least approval. Fewer than half the company representatives surveyed considered this solution to be ”effective” or ”very effective”. The effectiveness of gradually increasing CO2 pricing and a government investment programme recei-ved mixed ratings from respondents.

Summary• Many companies surveyed rated the significance of hydrogen

technologies for the decarbonisation of their own activities as ”high” or ”very high”.

• For many companies, the increased use of hydrogen technologies offers opportunities, particularly in opening of new markets, and the import of renewable energies.

• High electricity costs and obstructive regulatory framework conditions pose the biggest challenges for the companies.

• The reduction of electricity procurement costs for electrolysers is crucial in establishing hydrogen technology.

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Industry —

— opinions.

First, it is noted that many of the respondents con-sider Germany to be fundamentally well positioned in the field of hydrogen technologies. 69 per cent of the companies surveyed are of the opinion that Germany is one of the leading nations by internatio-nal comparison. In the respect, the companies refer to the very well-developed filling station infrastruc-ture, the extensive expertise in the construction of electrolysis facilities, and the large number of players who are already interested in the topic of hydrogen.

Despite this good starting position, many companies view future developments with concern, and they fear that the German economy could its connection with other countries due to political neglect. In this context, the interviewees refer primarily to the Asian region. Arne Jacobsen of Vattenfall describes the current situation from the perspective of a company that is already purchasing hydrogen technologies: "With respect to the quality of the products, there’s cur-rently no question that we purchase our equipment

for hydrogen drive applications from European ma-nufacturers. But manufacturers from China and other Asian countries are catching up."

A total of 46 per cent of the company representatives express concern that Germany could lose its position as one of the leading nations in the area of hydrogen technology due to the obstacles described above. With respect to Germanys future energy supply, many of the companies surveyed assume that Germany will import hydrogen in the future. While most inter-viewees emphasise the great potential for hydrogen production in North Africa and the Arab region, some companies are urgently calling for hydrogen produc-tion and trade to be established initially within Euro-pe. In addition to making optimum use of the poten-tial within Europe for producing renewable energies, this could help to strengthen European integration.

Furthermore, developing a European supply chain could also strengthen acceptance among the

population for the integration of hydrogen in the energy system in the future. A further aspect in the context of an international hydrogen value chain is the opportunity, by using hydrogen, to reduce dependence on energy imports from a few countries. Whereas many fossil energy carriers traded globally currently originate from a small number of export countries, an international hyd-rogen market could see considerably more count-ries emerge as energy exporters. Many countries which today are largely detached from the flow of operations could establish their own value-added chains through hydrogen. This would facilitate li-beration from other counties.

Hydrogen technologies as a German export productSo, while Germany will in the future become an im-porter of green hydrogen from an economic point of view, the situation on the other side of the value chain is quite the opposite. 55 per cent of the company representatives surveyed point out that, under the right conditions, hydrogen technologies could in the future become one of the German economy’s most important export goods.

Expertise in the area of manufacturing electrolysis facilities is repeatedly emphasised. But German companies could also establish themselves as

Industry opinions at a glance ”With respect to the quality of the products, there’s

currently no question that we purchase our equipment for hydrogen applications from European manufacturers. But manufacturers from China and other Asian countries are catching up.“

Arne Jacobsen, Vattenfall

58

Industry opinions Industry opinions

59

exporters of high-quality products in terms of other components of the hydrogen infrastructure, such as compressors, hydrogen tanks or pipelines for example.

For the purpose of the survey, Marco Schmidt re-presents project developers Hydrogentle GmbH as Managing Director. So even if the company itself does not produce and market technologies, he concludes that the development and manufacture of hydrogen technologies represent an outstanding opportunity for Germany as a business location:

"Many of German’s key industries could benefit from hydrogen technologies. Hydrogen symbolises the future of Germany as a business location."

Some of the companies surveyed draw a compa-rison with the manufacture of batteries and photo-voltaic modules and warn against once again losing the connection with a technology with great poten-tial. While Asian companies have long since esta-blished themselves as world market leaders in the field of battery production, the German economy can still successfully position itself in a future mar-ket for hydrogen technologies.

Possible solutions As mentioned above, the companies rate reducing electricity procurement costs for electrolysers and creating investment security through a national hydrogen roadmap as the most effective measures. The overwhelming majority of the companies

surveyed basically consider these two measures to be crucial.

"If we invest in technologies of the future today, and not just in hydrogen production - the focus is not only on environmental compatibility and economic efficiency, but also on planning reliability. Newly built chemical plants generally operate for several decades, so we as a company need long-term investment security," says Jürgen Fuchs, Chairman of the board of BASF Schwarzheide GmbH.

This statement suggests that large potential indus-trial consumers will decide in favour of hydrogen

technologies in the medium-term only if the economic deployment of the technology is faci-litating through long-term investment security.

Furthermore, Thyssengas Managing Director Jörg Kamphaus makes it clear electrolysers must also be exempt from charges, levies and taxes on the electricity price paid:

"The high electricity costs associated with opera-ting electrolysers means it’s impossible to run them economically. Market and technology development cannot provide a quick solution to this problem. Political adjustments are necessary."

”Many of Germany’s key industries could benefit from hydrogen technologies. Hydrogen symbolises the future of Germany as a business location.“

Marco Schmidt, Managing Director of project developers Hydrogentle

”If we invest in technologies of the future today, and not just in hydrogen production - the focus is not only on environmental compatibility and economic efficiency, but also on planning reliability. Newly built chemical plants generally operate for several decades, so we as a company need long-term investment security.“

Jürgen Fuchs, Managing Director of BASF Schwarzheide GmbH

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It is notable that this also includes some companies who own business model is heavily dependent on fossil raw materials. This concerns mineral oil groups - suppliers whose electricity production is largely dependent on fossil energy carriers, and a few com-panies in the natural gas sector.

Here’s something else interesting: Companies in the mobility sector tend to be quite critical of CO2 pricing as a means of promoting hydrogen technologies:

around 60 per cent of the critical opinions (”neither effective nor ineffective” to ”not very effective”) come from companies operating in the mobility sector.

Those in favour of CO2 pricing also want a signifi-cantly higher CO2 price to be set than at present, however. This would be the only way to support the use of hydrogen technologies. Some companies specify effective entry-level prices of between 100 and 200 euro per tonne of CO2.

Furthermore, some companies point out that a re-duction in electricity procurement costs for electro-lysers will not in itself lead to a breakthrough in hy-drogen technologies. According to the companies, further incentive mechanisms on the consumer side are needed to ensure the emergence of a market for green hydrogen.

It became evident during the interviews that a dif-ferentiated view of the evaluation of regulatory policy measures is required. For example, many companies note that bans or mandatory quotas would be effective in promoting the use of hydrogen

technologies. Most respondents emphasise, however, that the transition to a sustainable energy system can function only if tolerated by society, and that this would be endangered by restrictive prohibitions. Marco Schmidt of Hydrogentle explains further:

"Regulatory measures in the sense of bans will not resonate with society. Citizens need to get excited by hydrogen technology. We need to explain that hydrogen is part of a positive future for Germany."

67 per cent of the companies surveyed see gradual-ly increasing CO2 pricing as effective or very effective.

”The high electricity costs associated with operating electrolysers means it’s impossible to run them economically. Market and technology development cannot provide a quick solution to this problem. Political adjustments are necessary.“

Jörg Kamphaus, Managing Director of Thyssengas

”Regulatory measures in the sense of bans will not resonate with society. Citizens need to get excited by hydrogen technology. We need to explain that hydrogen is part of a positive future for Germany.“

Marco Schmidt, Managing Director of project developers Hydrogentle

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possible. Any new hydrogen infrastructure should be built only where essential.

But it is not just the gas industry that build on proven technologies by using hydrogen. For exam-ple, Ferry Franz of Toyota Motor Europe explains that hydrogen use in the mobility sector can also be based on existing structures:

"Mobility won’t change as a result of hydrogen. In the context of hydrogen, it’s better to talk about a mobility transition rather than a drive transition."

A complete system shift is not necessary for the increased use of hydrogen in an energy system in which greenhouse gas emissions are reduced by 95 per cent. Rather, the gas industry’s position, and that of Toyota, are exemplary in demonstrating that existing structures can continue to be used, and even secured, by using hydrogen as an energy carrier.

Transformation of the energy system During the interviews, a few theories regarding the transformation of the energy system were confir-med. The stance adopted by the gas industry mentioned above seems of interest here. Dr. Timm Kehler statement is particularly clear on this. Dr. Timm Kehler is Managing Director of the Zukunft Erdgas association, which represents the interests of 130 players from various segments of the gas industry:

"The gas industry wants to play an active part in shaping the energy system towards climate targets. Using hydrogen will allow us to secure the long-term existence of our industry, both the trading

structures and the infrastructure, in a decarboni-sed society."

Other gas industry representatives say similar things. They make it clear that the full transition to hydro-gen requires many technological adjustments and can happen only in stages. For example, the com-pressors used in the gas network and consumer end devices must be converted to hydrogen use. Nevertheless, the companies are expressly in favour of converting the existing gas infrastructure and believe the technological challenges can be resol-ved. From an economic point of view too, it is highly expedient to use existing infrastructure wherever

”The gas industry wants to play an active part in shaping the energy system towards climate targets. Using hydrogen will allow us to secure the long-term existence of our industry, both the trading structures and the infrastructure, in a decarbonised society.“

Dr. Timm Kehler, Managing Director of the Zukunft Erdgas association

”Mobility won’t change as a result of hydrogen. In the context of hydrogen, it’s better to talk about a mobility transition rather than a drive transition.“

Ferry Franz, Toyota Motor Europe

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Summary• Germany is in danger of forfeiting its leading position by international

comparison in the area of hydrogen technologies.

• The German economy sees the potential in hydrogen technologies of exporting the corresponding technologies This would be an excellent opportunity for Germany as a business location.

• Hydrogen as a sustainable energy carrier will lead to changes in global trade. The company representatives see Germany as an import nation for green hydrogen in the future.

• In addition to a reduction in electricity procurement costs and a political roadmap, most of the companies surveyed are also in favour of rising CO2 prices.

• So as not to endanger acceptance of hydrogen technologies, regula-tory measures should be implemented only with great caution. Quota rules are preferable to bans in this respect.

• The use of sustainable hydrogen may help to secure the existence of some sectors in a fossil-free future.

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Industry opinions

Inter national

case —

— studies.

Transforming the energy economy by integrating hydrogen as an energy carrier will have an inter-national impact on all countries that are committed to CO2 reduction or that want to be relevant in the emerging global hydrogen trade. The respective strategy of each country has a significant influence on the positioning of national companies in the international value chain. This applies to exporters of fossil energy carriers whose business model will be under threat in the future. It also applies to energy importers who must adjust their infrastruc-ture to a new energy carrier.

The decarbonisation of many different energy ap-plications by using hydrogen calls for new techno-logies that can replace conventional solutions. Several major economic nations are investing large amount and research, and in the construction of hydrogen infrastructure. These include, for example, Japan, South Korea, Canada and Germany. Part-nerships between politics and industry, international supply agreements, and the development of natio-nal and international roadmaps play a role in this. These are intertwining measures designed to deve-

lop a national market as soon as possible and adopts a globally leading position.The strategies selected can take very different forms. The differences in the choice of strategy are based primarily on the country’s economic starting posi-tion and the resources available locally. These efforts to achieve the fastest possible implemented are also reflected in the international cooperation on research in the area of hydrogen technologies. Within the framework of the global ”Mission Innovation” initia-tive, a cooperation of 12 countries and the European Union facilitates an easier entry for private compa-nies into the implementation of green hydrogen solutions16. All the countries have in common that they do not yet have the infrastructure or techno-logy to produce and use hydrogen on an industrial scale; rather, they are right at the initial phase of integrating hydrogen in the energy system.

In the following, we look more closely at the current activities in the field of hydrogen in the USA (California), China, Japan and Europe, which particularly distinguish themselves in an inter-national comparison.

The SORA fuel cell bus by Toyota: by as soon as 2020, 100 of these buses will be in use at the Olympic Games in Tokyo

Pioneers in hydrogen

70

International case studies International case studies

71

Building on the ten-year plan targetsIn 2016, China developed ”Made in China 2025” as the roadmap for fuel cell cars; decisively de-fines the framework conditions for hydrogen in this country34,35,36. In practice, the focus here is initially on developing and introducing buses and small trucks powered by hydrogen. The filling station infrastructure has also been geared pre-cisely to these segments. This means that the vehicles used in the fleet always travel in the vici-nity of a central filling station and are refuelled at other locations only rarely. Consequently, China currently has no distributed network of filling sta-tions worth speaking of.

The drivers behind the introduction of these fleets are the city councils that want to develop into centres for hydrogen technology. While a wide choice of cars with fuel cell drives ready for series production is not expected to be available for a few years yet, Chinese utility vehicle manufactu-rers are already preparing for series production. Shanghai Edrive, for example, is planning to

expand its production capacity from 3,000 uti-lity vehicles in 2020 to 30,000 vehicles within five years37. This pioneering technological spirit will be supported by a change in the policy to

If we look not at production, but rather at the number of fuel cell cars registered, California is the international frontrunner: of the approxima-tely 8000 FC cars in the USA, there are more than 6000 vehicles on the road in California alone28, 29. The state thus clearly occupies special role within the USA30, 31. The concentration of the population in large urban centres creates good conditions for supplying individual mobility with hydrogen. This enables most of the major hubs to be covered with a small number of hydrogen filling stations

- 41 in 2019.

Complete emissions reduction in transport is subject to the use of emissions-free hydrogen. In California, a 33 per cent proportion of green hy-drogen at filling stations is currently a legal requi-rement30. The quota system is intended to drive the expansion of generation capacity and thus support the further development of the associa-ted technologies. If hydrogen mobility is to be 100 per cent renewable in the future, however, the proportion of green hydrogen needs to be signi-

ficantly increased as soon as possible. The so-cal-led ”Credit System” is being used to introduce emissions-free mobility in California. This makes it mandatory for vehicle manufacturers and im-porters to produce a minimum volume of emis-sions-free vehicles32.

In the field of transport, the American manufac-turer Nikola has attracted attention: it claims to have received more than 13,000 advance orders for a fuel cell truck. Ambitious plans to establish more than 700 of its own hydrogen filling stations in cooperation with NEL ASA are turning the con-cept into a real alternative to current trucks. Whet-her the concept proves itself remains to be seen: series production is not due to begin until 202233.

USA (California) China

Market leader ambitionsWhile China is the market leader in having produced 4,000 fuel cell buses and trucks, there are currently virtually no fuel cell cars on the market. That’s set to change: there should be1 million fuel cell vehicles in the roads by 2030. Incentives include a central government subsidy of up to €25,300 per car up until the start of 2021.At the same time, the Credit System creates incentives for manufacturers to include more fuel cell cars in their product range.

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promote vehicles with alternative drive concepts38. From 2021, however, the generous central govern-ment subsidies for electrically powered vehicles are expected to come to an end. This will prevent manufacturers from becoming dependent on subsidies alone, while neglecting innovation.

However, it is unlikely to that China - in accordan-ce with its strategy to become the technological market leader34, 35, 36, - will then immediately cancel all subsidies without replacing them. Instead, the-re will probably be gradual reductions.

Japan, an island that covers more than 94 per cent of its primary energy needs with imports, will in the future focus heavily on sustainable energy supply with imported green hydrogen17,18. The initial focus of application is on hydrogen-based individual mobility, stationary fuel cells and, in the long term, hydrogen power plants. Japan has firmly anchored the targets for the respective sectors in its national H2 strategy18; the HESC pilot project, in cooperation with Australia, is intended to demonstrate the fea-sibility of a fully integrated supply chain for the provision of hydrogen from 202019.

If the project is successful, roll-out on a commercial scale is planned by 2030. Transport is planned to be by ship, such as e.g. the transport ship for liquid hydrogen developed by Kawasaki. Australia’s great potential in terms of renewable energies, distinct infrastructure for gas export, and the country’s existing and efficient industrial ports, form an ideal basis for hydrogen exports, and the possibility of replacing the export of fossil fuels with renewable energy sources in the long-term20. One step towards

the future is the start of construction of a hydrogen liquefaction and loading terminal at the Port of Hastings in Victoria21. In Japan, clear framework conditions form the basis for extensive investment large-scale projects. These will be delivered in

close cooperation between the Ministry of the Economy, Trade and Industry and the Japanese companies, in line with the hydrogen strategy that has now been put in place18. This has already enabled major progress to be made in terms of implementation: more than 250,000 fuel cells with internal natural gas reforming from Japanese manufacturers have now been installed for com-bined heat and power generation in households as part of the ENE-FARM programme23.

In the automotive industry, the Japanese manu-facturer Toyota is the global market leader in fuel cell cars, having produced over 10,000 of its Mirai model cars25. In Japan itself, there are approxima-tely 3,400 fuel cell cars on the roads. There are big plans: The second generation of the Mirai will be also be launched in 2020, and two new factory buildings will commence series production and increase production capacity to 30,000 vehicles per annum25. Declarations like this make the im-portance of striving for a leading role in the inter-national fuel cells market clear.

Japan

Special global roleIn terms of energy supply, Japan occupies a special role globally: 94 per cent of the county’s primary energy needs are met through imports. To achieve low-emission energy supply, Japan is focusing on hydrogen imports from countries such as Australia and Norway. The government is thus setting ambitious targets for 2030:the plan is to supply 300,000 tonnes of emissions-free hydrogen annually and allow 900,000 FC cars and 1,200 FC buses to fill up on hydrogen at up to 900 filling stations for less than €3/kg.

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The EU Commission has recognised the potential of renewable hydrogen and launched a public-pri-vate partnership known as the ”Fuel Cells and Hydrogen Joint Undertaking” (FCH JU) to promo-te hydrogen technology. This initiative bundles more than 250 projects within the EU, and a support budget of 1.33 billion euro for the period from 2014 to 202043. Subsequently, the continuation of FCH 2 JU will underpin the readiness of hydrogen tech-nologies for large-scale market introduction44.

One approach is the so-called ”Hydrogen Valle-ys”which are to be created in several European regions. These are local and interregional hydrogen networks, which are strongly integrated, and in the best case represent the complete process of pro-duction, storage, transport and end user. They enable the entire system to be examined and generate extensive experience in real operation45. To make efficient use of the knowledge gained, the FCH JU is establishing an information platform to facilitate the exchange of experience between

”Hydrogen Valley” projects46. One of the most

ambitious ”Hydrogen Valley” projects is in the north of the Netherlands. The ”HEAVENN” project inclu-des public-private investment by the FCH JU of approximately 90 million euro47. In the long-term, European efforts will be further intensified and, to this end, the development of hydrogen techno-logy has recently been declared a Project of Com-mon European Interest. In this context, a further 60 billion euro has been earmarked for investment in at least 11 large-scale projects over the next five to ten years48, 49.

In addition to concrete technology applications, the FCH JU is focusing on legislation. As part of the

”HyLaw” project for example, relevant laws and legal obstacles to the successful implementation of hydrogen applications are being identified. To overcome existing obstacles, a database of EU member states laws, along with recommendations, is being developed50.

A further step which will benefit electrolyser ma-nufacturers is the introduction of a clear certifica-

te of origin for green hydrogen. Such a system is the only way to offer users the opportunity to prove that they have reduced their emissions by using hydrogen from sustainable energy sources, and that they thus comply with legal requirements. The ”CertifHy” project sets Europe on a very good path in this respect. Following a pilot at the begin-ning of 2019, the results of this will now be integ-rated into developing a definitive and Europe-wi-de certification system51.

Apart from the Netherlands, France, the Scandi-navian countries, and Germany in particular, few countries in Europe are concerned with promoting sustainable hydrogen technology to a similar extent.

German industry is traditionally one of the biggest hydrogen consumers in the EU and has long shown interest in producing and using green hydrogen. This is also reflected in the investment activities on the part of industry and politics in Germany: over 50 per cent of the planned investment volume of around 1.8 billion euro for 42 European projects by

the FCH 2 JU will come from Germany53. While this is good news for the development of hydrogen technology, the final step towards a commercial and profitable value-added chain for hydrogen has yet to be taken, even in Germany.

Europe

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With respect to the construction of production and handling facilities is concerned, German manufac-turers are benefiting from the large number of pilot projects and many filling stations in Germany and abroad. This is allowing them to gain further expe-rience and achieve cost reductions through higher quantities. This is also reflected in the position in the global market: The Federal Republic has a 20 per cent market share in electrolysis and metha-nation plant engineering75. With established ma-nufacturers and their experience in plant enginee-ring such as Linde and Siemens, Germany is able to remain a major source of expertise. On the proviso that: the rapid pace of development is maintained.

Essential for German companies is the translation of research results into commercial applications and the leap to industrial scale facilities. In particular, the EU’s efforts to establish international standards are as beneficial as the planned certification system for green hydrogen in this respect76,77. In the longer term, demand for certification may lead to demand

for facilities in higher capacity classes - because consumers have the opportunity to reduce their emissions by using green hydrogen.

Around 19 billion standard cubic meters of hydro-gen are produced annually in Germany. The point of production and consumption are often identical; only 17 per cent is freely traded54. The hydrogen is produced primarily as a by-product of the petro-chemical industry, or by means of natural gas re-formation55. Only around 7 per cent is produced using chlorine-alkali electrolysis processes.

For a transition to broader zero emissions hydrogen use, the installed electrolysis capacity will need to be expanded from currently less than 30 MW, to 62 GW6 in the longer-term56,57. This expansion goes together with the development of electrolysers in higher performance classes in Germany. These are already capable of making dynamically mobile facilities in the double-digit megawatt range commercially available. One example is the Siemens Silyzer 300 which the company claims can deliver

340 kg of hydrogen per hour with an output of 17.5 MW58. Scaling of the facilities to higher capacities leads to significantly lower, specific investment costs and thus also to a reduction in the cost of green hydrogen59.

Production centres will emerge in Germany at two points in particular: on the one had where there is high potential available in terms of renewable energies, and on the other hand where seasonal fluctuations in the supply of electricity need to be compensated60. In north Germany, the ”Corners-tones of a North German Hydrogen Strategy” have already been developed. In the long term, surplus electricity from wind energy can be used directly on site for the electrolysis of hydrogen, and the energy thus stored chemically60. As a result, hydro-gen electrolysis may lead to wider use of renewa-ble energies and make a significant contribution to relieving the burden on the power grids.

In terms of using hydrogen as a chemical indust-rial gas, steel producers in Germany, for example, have already implemented large-scale pilot plants to reduce the emissions from steel production by using green hydrogen62. Chemical companies, which until now have needed hydrogen produced from fossil fuels, e.g. as the basis for ammonia production,

could in future cover their high demand with zero emissions by using their own larger-scale electro-lysers. One barrier to this is the strong price sen-sitivity in this sector. This is because currently, the use of hydrogen from natural gas reformation, or as a by-product in refineries, is still cheaper by a factor of three to six. The reasons behind this are the low raw material and emission costs, as well as high taxes and levies on electrolysis electricity consumption63.

In a very few cases, an electrolyser is available directly on site to supply the hydrogen, e.g. at a Shell filling station in Hamburg. For reasons of space and cost, trucks are more often used to supply filling stations with liquid hydrogen or pressure tanks. Current technology already allows costs for this form of hydrogen transport to be reduced. This requires technical regulations at the European level to be adjusted to today’s needs and possibi-lities69. In the long-term, pipelines will represent a possible alternative or supplement to the transport of hydrogen by truck. Pure hydrogen pipelines have so far been built in Germany mainly for industrial purposes, e.g. the two largest networks in the Ruhr area and at the Leuna chemical site. A new build may be economically viable in the long term if high volumes of volume are transported.

Germany as hydrogen technology exporter

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Germany by international comparison

The international comparison of expansion targets for fuel cell vehicles in Fig. 16 shows the ambitious targets set by South Korea, California, China and Japan. In contrast, Germany has so far adopted a supply-oriented approach, which envisages a strong expansion of the filling station infrastruc-ture. This should increase the attractiveness of fuel cell cars and represent a real alternative to other vehicle types.

Great progress has been made in establishing the hydrogen filling station infrastructure over the past five years. The 81 filling stations opened so far already ensure hydrogen-based mobility along the main transport axes, and secure Germany’s top position in the comparison of EU countries64.

Depending on how the volume of fuel cell cars in-creases, the number should rise to 400 by 2025 - one of the most ambitious targets worldwide65. Cur-rently, however, the existing filling stations are scarcely used because of the low number of ve-hicles. Of the leading countries in terms of hydro-gen filling station infrastructure, only Great Britain has fewer vehicles per filling station than Germany (cf. Fig. 17).

Whereas manufacturers in Japan and South Korea have already launched a 2nd generation of fuel cell cars66,67, only one model is available from German car manufacturers - the Daimler GLC F-Cell68. In the utility vehicles segment too, German manu-facturer are scarcely represented:

0,25 million

0,5 million

0,75 million

1 million

1,25 million

1,5 million

1,75 million

1000

2000

3000

4000

5000

6000

South Korea

South Korea

USA

USA

China

China

Japan

Japan

Germany

Germany

2019

2030

No

offic

ial t

arg

et

Fig. 16Current figures and official targets for fuel cell vehicle numbers according to national roadmap31,52

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20 20

60 60

100 100

120 120

40 40

80 80

0 0

Filli

ng s

tati

ons

Vehicles per filling

station

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a

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naUK

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n

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man

y

Filling stations Cars/filing stations

For example, mass produced fuel cell buses must be ordered from the Belgian manufacturer Van Hool, or from the Polish Solaris group.

The technical requirements for both the gas net-work and for customers are currently being revie-wed. Because depending on the end application, the maximum possible proportion of hydrogen in the gas mixture today varies between two and 20 percent70. The assumption is that, with minor changes in technology, it will in the future be possible to feed in a hydrogen proportion of up to ten per cent into the pipelines without any obstacles. German gas network operators are very open to a higher hydrogen content and are also conducting their own research projects to identi-fy the technically feasible upper limit70,71. Compa-red with the rest of Europe, Germany is aiming to set the limits relatively high. Only Great Britain, with ”HyDeploy”, is aiming for a higher proportion72. The British H21 project is currently exploring the

technical possibilities of expanding the use of a natural gas network to operation with 100 per cent hydrogen73. A high proportion of hydrogen in the gas network is nothing new here: by the mid-20th century, it was being used to transport town gas with a 50 per cent hydrogen content74.

Fig. 18 shows the focus of industry and political strategies in the five most relevant countries and regions (from left to right: Germany, Japan, South Korea, China and USA/California). Regarding the production of electrolysers, the assessment is based on the number of companies in this field of activity, the performance class of the avai-lable products and the scope of the projects implemented by those companies. The assess-ment of the zero emissions production of hyd-rogen is based on the exist ing faci l i t ies to produce electricity from renewable sources, as well as the existing electrolysers to produce green hydrogen.

Fig. 17Currently completed hydrogen filling stations and the ratio of FC vehicles to filling stations31

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Germany Japan Korea China USA (California)

current situation possible development in accordance with specific targets

Summary• USA (California), China and Japan are actively driving forward the

development of hydrogen technology in their own countries.

• Germany is leading Europe in terms of green hydrogen activities and projects

• With respect to filling station infrastructure, Germany is among the highest ranking in a global comparison; however, the Federal Republic is among the last in terms of vehicles.

• Germany leads in the provision of a national network of hydrogen filling stations but is not making use of this network.

• A considerably higher proportion of hydrogen in the natural gas network than is used today is possible.

• German producers have good opportunities to take a leading role internationally.

• Germany already has a 20 per cent market share in electrolysis and methanation plant engineering.

Hydrogen CHP

FCEV

FCEV production

Green H2 production

H2 filling stations infrastructure

Manufacture of electrolysers

Fig. 18Relative comparison of the endeavours of leading countries in various areas of hydrogen technology

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dix.

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Appendix Appendix

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Published by umlaut energy GmbH Glockengießerwall 26 20095 Hamburg Germany

Authors Felix Schimek [email protected]

Thomas Nauhauser [email protected]

Dr. Martin Robinius [email protected]

Prof. Dr. Detlef Stolten [email protected]

Dr. Christian Hille [email protected]

Published on 18.02.2020

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