Market insights: Hydrogen holds significant value creation potential for the economy

Germany is strongly committed to hydrogen which is reinforced with the introduction of its “Nationale Wasserstoffstrategie” (National Hydrogen Strategy or NWS) in late 2020 as well as its financial support for the latest hydrogen lead projects (“Leitprojekte”) in the beginning of 2021. The aim of the German government is to establish coherent value chains through national and international cooperation and to support a rapid market ramp-up for green hydrogen. Moreover, Germany tries to play along at the forefront of hydrogen.

The NWS outlines necessary steps in a concreate action plan to boost the smallest molecule. Measures are delineated for different fields of action (“Handlungsfelder”) that comprise 38 measures. Fields of action are:

    1. production of hydrogen,
    2. use of hydrogen (transport, industry, heat),
    3. infrastructure/supply,
    4. research, education, and innovation,
    5. European need for action and
    6. and international hydrogen market.

For instance, within the field of production of hydrogen, offshore wind energy is recognized as an attractive technology for the generation of renewable electricity, which can be used for the production of green hydrogen. The framework conditions are being further developed, including increased designation of establishment areas.

The hydrogen market has once again gained momentum not only in Germany, but on an international level in recent years. Further companies are in the process of expanding their activities in one or even several stages of the hydrogen value chain, which ranges from:

(v1) generation of hydrogen, (v2) storage, (v3) infrastructure and transport, (v4) utilization and application, (v5) standardization and quality management to (v6) higher-level technologies (e.g., safety technology).

Companies already active in the gas sector such as Shell have positioned themselves on the market quite early on to develop and further expand their hydrogen related activities. Shell, for instance, aims to become the leading supplier of green hydrogen for the industrial and transportation sectors in Germany (v1). Therefore, Shell is building an electrolyser REFHYNE in the Rhineland region. With 1,300 tonnes of hydrogen per year using renewable energy it will be the world’s largest PEM hydrogen electrolyser. The produced hydrogen will be used to explore applications within industry, power generation, building heating, and transportation.

In addition to those already established projects, new ones are emerging on a weekly basis. The German government is boosting innovation by launching various flagship hydrogen projects. The Federal Ministry of Education of Research supports three projects with approximately 700 million euros in funding and bring together more than 200 partners that develop the hydrogen technologies of the future. One of the projects is H2Mare. The project is developing ways to produce hydrogen and hydrogen downstream products using off-grid wind turbines directly at sea to minimize the cost of hydrogen production (v1). The H2Mare initiative under the consortium leadership of Siemens Energy consists of several sub-projects involving more than 30 partners from industry, institutes, and science.

Another example for an innovative hydrogen project is H2Accelerate (H2A). H2A was established in December 2020 and focuses on the utilization and application of hydrogen (v4). The objective is to

create the conditions for a mass market introduction of hydrogen trucks in Europe. However, such projects are carried out in close collaboration, which has the advantage of building synergies and reducing risks for everyone involved. The parties involved in the H2A project are Daimler Truck AG, the Volvo Group and Iveco, as well as oil companies e.g. OMV. In a first phase of the project participants will work together to seek public support in the form of funding for early pre-commercial activities. In parallel, participants will interact with policymakers and regulators to foster a suitable policy environment.

It currently seems that there is no alternative way around cross-sector or cross industry cooperation if you want to lead the project to success, exploit synergies, or simply minimize risks of hydrogen projects / undertakings. Nevertheless, the success of these collaborations depends to a large extent on its business case and operational model. Key questions are: What does the funding look like or how was the shareholder agreement or special purpose vehicle set up?

After all, it remains exciting how the market will continue to develop, as further governmental incentives are in the starting blocks (such as the amendments of the EEG in Germany) and valuable experience is gained.