Germany Faces Potentially Highest Hydrogen Prices Worldwide, Study Reveals

The demand for green hydrogen in Germany is projected to increase significantly; however, a recent study by the Fraunhofer Institute for System and Innovation Research (ISI) indicates that domestic production capacity may fall short. Despite ambitious government plans to establish ten gigawatts (GW) of electrolysis capacity by 2030--expected to cover approximately 30 to 50 percent of the national hydrogen requirement--the current output stands at just over 0.1 GW.

According to the findings, Germany might face some of the highest hydrogen prices globally due to a combination of high demand and limited production capacity. The study, part of a collaborative effort involving nine research institutes, aims to assess the future role of green hydrogen both in Germany and on a global scale. It investigates electricity prices, production potentials, investment needs, storage, and transportation of hydrogen.

The results suggest a looming deficit in hydrogen availability in Germany, despite an expected increase in demand. By the year 2050, the global hydrogen demand is estimated to reach between four and eleven percent, while Germany's demand could soar to 20 percent. This scenario indicates that Germany will likely need to rely on imports, with potential suppliers identified as the United Kingdom, France, Poland, and Spain.

Current projections estimate wholesale hydrogen prices in Germany could reach approximately 132 euros per megawatt-hour (MWh) by 2050, making it one of the most expensive markets, just slightly above the Netherlands at 139 euros per MWh. In contrast, countries like Spain and the UK are expected to offer significantly lower prices, around 74 euros and 70 euros per MWh, respectively. Furthermore, the cost of importing hydrogen is anticipated to add to Germany's expenses, with projections indicating a price range of 3.5 to 6.5 euros per kilogram by 2030, decreasing to between 2.5 and 4.5 euros per kilogram by 2050.

The study also highlights that with these high prices, Germany may struggle to fulfill the hydrogen needs of various sectors, including steel production, basic chemicals, aviation, shipping, and refineries. The report underscores a competitive disadvantage for Germany compared to the United States and Canada in hydrogen exports. Alternative exporting countries such as Morocco, the United Arab Emirates, Canada, Brazil, and Chile are highlighted, although transportation costs must be factored into the equation.

Experts from the study emphasize the urgent need for Germany to secure a stable and sustainable hydrogen supply to meet its anticipated future demand. They advocate for learning from past oversights and reducing future dependencies by fostering international collaborations with both importing and exporting nations.

In summary, while Germany is poised to become a major player in the green hydrogen market, it faces significant challenges related to production capacity and pricing. Strategic planning and international partnerships will be crucial for navigating these challenges effectively.