German Economy Minister Reiche Downgrades Green Hydrogen Priorities

The German Federal Minister for Economic Affairs, Katherina Reiche, has indicated a significant shift in the country's approach to hydrogen production, particularly regarding green hydrogen. A new draft of the Hydrogen Acceleration Act, released recently, suggests that the production of hydrogen will no longer be predominantly reliant on renewable energy sources.

Reiche aims to expedite the development of infrastructure for the generation, storage, import, and transportation of hydrogen. This initiative is part of the government's broader strategy to simplify and digitize planning, approval, and procurement processes, which are essential to meet climate goals. However, the latest draft has notably relaxed previous requirements for green hydrogen, which was initially mandated to be produced mainly from renewable energy.

According to the draft, the primary goal is to ensure a reliable hydrogen supply. The new guidelines specify that while the production must be greenhouse gas neutral, the requirement for it to be primarily derived from renewable energy has been removed. Furthermore, the draft now establishes that the 'overriding public interest' will apply to all hydrogen production facilities, regardless of the energy source used, contrasting with earlier regulations that focused specifically on electrolyzers powered by at least 80% renewable energy by 2029.

This regulatory shift arrives amid significant challenges for the ambitious green hydrogen projects that were seen as critical to Germany's industrial transformation. Notably, ArcelorMittal, the world's second-largest steel manufacturer, has withdrawn from its green steel production projects in Bremen and Eisenhüttenstadt, citing high energy costs and insufficient government support as key reasons for its decision to forgo EUR1.3 billion in subsidies. Additionally, energy company Leag has canceled plans for an electrolyzer project in Saxony, further complicating the landscape for green hydrogen development.

Reiche's approach also indicates a departure from previous government strategies. Unlike her predecessor, Robert Habeck, who advocated for a mandatory conversion of backup gas power plants to hydrogen, Reiche has expressed a willingness to forego such mandates. The ruling coalition of CDU, CSU, and SPD emphasizes a pragmatic approach to building a hydrogen economy, suggesting that all types of hydrogen should be utilized during the transition, rather than exclusively focusing on green hydrogen.

Historically, the German government had positioned itself as a global leader in hydrogen technology, emphasizing the long-term sustainability of green hydrogen as the sole viable option. The initial focus was on the electrolysis process, which separates water into hydrogen and oxygen using electricity from renewable sources.

Despite earlier commitments, the government acknowledged that, at least temporarily, CO2-neutral hydrogen might also play a role in the energy transition. This form of hydrogen could potentially achieve net-zero emissions, provided that any carbon dioxide produced is captured and stored effectively. Different methods of hydrogen production, including blue and turquoise hydrogen, have emerged as alternatives, with blue hydrogen involving carbon capture and storage and turquoise hydrogen produced through the thermal decomposition of methane.