What’s happening? In Germany’s industrial heartland, ThyssenKrupp Nucera has developed electrolysers that produce hydrogen using electricity to split water, offering a potential solution to reduce greenhouse gas emissions from heavy industries like steel-making. Backed by €700m ($746m) of German government subsidies, Nucera’s technology has attracted orders from major energy companies and governments pursuing green hydrogen projects. While the high costs of electrolysers and renewable electricity remain a challenge, government incentives and the need for industrial decarbonisation are driving adoption. (The New York Times)

Why does this matter? One of the greatest hopes for green hydrogen is that it can one day decarbonise heavy industry – a step ThyssenKrupp Nucera’s new technology potentially brings one step closer. The EU’s green hydrogen sector is in desperate need of a catalyst if it is to achieve its target of reaching 42% of total hydrogen consumption by 2030. Grey hydrogen, derived mainly from natural gas, represents 99% of total hydrogen consumption in the bloc and is far from the clean, carbon-free energy source the EU craves.

Green goals – The EU hopes to produce 10 million tonnes of green hydrogen – produced via electrolysis using renewable electricity – and import 10 million tonnes by 2030. Since 2020, the EU has adopted the European Hydrogen Strategy, which outlines action points for boosting investment, demand, and production of green hydrogen. Globally, green hydrogen accounts for just 0.7% of total hydrogen demand, according to the International Energy Agency. In February, Germany earmarked €3.5bn of public funds from its Climate and Transformation Fund between 2027 and 2036 to procure green hydrogen.

Underdeveloped infrastructure – Hydrogen infrastructure, including transport and storage technology, is still maturing, creating price fluctuations and supply delays, especially given Germany is expected to import an estimated 70% of its green hydrogen supply rather than produce it domestically. Several infrastructural projects have already faced delays, including the BarMar hydrogen pipeline. The project aims to link Spanish electrolysers to German industrial zones via a pipeline along the Mediterranean coast between Barcelona and Marseille. Official communications claim the project will be operational in 2030 with a transit capacity of 2 million tonnes of hydrogen per year.  

However, documents from the French environmental planning department are less optimistic, stating that “By 2030 [there will be] no infrastructure for a decarbonised H2 import strategy” in Europe, indicative of the widespread belief that the project is in limbo. BarMar is the successor to the controversial and ill-fated MidCat pipeline, which was opposed by the French government, citing economic and ecological concerns as it passed through the Pyrenees mountains.  

Future projects – As a result of these uncertainties, Germany has turned to Algeria for support in producing green hydrogen and transporting it to mainland Europe. Current pipelines linking North Africa with Europe transport natural gas, but a project spearheaded by Italy known as SoutH2 or “Southern Hydrogen Corridor” could see 4 million tonnes of hydrogen eventually flow into Europe – 40% of Europe’s 2030 target.  

Alongside the SoutH2 project, the EU announced it would distribute €6.9bn of state aid to Germany and six other member states to support the development of their hydrogen infrastructure networks. The programme will fund 3.2 GW of large-scale electrolysers capable of producing renewable hydrogen and 2,700 km of hydrogen transmission and distribution pipelines.  

International cooperation – The UK and Germany also signed an agreement in September 2023 to help accelerate the development of an international hydrogen industry. The fledgling hydrogen infrastructure system proposed by European governments presents a market opportunity to investors operating in the hydrogen space as appetite to develop the industry is strong in Europe.

Green hydrogen hopes remain high but the German and wider European market remain hamstrung by high costs and infrastructural challenges. Germany is one of the best-positioned economies for widespread green hydrogen adoption, so its journey could be a playbook for other economies to follow if successful or a warning that the obstacles towards widespread green hydrogen adoption are simply too great.