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This is what it’s all about: the green game changer for the energy transition

Germany’s future energy supply is to be organised on the basis of renewables. Green hydrogen will play a key role in this. It can be produced from renewables and is extremely versatile. This makes it possible to reduce CO₂ emissions especially in areas where energy efficiency and a direct use of renewables cannot have a sufficient effect or are not possible at all – e.g. in the transport and industrial sectors. Carbon-free hydrogen can also be used to produce synthetic fuels designed to replace diesel for heavy-duty vehicles and shipping, and eKerosene for aviation. In other words, hydrogen can act as a link between the power, heat, and transport sectors (sector coupling).

Making further progress on international market ramp-up for green hydrogen

To facilitate the start of the green hydrogen industry and its international market ramp-up, the H2Global Foundation was established in June 2021. The Federal Government is providing a total of €900 million for this project.

Double-auctions model for reliable planning and viable prices

H2Global is underpinned by the notion of the ‘double-auctions model’. The idea behind this is to bridge the difference between the (high) prices at which hydrogen is currently being traded on the global market and the (lower) prices at which it can be sold on and be used in economically viable ways at regional level.

This is how it works: An international auction for the purchase of green hydrogen or its derivatives is held on behalf of a subsidiary of the H2Global Foundation. The best offer wins and gets a long-term contract. This means that suppliers have the certainty they need to plan on, which encourages them to invest more in their hydrogen production. At the same time, they are subject to the condition that they must sell the products they produce in their partner countries to Europe. The Federal Government is hoping that this model will result in large-scale hydrogen imports from regions that have a lot of sunshine and wind.

In a second auction, the hydrogen that has been delivered to EU countries in this way is to be auctioned on to the highest bidder. Having green hydrogen available at a competitive price will create stronger incentives for the industrial sector and others to invest in installations that can use this hydrogen. The H2Global funding mechanism is to bridge the gap between the prices asked and given on the supply and demand sides respectively.

Green light from the European Commission

The European Commission gave its approval for the funding project in December 2021 and declared it compatible with the state-aid rules. The first supply contracts are to be concluded in 2022 and the first deliveries of hydrogen-based fuels to Germany and Europe to take place in 2024.