Hydrogen Value Chain Summary Report – German-Norwegian Energy Cooperation Joint Feasibility Study.
On behalf of the German and Norwegian Governments Deutsche Energie Agentur (dena) – the German Energy Agency – and Gassco have conducted a feasibility study on a hydrogen value chain from Norway to Germany.
The objective of the study has been to verify the viability of a German-Norwegian hydrogen value chain; hence the study framing covers the whole value chain, from potential hydrogen production in Norway to consumers in Germany. The work has been based on input from industry-driven projects at a scale large enough to establish a hydrogen value chain from Norway to Germany, starting in 2030. Most parts of the industry projects of the hydrogen value chain are still in the early stages of project development, but some of the German hydrogen consumers are more mature i.e. the steel industry.
Based on the definitions of the EU Commission1, this report refers to low-carbon hydrogen and renewable hydrogen instead of blue and green hydrogen. Low-carbon hydrogen in this report refers to hydrogen produced from natural gas with CCS with an ultra-low carbon intensity2 (below 1 kg CO2e/kg H2), and renewable hydrogen refers to hydrogen produced through the electrolysis of water powered by electricity from renewable sources.
The hydrogen framework in Germany differs in the various parts of the value chain with respect to the production pathways. While the infrastructure parts mostly make no difference between low-carbon and renewable hydrogen, the funding programs for both production and offtake do make a difference. When the two different types are explicitly named, renewable hydrogen is always favoured over low- carbon hydrogen.
The establishment of pipeline infrastructure for hydrogen transport from Norway to Germany must be based on a need to transport large quantities of hydrogen, in the order of millions of tonnes per year. Hydrogen production at this scale starting in 2030 could be realised based on low-carbon hydrogen, under the assumption that there is a basis for commercial commitment. This could in turn form a basis and include the transport capacity for the less mature renewable hydrogen production projects, that are at a scale relevant for pipeline transport. Currently, the most mature renewable hydrogen projects are small-scale and located in remote areas.
Pipeline transport of hydrogen from Norway to Germany is considered technically feasible within 2030. There is, however, a need for qualification of technology, such as compressors, valves and flow meters. This qualification can have an impact on the timeline as well as the cost. Additionally, there are other issues, such as clarification of regulatory model, technical and regulatory codes, standards and guidelines for cross-border offshore H2 pipelines, that need to be in place.
The integration of Norwegian hydrogen imports into the German hydrogen pipeline network could be possible without delays and without increased overall network costs. The German core network is planned to be regulated. The grid charges and further grid planning necessary to integrate increasing imports from Norway into the German grids are planned available by the end of 2023. Under the assumption that the grid fees will be set in a regulated manner and will be the same throughout Germany, there will be no disadvantages for the first consumers, regardless of their location.
The projected demand for hydrogen in Germany will exceed the domestic production volumes for hydrogen already before 2030. Import will be necessary in all German demand scenarios, both short- term and long-term. Even though these demand scenarios are associated with uncertainty, the
1 (Commission, u.d.)
2 (WBCSD, 2021)
customers in Germany assume that it will hardly be possible to cover the demand with renewable hydrogen at the beginning of the market ramp-up. As such, the purchase of low-carbon hydrogen is expected to be necessary and therefore desirable.
The major customers in Germany see low to zero technical hurdles in the use of hydrogen, but clear economic ones, which can be overcome by subsidies from the German state. Some of the large projects on the consumer side are awaiting final approval of IPCEI funding. Once this is approved, these projects are planning to make final investment decisions. Several projects will start by converting their plants first to natural gas and then to hydrogen, which reduces risks such as delayed grid connections. The cost difference between the current use of fossil alternatives and low-carbon and renewable hydrogen use can be closed by the climate protection contracts, which are based on the concept of Carbon Contracts for Difference (CCfD), for the projects that are eligible for governmental support. Both the CCfD funding program and the update of the National Hydrogen Strategy state the importance and possible use of low-carbon hydrogen. These measures combined would enable the consumer to enter into a commercial commitment with producers of low-carbon hydrogen. Therefore, it can be assumed that low-carbon hydrogen will initially cover an essential share of the German demand. The share of renewable hydrogen is expected to increase. Since the total demand will increase, low-carbon hydrogen will remain in the market as long as it is cost- competitive and has a low carbon intensity.
Germany will have a large storage requirement, especially to compensate for the fluctuation of electrolyser outputs. Storage projects are already under development and the first demonstration projects are being implemented. More projects are expected to be initiated as the demand for storage increases.
The results show that a German-Norwegian hydrogen value chain could be feasible based on the following main assumptions:
- A market with the willingness and ability to pay for increased energy costs is established.
- A framework enabling long-term contracts on low-carbon hydrogen is in place.
- The producers can ensure that the low-carbon hydrogen meets all criteria required in support programmes and crediting mechanisms.
- The landfall point in Germany can be implemented quickly and jointly.
- The storage capacities in Germany are sufficient to enable a stable system, with consistent and fluctuating production facilities feeding in.
- The technical uncertainties and development needs along the value chain can be solved and implemented as planned.
- Accelerated approval of the infrastructure can be made possible in all countries concerned, including the core grid in Germany.
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