Hydrogen import strategy - market ramp-up and import requirements

We are taking the publication of the hydrogen import strategy as an opportunity to highlight the import strategy, current challenges in the transport of hydrogen, the expected origin of hydrogen imports and, finally, the recently published innovations from the TransHyDE research and development programme in a four-part series of articles.

This first article deals with the expected increase in hydrogen import demand as well as the financial and regulatory incentives with which the former Federal Government wants to achieve the ramp-up of the hydrogen market.

The hydrogen import strategy

In the hydrogen import strategy developed under the leadership of the then Federal Ministry for Economic Affairs and Climate Protection (BMWK), now the Federal Ministry for Economic Affairs and Energy (BMWE), which emerged from the update of the National Hydrogen Strategy 2023 (NWS 23), the Federal Government explained how the forecast import demand could be met. The aim of the hydrogen import strategy was and is to ensure a resilient supply of green hydrogen and its derivatives (for the colour theory, see here). The desired resilient hydrogen supply should be stable, secure, diversified and sustainable. According to the coalition agreement, the new Federal Government also wants to achieve this by expanding the (Europe-wide) hydrogen (nuclear) network, among other things.

Strong increase in hydrogen demand expected

The traffic light coalition assumed a sharp increase in the import demand for hydrogen and hydrogen derivatives: A demand of 95-130 TWh of hydrogen including hydrogen derivatives was expected by 2030. The estimated import share was 45 - 90 TWh - i.e. 50 - 70 %. In addition, the Federal Government at the time planned to add 10 GW of electrolysis capacity nationally. The new federal government would like to facilitate this expansion on a more widespread and decentralised basis. The traffic light coalition assumed that demand would continue to rise to 360-500 TWh for hydrogen and a further 200 TWh for hydrogen derivatives by 2045.

The expected demand is currently still based on very uncertain forecasts, but is expected to arise primarily in the following sectors:

• Steel industry
• Production of chemical base materials
• petrochemicals
• Mobility and logistics
• Power plant sector
• Heat generation

Market ramp-up: strengthening supply and demand

Various political, legal and economic measures are being taken at both European and national level to promote a rapid market ramp-up of the hydrogen economy.

• On the one hand, the demand for hydrogen on the German market is to be strengthened through financial incentives and practicable and reliable framework conditions, and at the same time the supply of hydrogen on the international market is to be expanded.
• On the other hand, sufficient low-cost hydrogen should be available on the supply side in Germany, for which "the full range of foreign trade instruments" should be utilised.

1. Financial support

The financial support instruments intended to increase supply and demand include

• the already expanded H2Global programme (we reported); H2Global is intended to create security of supply and promote the linking of international supply with demand in Germany
• the Climate Protection Contracts funding programme, which supports industrial companies in setting up and operating climate-friendly production facilities;
• the federal funding programme for industry and climate protection , which has been promoting investments in decarbonisation and the storage and use of CO2 , particularly in small and medium-sized enterprises, from April 2024 to 2030
• the EU Innovation Fund, which the EU uses to promote hydrogen production via auctions organised by the European Hydrogen Bank (details here)
• increased funds for green hydrogen at the European Investment Bank;
• KfW's PtX Development Fund and other co-operations between the public and private sectors; and
• the promotion of hydrogen projects from the four IPCEI waves (Hy2Tech, Hy2use, Hy2Infra and Hy2Move), which are intended to promote the hydrogen ramp-up in Europe along the entire value chain.

The new Federal Government also wants to promote research and development in the field of hydrogen technology, is endeavouring to set up a hydrogen refuelling station network and is initiating the procurement of hydrogen vehicles. In particular, the Federal Ministry of Transport (BMV) is supporting the hydrogen refuelling infrastructure via the National Innovation Programme for Hydrogen and Fuel Cell Technology (NIP).

​​​​​​​​​​​​​​2. Legal developments

The EU in particular has created regulatory incentives, not only by adapting the EU emissions trading system, but also through the RED III Directive and its implementation, as well as the ReFuelEU Aviation and ReFuelEU Maritime initiatives (we reported). In addition, the CO2border adjustment mechanism CBAM protects the price expectations of European producers of green hydrogen from cheaper, grey hydrogen imports.

Back in July 2024, the traffic light coalition agreed on a Power Plant Safety Act, which has already been coordinated with the European Commission. The aim is to drive forward the decarbonisation of power plants. The framework conditions for the tendering of new power plant capacities and long-term storage facilities are also to be created. The gas-fired power plants to be put out to tender on this basis are to be H2-ready. The new federal government can build on this draft to achieve its goals.

Conclusion

The agreement on a hydrogen import strategy is a major step in the development of the German hydrogen market. The driving forces were and are the demand for (green) hydrogen, the industry's willingness to transform and the legal developments at EU level.

A wide range of measures have been and are being taken at national level to enable and promote the ramp-up of the hydrogen market. However, there are still open questions and challenges - particularly with regard to the origin of hydrogen. As part of the hydrogen import strategy, the sourcing of hydrogen from other countries in particular is being scrutinised. In our next article in the series, we will therefore look at the likely origin of hydrogen imports.

The EU/COMP team at Chatham Partners specialises in complex issues and procedures in connection with hydrogen projects and is happy to advise you on their planning and implementation, in particular in connection with procurement and planning procedures as well as funding opportunities.

We would like to thank Flora Bantelmann, Louica Unger and Christoph Ludwig for their valuable support in the preparation of this article.