Domestic green hydrogen production offers huge economic potential for Germany – study

Producing large quantities of green hydrogen with renewables at home might be cheaper for Germany than betting on hydrogen imports, a joint study by the Wuppertal Institute for Climate, Environment and Energy and the German Economic Research Institute (DIW) has found. "It's not true that imported hydrogen is generally cheaper," the authors said, arguing that "actually achievable" power production and transport costs for partner countries can tilt the balance in favour of domestic production. If green hydrogen is produced in the country itself, this will also have positive effects on employment and economic growth, the researchers said. If the 2050 emissions reduction target were to be achieved and 90 percent of green hydrogen consumption is sourced at home, Germany's economy could add up to 30 billion euros per year and create up to 800,000 jobs by the middle of the century, according to the study that had been commissioned by the German Renewable Energy Federation (BEE) and the regional renewable energy federation LEE NRW from North Rhine-Westphalia.

"With the National Hydrogen Strategy, Germany so far merely has decided to consume green hydrogen at a large scale," BEE head Simone Peter said. The country therefore now had to also focus on producing the green fuel and start setting up the necessary legislative and physical groundwork, Peter argued.  "The government has to loosen the brakes and set incentives for creating the required electrolyser capacity, the infrastructure and above all enough renewable power installations," she said. Christian Mildenberger of LEE NRW stressed that many industrial companies in the country would need green hydrogen to decarbonise their production which, "if looking at all facts", should be produced at home. The value creation effects could even "trigger a new economic miracle in Germany as far as jobs are concerned”, Mildenberger argued.

If hydrogen is produced for import from other countries which lean heavily on their export industry, this could stall energy transition efforts there if the producing country's energy system is not transformed in parallel, the researchers wrote. In Morocco, for example, 90 percent of the primary energy mix in 2030 would likely still be covered by fossil fuels. "The result: Germany imports green hydrogen but fossil fuels continue to fan climate change in the production country." Moreover, hydrogen consumers, such as big steel or chemicals producers, could ultimately relocate production capacities to the hydrogen exporting countries to reduce transport costs and other uncertainties, the study warned. In addition, hydrogen production in Germany could help provide flexibility to renewable power production and help with the integration of new wind and solar power capacity, they added. Study co-ordinator Frank Merten of the Wuppertal Institute said Germany was debating the costs of domestic production too much and did not adequately consider the positive effects. "Germany has a huge chance here to become a frontrunner and specialist on the future world market for green hydrogen," Merten said.