Germany's plans for hydrogen storage fall well short of future demand, utilities warn

Planned hydrogen storage projects remain significantly behind forecasted demand, an issue which could affect Germany’s attempts to move towards a renewable energy system, found a report commissioned by the German Association of Energy and Water Industries (BDEW). Complex approval procedures, a lack of planning and investment security, and uncertainties regarding profitability are among the issues holding hydrogen storage projects back, concluded the report, conducted by consultancy Frontier Economics. Stored hydrogen could be used to generate electricity at times when solar and wind are unable to meet demand.

The report recommends a state funding mechanism to incentivise the construction of hydrogen storage facilities. It highlights revenue-based contracts for differences (CfDs) as the best option. Revenue-based CfDs are an instrument that guarantees operators the reimbursement of the difference between fixed reference revenues and the revenues actually realised on the market over a fixed contract term (e.g. 15 years). Thus, the CfDs compensate for the gap between the costs shouldered by storage operators and the customers' willingness to pay (which is likely to be too low in the market ramp-up phase).

“For the successful development of hydrogen storage, in addition to the financing mechanism, the regulatory regime and the requirements for hydrogen quality must also be bindingly determined as quickly as possible,” said Kerstin Andreae, chairwoman of the BDEW executive board.

The German government recently gave the green light for the construction of a hydrogen “core grid,” which would simplify the transport of hydrogen across the country. They’re also helping to fund the conversion of a natural gas cavern into a hydrogen storage site, with plans to store at least 250 GWh of hydrogen in salt caverns by 2030.