The financial burden of transforming German industry towards hydrogen will be substantial.
According to research by the Fraunhofer Institute and seven other institutions, transitioning Germany's heavy industries to green hydrogen will be financially burdensome. Reportedly, hydrogen, derived from excess renewable energy, is expected to be tight in supply in the short to medium term and extremely expensive in the long term within Germany.
The scientists released a document known as the Hydrogen Potential Atlas, suggesting that Germany would bear the highest green hydrogen prices across the EU and globally. The researchers estimated wholesale prices of 132 euros per megawatt-hour for green hydrogen in Germany and 139 euros in the Netherlands by 2050. In contrast, the prices would be significantly lower at 70 euros in the UK and 74 euros in Spain. Annual natural gas costs hover around 34 euros per megawatt-hour this year.
The high demand for hydrogen from energy-intensive sectors like steel and chemistry, combined with limited renewable energy capacity within Germany, are why green hydrogen is so costly. The expensive storage and transportation costs associated with domestic production are another challenge. Potential hydrogen exporters mentioned in the study include Morocco, the United Arab Emirates, Canada, Brazil, and Chile. Notably, a majority of these countries are geographically distant from Germany, making pipeline supply impractical.
The study concludes that green hydrogen will be economically viable only in industries with limited alternatives for achieving climate neutrality, such as chemistry and steel plants, aviation, and refineries. The costs would be prohibitive in sectors like road transportation and heating, where cheaper alternatives are available.
Green hydrogen, derived from renewable energy sources, holds the potential to significantly contribute to climate neutrality by 2045. It can potentially replace natural gas in power plants and serve particularly energy-intensive industries. Nevertheless, challenges related to availability and storage continue to be a work in progress through various experiments.
The high costs of green hydrogen in Germany are primarily due to its demand from energy-intensive sectors and limited renewable energy capacity within the country. Despite being expensive, green hydrogen derived from renewable energy sources has the potential to replace natural gas in power plants and serve energy-intensive industries.
