Research shows that by 2030, the cost of producing green hydrogen in Germany will be lower than that of importing green hydrogen

A comprehensive analysis by the Wuppertal Institute for Climate, Environment and Energy in the German city of Wuppertal suggests that Germany should pay more attention to the expansion of domestic production of green hydrogen.

Germany may have made importing green hydrogen a centerpiece of its hydrogen strategy, but a new analysis by the Wuppertal Institute suggests that Germany could be shooting itself in the foot if it doesn't focus more on domestic production of green hydrogen.

By 2030, the cost of producing green hydrogen in Germany will be lower than that of renewable hydrogen imported from abroad, and it is likely to be just as cost-competitive with hydrogen imported via pipelines from North Africa and European neighbours.

Commissioned by the NRW Renewable Energy Association, the Wuppertal Institute for Climate, Environment and Energy recently conducted a comprehensive analysis of 12 studies since 2021.

According to the Wuppertal Institute, the cost of local hydrogen production in Germany is expected to be 0.07-0.13 euros/KWH by 2030. Since 1 kg of hydrogen is equivalent to about 33.3 KWH at lower caloric value conditions, the cost of local hydrogen production in Germany is about 2.33-4.33 euros/kg or 2.53-4.71 US dollars/kg.

In contrast, the study suggests that the cost of imported hydrogen from long-distance transport such as the Americas will be 0.09-0.21 euros/KWH (2.99-6.99 euros/kg) by 2030, while the cost of imported hydrogen by pipeline is estimated at 0.05-0.15 euros/KWH (1.67-5.00 euros/kg).

The analysis showed that across all 12 studies, the lowest hydrogen cost forecast was for the delivery of hydrogen to Germany via pipeline from Spain, Eastern and Northern Europe, and North Africa. At the same time, the latest research is more optimistic that the cost of hydrogen imports is expected to be further reduced.

Germany is currently in the process of updating its national hydrogen strategy, and leaked drafts indicate that while the country is expected to double its electrolyzer installation target to 10GW by 2030, Germany will still plan to meet 50-70% of its renewable hydrogen demand through imports by 2030.

Meanwhile, Robert Habeck, Germany's vice Chancellor and Federal Minister for Economic Affairs and Climate Action, has been on a charm offensive over the past few years, reaching and signing memorandums of understanding with potential hydrogen exporters such as Australia, Brazil, Egypt, Namibia and South Africa.

Under its H2Global program, Germany is also the first country to launch a dedicated auction to import green ammonia, methanol and synthetic aviation fuel, which is now planned to be rolled out across the EU.

But the report argues that the German government should step up efforts in the near term to build hydrogen capacity closer to home.

Dr. Manfred Fischedick, President and scientific Director of the Wuptal Institute, believes that strengthening the domestic green hydrogen economy makes sense, especially because of the associated added value in the country, and the cost advantages of importing hydrogen do not offset other advantages of producing hydrogen domestically.

However, the study comes with a caveat that the scenario in which total demand for hydrogen is projected to increase also involves a greater reliance on imported hydrogen.

While demand for hydrogen in all sectors in Germany, including industry and energy, is expected to be between 29-101 TWH by 2030, estimates for 2045 or 2050 suggest that demand could be between 200-700 TWH.

By 2050, the cost gap between producing hydrogen domestically and importing it overseas will begin to narrow, while importing hydrogen via pipeline will become cheaper.

By mid-century, the cost of locally produced hydrogen in Germany will be 0.07-0.09 euros/KWH (2.33-2.99 euros/kg), similar to the cost of importing hydrogen by sea at 0.07-0.11 euros/KWH (2.33-3.66 euros/kg). By 2050, the cost of pipeline imported hydrogen will also fall to 0.04-0.12 euros/KWH (1.33-3.99 euros/kg).

Green hydrogen instead of blue hydrogen

The report analysis also rejected the import of blue hydrogen from Norway on an emissions basis, noting that even under the most favorable assumptions for upstream emissions and carbon capture rates, blue hydrogen would still produce "significantly higher greenhouse gas emissions" than renewable hydrogen. Existing blue hydrogen production plants achieve an average separation rate of only about 56 percent, thus reducing greenhouse gas emissions by only about half compared to gray hydrogen.

The report also shows that blue hydrogen produced in other countries, such as the United States, mostly uses fossil gases, and its upstream emissions are even higher.

Due to the failure of previous attempts to include blue hydrogen in the definition of the new renewable Energy Directive, the EU is currently focusing development solely on renewable green hydrogen, but there is also likely to be growing pressure to reassess support for blue hydrogen as part of the upcoming hydrogen and decarbonized gas market package.