A H2erculean task:
Hydrogen infrastructure at the core of the ramp-up in Germany
The aim is clear: After a year of putting out fires, a year in which our energy supply was turned upside down, the course must now be set for the future. A future with safe and, at the same time, clean energy sources. A future with a fire prevention plan that protects us from further energy crises. What is the key to 2023 becoming the year of seized opportunities in the energy transition? The answer lies in the ramp-up of hydrogen in Europe and Germany, which has to finally pick up speed.
This is where OGE and the other partners of the initiative will make a decisive contribution with their H2ercules project. H2ercules encompasses hydrogen production, import and storage and will soon enable the use of hydrogen in power generation and industry. And H2ercules will also create a dedicated hydrogen network that connects all parts of the value chain.
H2ercules – the fast track for hydrogen at a glance
The initiators RWE and OGE have developed H2ercules to accelerate the hydrogen ramp-up in Germany, whereby consumers are to be supplied with green hydrogen from domestic production and via import routes. As part of the H2ercules project, RWE aims to build up to 1 GW of additional electrolysis capacity, while OGE is looking to add more than 2,000 km of pipelines by 2030 and is investing more than three billion euros to do so. The pipelines will primarily be repurposed natural gas pipelines, but there will also be some new dedicated hydrogen pipelines. In addition, we are developing five import corridors with our partners in Norway, Belgium, France, the Czech Republic and the Netherlands, and the whole system will be supplemented by hydrogen storage facilities and the conversion of gas-fired power plants to hydrogen. Extending across the different stages of the value chain, this approach will thus solve the chicken-and-egg problem of the hydrogen ramp-up on an XXL scale.
- H2 external pipelines
- centres of consumption
You can find detailed pipeline routes and realisation dates according to the current planning status here: webhercules.azurewebsites.net
Not an isolated solution – H2ercules open to further partners
The aim of the H2ercules project is to accelerate the overall hydrogen ramp-up. It is not meant to offer an isolated solution but rather intended to enable other hydrogen projects along the network and therefore designed as an open initiative that has been joined by other partners: In the last twelve months alone, there have been 16 partners from industry, mobility, science and the energy sector. More are to follow. Further information for potential partners can be found here: www.h2ercules.com
Implementation underway – political decisions as a factor for success
OGE and the project partners are pushing ahead with key elements of the H2ercules project. For example, we have started the detailed planning of the pipeline routes and the first regional planning procedures. The actual implementation of the entire project and the final investment decisions, however, will be subject to political decisions which will have to be made in 2023.
Click through the courses of political action we believe are most important. OGE is affected by the demands for network expansion, while the other demands concern RWE and the other project partners:
Passing the Hydrogen Acceleration Act and determining the H2 backbone
In the H2 Acceleration Act scheduled for 2023, the federal government must define the specific requirements for the first H2 backbone in Germany. H2ercules will be an integral part of this backbone, which will form the country’s first H2 network.
Financing: investment security as a prerequisite for rapid project delivery
It will be important to avoid excessive costs for pioneer customers connected to the hydrogen network and, at the same time, to ensure investment security for network operators. One way to do this is to embed the dena model in legislation. The model provides for network expansion to be financed by the gas transmission system operators (TSOs) who hold the investments in a regulatory account over a period of time. As a result, the state will only be required to step in to cover the risks if the hydrogen ramp-up fails to materialise, contrary to the declared political goal of the German government, and there is an amortisation gap in the regulatory account.
Implementation hurdles in the current EU gas market package
Operator models and unbundling of natural gas and hydrogen network operators
The proven Independent Transmission Operator (ITO) model must continue to apply unchanged and must also be applicable to hydrogen network operators so that gas TSOs invest in transformation. The hurdles to information exchange and horizontal unbundling of natural gas and hydrogen network operators, as provided for in the current gas market package, must be removed so that existing expertise can be used.
Raising the expansion targets
In view of the foreseeable high demand for hydrogen to decarbonise industry, transport and electricity generation by 2030, the expansion targets for domestic hydrogen production should be significantly increased – even beyond the coalition agreement’s targets of 10 GW – and a perspective for the time after that should be added, reaching until at least 2035.
Promotion of hydrogen production
The expansion targets must also be reflected in adequate financial support for investments in electrolysers, especially during the initial phase, in order to mitigate first-mover disadvantages. In addition to existing support programmes, industrial-scale projects, industrial on-site projects in close proximity to consumers and offshore projects should also be explicitly taken into account.
Rapid expansion of renewable energies and the network
A rapid expansion of renewable power generation, especially at sea, and the further acceleration of network expansion (bringing forward offshore network connections), including the reservation of offshore power generation capacity for electrolysis, are essential.
Planning and approval procedures
The planning and approval procedures for renewable energies and for electrolysers urgently need to be accelerated. Prioritisation should be introduced in decision-making considerations, not only for renewable energies but also for electrolysers and the hydrogen infrastructure – including beyond 2025.
Green power criteria
Pragmatic green power criteria must be defined and the eligibility of hydrogen for climate targets, e.g. from the Renewable Energies Directive, must be ensured. It is crucial that the planned rapid ramp-up of the hydrogen economy is not slowed down and that hydrogen production in Germany and Europe remains competitive with hydrogen imports.
Promotion and expansion of offshore electrolysis/offshore-to-X
As an additional H2 production route, the tendering of offshore electrolysis plants should also be promoted. Offshore-to-X will enable efficient production and energy transmission to the coast, including from more distant offshore locations, via H2 pipelines (instead of offshore power connections).
Development of demand
In view of the challenges posed by the climate targets for the decarbonisation of industry and transport as well as for the back-up capacities for power generation, the demand for hydrogen will rise sharply by the end of the decade at the latest. With an import strategy, the federal government should flank the activities of the companies and strengthen foreign trade relations with potential supplier countries.
Introduction of sector-specific (Carbon) Contracts for Differences ((C)CfDs) for hydrogen in industry
Climate protection contracts should cover the additional costs of CO2 avoidance caused by the use of hydrogen compared to conventional processes. In the basic industries (steel, ammonia, cement, lime, etc.) in particular, subsidising operating costs in this way is essential. Here, the parameters will need to be defined according to the industry and technology. The basis for funding decisions must be the respective CO2 avoidance costs, the CO2 reduction potential and the international competitive situation.
Creation of lead markets
In addition, there should be cultivation of lead markets for green gases, for example through quotas or within the framework of public procurement. In addition to the expansion of CCfDs, quotas can provide a reliable framework for market development. This is because they can ensure decarbonisation of the gas supply in a way that can be planned and targeted for all market actors and thus guarantee investment security.
Eligibility of hydrogen for climate targets
The eligibility of hydrogen for climate targets must be ensured.
H2-ready power plants
Decarbonisation-ready gas-fired power plants will be indispensable as partners of renewables if, after the nuclear phase-out in 2022, the phase-out of coal is to succeed by 2030. To ensure that the necessary capacities are available in time before the end of the decade, the appropriate political course must be set quickly:
- Acceleration of the necessary planning and approval procedures for both gas and hydrogen operation, including immission control regulations for the conversion from gas to hydrogen, in order to ensure planning security.
- Financial support for the necessary replacement and reserve capacities via a basic capacity mechanism and compensation for disadvantages for plants already operating with hydrogen via a CfD (to compensate for the higher operating costs incurred with hydrogen compared to a gas-fired power plant); the corresponding regulations/deadlines should be based on the requirements of the Delegated Act on the Implementation of the Taxonomy Regulation.
- Furthermore, the location of the power plants must be given priority in the context of hydrogen network expansion planning in order to ensure the timely supply of hydrogen. Any unavailability of hydrogen for network reasons must not come at the expense of the power plant operators.
The development of hydrogen and H2-derivative turbines and their use must be advanced as quickly as possible with the targeted use of research and development funds.
Promoting the construction of new H2 storage facilities and the repurposing of existing storage sites
With the emergence and growth of an H2 market, the first hydrogen storage facilities will be needed before the decade is out.
As industry increasingly demands a largely constant supply of pipeline hydrogen, as hydrogen production has to react more flexibly to fluctuations in renewable output, and as more hydrogen is imported and more gas-fired power plants are converted to hydrogen, the need for storage capacity will likewise increase.
In its Roadmap 2030, the National Hydrogen Council assumes a hydrogen storage requirement of 5 TWh. Repurposing existing caverns for the storage of hydrogen will require a lead time of about five years for planning, approval and conversion. Hence, there is an urgent need for action to initiate the expansion process. Since considerable learning-curve effects are expected with regard to the technical design and use of H2 storage facilities as well as system integration, financial support for investments (CAPEX and OPEX funding) in H2 storage will be needed, particularly in the initial phase, in order to mitigate the first-mover disadvantages and to provide an incentive for the development of H2 storage capacities.
Temporary reliable exemption for “first-time” installations
Cushion gas, which will remain in storage in the long term, should not have to be provided exclusively from green hydrogen if sufficient green hydrogen is not available by 2030.
Introduction of a regulatory framework for hydrogen storage projects
To create a regulatory and access regime for storage facilities that incentivises investment.
Integration into network development planning
In view of their high flexibility potential for stable network operation, hydrogen storage facilities should be included in the scenario planning of the network development plan.
Shorter approval procedures will accelerate the construction and provision of H2 storage facilities and thus avoid a critical bottleneck in the development of the H2 infrastructure. Underground storage facilities are subject to mining law. An acceleration of the procedures can be achieved with two essential adjustments:
- The inclusion of regulations on H2 in the Ordinance on the Environmental Impact Assessment of Mining Projects (UVP-V Bergbau) will make it possible to handle approval procedures within the associated legal framework (similarly to natural gas) and avoid the complex approval paths provided for in higher-level rules and regulations.
- A clearly described procedure for the conversion of natural gas storage facilities to store H2 could significantly shorten approval procedures.
In addition, there are interdependencies with the provisions in the Energy Industry Act (EnWG) on the approval requirement for (partial or complete) decommissioning of natural gas storage facilities by the Federal Network Agency in the event of their conversion to hydrogen.
Eligibility of H2 storage facilities for connection and network access
As with RE plants, it will be crucial for H2 storage facilities to be entitled to network access (for both power and hydrogen grids). This will create the necessary investment security for the operation of storage facilities in the H2 network.
With H2ercules, 2023 can become the year when the energy transition in Germany and Europe regains the speed it needs. We’re ready – so let’s do it.