Policymakers in Germany and the EU have been told to design and implement mechanisms that can solidify long-term demand for green hydrogen imports, supporting efforts to permanently displace demand for Russian gas.
On 24 June, the Green Hydrogen Taskforce – a collaborative effort between Fortescue Future Industries (FFI) and some of the strongest energy, industrial and technology companies in Germany – published a report, aiming to help meet the ambitious target of importing large amounts of green hydrogen from Australia to Germany. The need to reduce fossil fuel production has been heightened following Russia’s invasion of Ukraine, which has created a new reality calling for an accelerated energy transition.
Developing a green hydrogen economy can be a key part of this, helping to diversify energy supply, with the report outlining how industrial demand centres in Germany and the EU are ready to offtake up to 5mn tonnes per annum (Mtpa) of green hydrogen in the short-term, with a total addressable market of up to 27Mtpa in the long-term. Green hydrogen imports of 15Mtpa could close 35% of the supply gap of the EU’s target to eliminate the import of Russian fossil fuels by 2030, without undermining climate-related ambitions.
Further findings included that by 2030, the carbon price will likely reach a sufficient threshold – around €150/tCO2 – for imported green hydrogen to be competitive with fossil fuels, negating the need for further subsidies. It also noted that the required near-term market and first-mover support of €20-30bn will achieve more than ten times the leverage on capital deployed into industrial assets.
It went on to set out a series of critical actions to be taken by the end of 2022 to successfully develop a robust import supply chain for green hydrogen to reach the continent by 2024.
Therefore, to solidify long-term demand for green hydrogen imports, policymakers in Germany and the EU should set precise standards for green hydrogen and adopt a clear certification scheme as quickly as possible, providing prospective supplies and consumers with enough guidance to draft long-term procurement contracts.
There is also a need to design effective support mechanisms to signal confidence in a growing green hydrogen market and remove barriers to investment by mitigating long-term market and first-mover risks; engage with companies to develop and deploy an overarching communication strategy that could build up public support for green ammonia and green hydrogen; and continue to fund innovation in advanced hydrogen technologies and applications, especially in the transport sector.
Moving quickly and strategically to build up a green hydrogen trade will mean Germany and the EU capitalise on short-term opportunities across volatile global energy markets, as well as safeguarding energy security as they achieve key decarbonisation objectives.