As an Executive Board Member of the Neuman & Esser Group, the author is responsible for the Energy Solutions division with international companies that offer industrial solutions from the generation to the use of hydrogen.
Anyone who has been involved with alternative, emission-reducing technologies for many years, advanced their development and fine-tuned their profitability may have taken many a leap for the air when the topic of hydrogen was suddenly on everyone’s lips.
The announcements of breathtakingly high amounts of funding and the new committees and regulations supporting hydrogen have literally rolled over one another in the past two years.
But in many areas where hydrogen could make a big difference, it has so far been almost unnoticed. One such field is the use of hydrogen in the broad, decentralized and medium-sized industrial landscape, the bulk of our German economy.
In Germany, hydrogen plants with a total output of ten gigawatts are to be built by 2030. To a significant extent, this will have to be implemented using large systems running at more than 50 megawatts. However, such systems require large investments, require appropriate locations, many years of advance planning and, last but not least, a suitable infrastructure.
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2030 is only eight years away. This is practically “tomorrow” in industrial investment cycles. In order to achieve the hydrogen targets in Germany, smaller, decentralized projects that can be implemented relatively quickly must therefore urgently be made possible.
An example are industrial hydrogen plants in the range of one to five megawatts. This size has the advantage that the container-sized systems can be accommodated in industrial parks, business parks or at medium-sized production sites and the amount of hydrogen produced can be used directly on site. In addition, the interests of several companies can be bundled here, making it easier to integrate all material and energy flows. In addition to the hydrogen, there is also the oxygen and the waste heat produced, which is automatically generated in green hydrogen systems (electrolysers). This makes the overall system highly efficient and the capital costs can be shared between all parties involved.
Reasons why projects do not come about
This opens up enormous additional potential. Because the broad mass of German companies cannot currently switch to hydrogen alone. With integrated concepts that take into account the entire chain from joint hydrogen production to the various applications in fleet mobility, production processes or even the supply of neighboring residential areas, small and medium-sized enterprises (SMEs) can also contribute to the energy transition.
These SMEs form the backbone of the German economy. In North Rhine-Westphalia alone, for example, there are around 730,600 SMEs, which corresponds to over 90 percent of all companies in the state. Many of these companies can only become carbon neutral by using hydrogen. For several reasons, such projects are currently not being implemented:
- There is currently no price competition with fossil fuels, even for highly optimised, integrated hydrogen systems, so there is no easy business case for such projects. For small and medium-sized companies in particular, the investment volumes and risks of switching to hydrogen are still disproportionate to the achievable result.
- In addition, the current regulations for the necessary trades and sub-areas of a system for the production and distribution of green hydrogen often do not match or are not reliable enough for a relatively high investment. The huge sums of announced subsidies mentioned above are currently hardly ever received by medium-sized companies. The reasons are varied.
- Subsidy applications are complex and demanding, they already require a very high level of detail in the technical and commercial planning and thus a high level of knowledge and resources in advance. The processes leading up to approval or even just reaching the next application stage are often non-transparent and are unpredictably delayed: Unfortunately, this is poison for business decisions.
An alternative to promoting the investment sums are reliable legal framework conditions that make the operation and sale of the hydrogen produced commercially sensible, i.e. profitable.
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The new European directives (RED II) are the first good starting points, which, for example, have recently made the use of hydrogen in transport economical. This should also be possible for industrial hydrogen use.
Share of renewable sources too low
Industry is responsible for a little less than a quarter of the CO2 emissions in Germany, ahead of the transport sector with less than 20 percent. This means that it is not enough to convert the energy industry, which accounts for around 35 percent of emissions, to renewable sources and car traffic to battery-electric mobility.
Industry is responsible for a little less than a quarter of the CO2 emissions in Germany.
(Photo: imago images/Future Image)
This fact alone should be an incentive for politics and business to search creatively and pragmatically for solutions to overcome the hurdles that still exist for medium-sized, industrial hydrogen plants.
As a child of the 1970s, I grew up with controversial discussions about the future of the energy industry. From the two oil crises to geopolitical issues, where we get our natural gas from, to “Nuclear Power – No Thanks!” stickers on cars.
Guest Commentary Series: Future Hydrogen
From my point of view, the big difference compared to the past decades is that we now have fully developed clean technologies available that can and must now be used and scaled up if we want to even come close to achieving the climate goals.
So let’s not exclude promising H2 business models that make a strong contribution to CO2 reduction from the hydrogen market ramp-up – and let’s also say for the backbone of our German economy, medium-sized industry: “Hydrogen – yes please!”
The author: As an Executive Board Member of the Neuman & Esser Group, Stefanie Kesting is responsible for the Energy Solutions division with international companies that offer industrial solutions from the generation to the use of hydrogen.
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