Berlin Federal Minister of Economics Robert Habeck (Greens) wants to create the conditions for the rapid development of a hydrogen network infrastructure. He says goodbye to the idea of founding a state hydrogen network company and wants to take up the plans of private gas line operators for a “hydrogen starter network”. The Handelsblatt learned this from ministry circles.
The circles also said that the goal was “a faster and more cost-efficient development of the hydrogen network infrastructure in Germany, which grows with the hydrogen market and is embedded in the EU internal market in order to advance the energy transition”.
This ends a stalemate that had caused considerable resentment in large parts of the industry. For months, companies that depend on hydrogen on the way to climate neutrality have been waiting for the network expansion to begin in order to gain access to hydrogen.
The plans for setting up a network are ready. However, unresolved regulatory issues, the debate about state participation in a hydrogen network company and uncertain refinancing have so far stood in the way of the start. Habeck now wants to end this situation.
The lack of a hydrogen network infrastructure is one of the reasons why the hydrogen ramp-up is not progressing overall: As long as the infrastructure is missing, investments in hydrogen production will also be postponed. Because as long as it is unclear whether and when the hydrogen can also be transported, the development of hydrogen production makes little sense. Potential buyers are also put off: they still don’t know for sure when delivery could be possible.
First step: design the starting net
The current situation is stressful for many companies. Steel manufacturers such as Thyssen-Krupp or Salzgitter have decided to invest billions in hydrogen-based processes and are already in the implementation phase, but do not know if and when a hydrogen pipeline will pass their works.
Apparently Habeck said goodbye to the idea of founding a state hydrogen network company.
(Photo: IMAGO/Frank Peter)
In order to make progress in building a hydrogen network infrastructure, the ministry is now pursuing a two-stage approach. In the first stage, the Energy Industry Act (EnWG) is to be amended.
With the EnWG change, a “hydrogen starter network” with a length of 1700 kilometers is to be legally defined. The network is to be defined “by the Federal Network Agency with the participation of the long-distance gas pipeline operators,” according to ministry circles. The “Startnetz” would thus be a legally prioritized project with speedy approval procedures. Significant parts of the new network are to consist of repurposed natural gas pipelines.
The operators of the long-distance gas pipelines have already dealt intensively with the question of what the starting network could look like. They presented their first ideas at the beginning of 2020. Your plans for a starter network are likely to be changed in cooperation with the Federal Network Agency.
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According to the plans so far, the hydrogen start-up network will initially primarily serve north-west Germany. The south will follow later. The Bavarian economy had heavily criticized it. Insiders assume that the legally defined “starting network” takes this criticism into account.
Second step: Merge network development plans
In a second step, the plans for the gas and hydrogen networks are to be combined in an “integrated gas/hydrogen network development plan” as early as 2024. The EnWG is also to be changed for this.
The network development plans are the basis for the expansion of the gas and electricity networks. They are drawn up by the network operators and confirmed by the Federal Network Agency. They are therefore an important instrument for controlling grid expansion.
At the beginning of December last year, a paper from the Federal Ministry of Economics triggered debates in which the establishment of a hydrogen network company with state participation was announced. The operators of the long-distance gas pipelines, who want to gradually convert their infrastructure to hydrogen operation, had criticized this.
They warned that a construction with state participation would inevitably lead to further delays, since a functioning private-sector system would have to be restructured. At the same time, however, plans by individual long-distance gas pipeline operators were also circulating, in which models for the structure of a company with state participation were developed.
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Industry insiders report that they only wanted to prevent the worst with these plans. Nobody in the industry is convinced of the idea of state participation. Critics have also spoken out from within the coalition, for example from the FDP, but also from the ranks of the Social Democrats. Now the idea of the hydrogen network company with state participation is off the table.
Operators should pre-finance the network, the state ensures profitability
The Federal Ministry of Economics also wants to eliminate previously unresolved problems with the refinancing of investments in the hydrogen network. The operators of the gas networks have long criticized the fact that state network regulation is preventing the construction of a pipeline infrastructure for hydrogen.
The regulation for hydrogen networks decided by the grand coalition provides that only the customers of the hydrogen networks finance the expansion and operation of the lines through their network fees.
For example, the first user of a hydrogen line would have to provide the complete refinancing with the fees charged for its use. In the initial phase, this would lead to prohibitively high network charges.
The network operators have been advocating a different solution for years: They want to finance the construction of the hydrogen network from the fees they receive for using the natural gas pipelines. But politicians reject this form of cross-subsidization.
According to information from the Handelsblatt from ministry circles, the Federal Ministry of Economics now wants to take a different approach, which is essentially based on a concept that the German Energy Agency (Dena) presented in the summer of last year: A “repayment account” should provide state security for Network operators give if the hydrogen ramp-up is delayed and there are no or very few customers.
The network operators should pre-finance the expansion. In return, the state assures them that the profitability of the investment will be secured in the long term. Initially, the network charges should be capped so as not to deter potential network users.
Initially, however, the capped network charges will not be sufficient to finance the network operators’ investments. This results in a financing gap for the network operators. This gap is closed by the “amortization account”, from which the costs for the construction are deducted and into which the network charges are paid.
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The financial gap will decrease after the ramp-up phase because the number of users will increase and the efficiency of network operations will increase as a result. The state guarantees amortization in the event that the hydrogen ramp-up is delayed and thus jeopardizes profitability. In addition, the state can build up funds to compensate for the gaps, for example through a fund.
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