The foundation is endowed with 4.4 billion euros. Companies that qualify now can make concrete bids in early 2023 for the production and supply of green hydrogen over the period from early 2024 to late 2033. One of the conditions is that the hydrogen is produced outside the EU. Buyers who are willing to pay the highest price are awarded the contract.
And this is how it works: On the one hand, the foundation concludes long-term purchase agreements in order to give hydrogen producers planning and investment security. On the other hand, “H2 Global” concludes sales contracts to serve the need for green hydrogen. “H2 Global” buys the products at the lowest possible prices and then sells them to the buyer who pays the highest price. The difference in costs between the expected higher purchase price and the lower sales price will be compensated for with subsidies from the Federal Ministry of Economics.
The tender states that the aim of the Federal Ministry of Economics is to support projects in countries where green hydrogen can be produced inexpensively. And further: “Green technologies are to be established there and a contribution to covering the growing demand for green hydrogen” in Germany and the EU is to be made.
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“H2 Global” is one of the most important instruments of the federal government to enable the supply of industry with green hydrogen. Green hydrogen is considered the key to decarbonizing industrial processes, for example in the steel and chemical industries. The companies are focusing on making carbon dioxide-intensive processes climate-neutral by using green hydrogen.
Green hydrogen is in high demand, but hard to come by
Green hydrogen is created by splitting water into its components, hydrogen and oxygen, using electricity from renewable sources via electrolysis. The hydrogen produced in this way is climate-neutral. It is therefore referred to as “green” hydrogen.
The problem: Green hydrogen is currently only available in a very small volume. However, industry will need gigantic amounts of green hydrogen within a few years if it wants to meet its greenhouse gas reduction obligations.
Most experts assume that the hydrogen required in Germany can only be partially produced here, as the potential for electricity production from renewable sources is limited. A large part of the green hydrogen will therefore be produced in windy and sunny countries of the Global South. The federal government is working on establishing “hydrogen partnerships”. Federal Minister of Economics Robert Habeck (Greens) is currently traveling in southern Africa for this purpose.
>>Read here: Habeck is helping the industry with billions in the transformation
Companies such as the steel manufacturers Thyssen-Krupp and Salzgitter have decided to invest billions in the past few months in order to convert their production to hydrogen-based processes. In the steel industry, the classic blast furnace route is being replaced by the so-called direct reduction process. If green hydrogen is used, the steel produced is climate-neutral. However, the costs of the new process will initially significantly exceed the costs of the conventional production method.
This is where the tendering process comes in: In order to be able to produce climate-neutral steel from the middle of the decade in the new plants that will be built in the coming years, a hydrogen value chain must be created. “H2 Global” helps with this.
In the first step, the foundation will provide 900 million euros. For the second round, a further 3.53 billion euros will be added, which the Bundestag approved at the end of November. The second tranche is intended to stimulate deliveries for the period from early 2026 to late 2035.
Daimler, Deutsche Bank and Eon are among the donors
The first tranche, for which potential hydrogen producers can now qualify, is divided into three lots of equal size: According to the EU’s electronic tendering platform, they relate to the “purchase of green hydrogen derivatives”, namely green ammonia, green methanol and green kerosene. Hydrogen derivatives are derived products that are made based on hydrogen.
One of the purposes of converting the hydrogen is to facilitate transport over long distances. Processes for liquefying hydrogen in order to reduce its volume and transport it by ship only work on a very small scale. The use of derivatives such as ammonia and methanol, on the other hand, has been tried and tested around the world. Converting the derivatives back into hydrogen is not always necessary, as some industries can also use the derivatives directly.
>> Read here: RWE boss: “EU regulation completely chokes off the hydrogen ramp-up”
The tender also states that it is assumed “that the accepted hydrogen products are produced using renewable energies and in compliance with sustainability requirements”.
The foundation is open to all companies – including those that are not based in Germany. The list of “H2 Global” donors is constantly growing. It now includes 57 companies, including German companies such as Covestro, Daimler, Deutsche Bank, Eon, MAN, Linde, RWE, Salzgitter, Thyssen-Krupp and Uniper, as well as European players such as Gasunie and Total.
The Australian hydrogen company Fortescue, owned by multi-billionaire Andrew Forrest, is also one of them. “H2 Global” is thus developing into a blueprint for the development of a European hydrogen import structure that covers all value-added stages – from the production of hydrogen to hydrogen logistics and consumption.
The federal government is considering making the model a pillar of the European “hydrogen bank”, which EU Commission President Ursula von der Leyen announced in late summer.
The EU Commission wants to create strict criteria for green hydrogen
The plans of the EU Commission for the definition of green hydrogen are currently proving to be an obstacle for the work of “H2 Global”. According to “H2 Global”, the narrow interpretation of the criteria to be applied causes “considerable problems”. Only hydrogen that is produced with electricity from additional renewable systems should be allowed to bear the “green” stamp.
In addition, the renewable electricity for hydrogen production must be produced in the same hour as the hydrogen itself. This is to prevent gas or coal electricity from being used for hydrogen electrolysis. Insiders say that it is “completely illusory” to compete internationally under these conditions.
In the meantime, a rethink is taking place in the EU Commission; at least the criterion of simultaneity should no longer be defined so narrowly. However, the problems have not been completely resolved.
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