This blog post explores the challenges and economic implications of hydrogen as a key player in Germany's energy transition, highlighting the high costs of green hydrogen production, the inadequacies of current infrastructure, and the skepticism surrounding ambitious hydrogen strategies.
In recent discussions surrounding Germany's energy transition, hydrogen has emerged as a focal point of hope and skepticism. Michael Liebreich, a consultant and entrepreneur in clean energy, shares his insights on the viability of hydrogen as a sustainable energy source. This post delves into the economic realities, infrastructure challenges, and the future of hydrogen in Germany's energy landscape.
Liebreich begins by dismissing the feasibility of hydrogen imports from countries like Canada, Namibia, South Africa, and Chile, labeling such ideas as unrealistic. He argues that the notion of transitioning to hydrogen heating systems, particularly in regions like Bavaria, is misguided. Hydrogen, he asserts, will cost at least 2.5 times more per heat unit than natural gas, raising questions about affordability for consumers currently reliant on gas heating.
Germany has developed a hydrogen strategy that includes numerous projects and a recently approved hydrogen core network. However, Liebreich expresses skepticism about the economic viability of these initiatives. He acknowledges the existing use of hydrogen but emphasizes the need for sustainable production methods. The challenge lies in the high costs associated with producing green hydrogen, which can range from 6 to 14 euros per kilogram compared to just 1 euro for hydrogen derived from natural gas.
The economic implications of transitioning to green hydrogen are staggering. Liebreich calculates that if green hydrogen costs 5 euros more than conventional hydrogen, the annual financial burden could reach 10 billion euros. Furthermore, the projected costs for developing the necessary infrastructure, including pipelines and production facilities, could total around 150 billion euros. This raises critical questions about who will bear these costs—whether it be the state, consumers, or industry stakeholders.
The steel industry, which employs approximately 80,000 people in Germany, is another area of focus. Liebreich discusses the potential for green hydrogen to facilitate the production of green steel. However, he warns that the costs associated with producing green steel will likely exceed those of conventional steel, making it economically unfeasible without substantial government support.
Liebreich also addresses the potential for hydrogen derivatives, such as ammonia, to become competitive with conventionally produced ammonia. He notes that even with low electricity costs, green ammonia would still be significantly more expensive than its conventional counterpart. This raises concerns about the practicality of using ammonia as a fuel source for electricity generation, given the high costs involved.
The approved hydrogen core network in Germany is projected to span 9,000 kilometers, with an estimated investment of 18 to 19 billion euros. However, Liebreich points out that the network is designed to connect areas where hydrogen is neither produced nor consumed, questioning its overall utility. He emphasizes that the real issue is not just the lack of demand but the exorbitant costs associated with hydrogen production and distribution.
Looking ahead, Liebreich argues that hydrogen can only be economically imported via pipelines. He dismisses the idea of transporting liquid hydrogen via specialized ships as impractical due to high costs, estimating transport costs could reach 10 euros per kilogram. This is in stark contrast to the current price of natural gas, which is around 1 euro per kilogram.
Liebreich introduces the concept of the hydrogen ladder, which categorizes various applications of hydrogen based on their economic viability. He argues that while hydrogen has potential uses in certain sectors, such as fertilizers and refineries, it is less competitive in others, like household heating and transportation. The ladder illustrates that direct electrification is often a more efficient and cost-effective solution than hydrogen.
In conclusion, while hydrogen is often touted as a cornerstone of Germany's energy transition, the economic realities present significant challenges. The high costs of green hydrogen production, inadequate infrastructure, and the skepticism surrounding ambitious hydrogen strategies raise critical questions about the future of hydrogen in Germany's energy landscape. As Liebreich suggests, a reevaluation of priorities may be necessary, focusing on direct electrification and sustainable practices rather than an over-reliance on hydrogen.
