German government outlines green hydrogen definition
LONDON (ICIS)–The German cabinet agreed on a definition for green hydrogen and the incentives involved in helping to ramp-up production on 19 May as part of an update to the Renewable Energy Act 2021 (EEG 2021), expected to come into force on 1 January 2022.
With this the cabinet expect that the “electrochemical production of green hydrogen will become significantly more economical and thus more competitive compared to conventional hydrogen production”.
EEG 2021 came into force on 1 January 2021, with the aim of expanding renewable production in Germany through a variety of mechanisms such as ambitious renewable capacity targets and increased tender volumes.
While EEG 2021 did include hydrogen, enforcing support mechanisms, such as an exemption from EEG levies, wasn’t possible due to a lack of clarity – something the recent update addresses.
GREEN HYDROGEN DEFINITION
The definition agreed by the German government, is that for hydrogen to be considered “green” it must be produced “electrochemically”, for example via electrolysers, from renewable energy sources to be exempt from the EEG levy or surcharge.
The cabinet stipulate that green hydrogen would also need to be produced using renewable energy sources as defined by the EEG itself, of which 85% has to be located in the price zone for Germany, which includes power produced in Germany and Luxembourg.
The remaining 15% is expected to come from a price zone that is electrically linked to Germany.
Further, proof of the power source as being generated by renewable capacity is needed. For instance, a green hydrogen producer would need to demonstrate a supply agreement with a renewable power producer. A guarantee of origin (GO) could accompany such an agreement, but a single GO without a supply agreement would not be valid to support surcharge exemption.
INCENTIVISING GREEN HYDROGEN
By setting out definitions that ensure the power supply for hydrogen via electrolysis is renewable, green hydrogen producers are able to benefit from cost saving support mechanisms, namely exemption from the EEG levy or surcharge.
This was done to support production of green hydrogen by making it more competitive against hydrogen produced via an electrolyser powered with fossil-fuel derived energy.
In the EEG update the cabinet stopped short of specifying detailed definitions for different forms of green hydrogen and refrained from outlining specific locations for electrolysers to be installed. Further supporting a ramp up of capacity while Germany awaits the wider adoption of hydrogen standards set out at a European level.
Despite no formal regulation on the location of an electrolyser in relation to renewable power, the cabinet recommended that electrolysis plants should be installed in locations with high renewable energy potential, where geological storage facilities can be used for hydrogen storage and access to hydrogen infrastructure is possible.
This would also support grid balancing and avoids renewable power generation curtailment.
The EEG levy is added as a premium to electricity bills paid by consumers and helps to fund subsidies and feed-in tariffs for renewables.
The agreement exempts producers of hydrogen from renewable energy sources from paying the EEG surcharge from January 1 2022, making the costs of electrolysis, and therefore hydrogen, cheaper.
Additional reporting by Arlind Neziri
Speak with ICIS
Now, more than ever, dynamic insights are key to navigating complex, volatile commodity markets. Access to expert insights on the latest industry developments and tracking market changes are vital in making sustainable business decisions.
Want to learn about how we can work together to bring you actionable insight and support your business decisions?