The German government announced on 8 December that it is commencing the process of awarding contracts for the procurement of renewable hydrogen using a €900mn fund via the support programme H2Global, establishing Germany’s long-term import supply of the molecule.
German federal minister for economics and climate protection Robert Habeck formally announced the tendering process while on a trip to South Africa, stating “we want to make Germany and Europe the lead market for green [renewable] hydrogen. That is why we are giving the go-ahead today for a first tender for the import of green hydrogen worth 900 million euros.”
The tendering process will operate on a basis of awarding long-term contracts to the lowest bidder among hydrogen producers outside of Europe.
The hydrogen will then be re-sold by the H2Global programme to the highest bidder in Europe.
It is through this mechanism that the German government aims to establish long-term, affordable renewable hydrogen supply to Europe.
First deliveries of hydrogen and hydrogen derivatives are expected from 2024, some time ahead of when member states and European market participants aim to meet the production targets set out in their national hydrogen strategies.
This would mean market participant who either already use or intend to use hydrogen for decarbonisation purposes would not have to wait for production capacity to come online in Europe. Recently European market participants have been noting concerns regarding the fact that an absence of production criteria for renewable hydrogen has restricted projects taking final investment decision in Europe.
ICIS data shows that hydrogen production costs for a renewable hydrogen project starting in 2024 using an offshore wind 10-year power purchase agreement (PPA), including capital cost recovery, would be €8.21/kg in the Netherlands and €8.70/kg in Germany.
The ICIS ammonia-to-hydrogen assessment for northwest Europe shows that, based on current spot ammonia market prices, the import and decomposition of ammonia into hydrogen at the Port of Rotterdam would cost €8.71/kg.
Tenders for renewable hydrogen via H2Global could run up to 2036, with the German federal government intending to make a further €3.5bn available for the programme as part of the 2023 federal budget.