Important progress has been made in discussions between the German Federal Ministry of Economics and Climate Protection and the European Commission regarding hydrogen power plants. A framework has been established for future measures, including plans to tender 8.8 GW of new hydrogen power plants and convert existing plants to run on hydrogen by 2035.
Framework for power plant strategy in place – Important progress made in discussions with European Commission on hydrogen power plants
Consultation phase and formal State aid procedure to follow as next procedural steps
Introduction
The German Federal Ministry of Economics and Climate Protection (BMWK) and the European Commission made important progress on three measures for hydrogen power plants in very intensive and constructive talks. This also provides the framework for the BMWK's national power plant strategy. The progress made with the European Commission is a first important step, which does not mean that the intended measures have already been approved by the European Commission under State aid rules. The common understanding for the steps ahead comprises central components and the relevant framework conditions for the future measures. To a certain extent, this sets out the guard rails within which the state subsidy programs must operate in order to comply with the State aid and energy legislation at European level. The next step will be a consultation phase, which will begin at the end of the summer. During the consultation phase, the state aid proceedings with the European Commission will then also be continued.
Developing a common understanding was important in order to prepare the consultation as efficiently as possible and to clarify initial questions regarding the formal assessment of the State aid at an early stage. In the consultation phase beginning at the end of the summer break, the main aim will be to give the stakeholders concerned, i.e. the affected associations, the manufacturers and operators of power plants, possible users of renewable hydrogen, and other market players, operators of infrastructures or electrolysers, the opportunity to comment on the effects on competition and the necessity, eligibility and proportionality of the measures.
Federal Minister Robert Habeck: "In intensive and very constructive discussions with the European Commission, we achieved important progress on the framework for future hydrogen power plants and thus prepared the consultation phase that is now following well and efficiently. Decarbonization of the power sector is important and central to all other sectors. Together in Europe and in Germany, we set the course for renewable energies last year. Now the task is to initiate the transformation of our combustible power plant fleet to hydrogen and thus set the course for climate neutrality in the entire power sector. A climate-neutral power sector is the backbone of decarbonization of the other sectors, because all other sectors will use more electricity in the future than they do today. To achieve this, the main pillars are renewables, flexibility in the system and storage, but in some hours of the year also controllable power plants. The conversion and decarbonization of the fossil-fuel based power plant fleet is therefore the next important step. And it is therefore all the more important that we made progress with the European Commission on the framework for future hydrogen power plants".
"Specifically, we want to tender 8.8 gigawatts of new power plants that will run on hydrogen from the start. And we want to put out to tender up to 15 gigawatts of hydrogen power plants that can temporarily run on natural gas until they are connected to the hydrogen grid, by 2035 the latest. Of these 15 gigawatts, we intend to put out to tender 10 GW in a first step until 2026 and then carry out an evaluation before the remaining 5 GW can be put out to tender. The plan will of course be first consulted with the stakeholders” he continued.
Closer to the details:
As early as 2035, the electricity supply in Germany is to be virtually climate- neutral, i.e. almost entirely based on renewable energies and renewable fuel.
Last year, we set the course for more speed in the expansion of renewable energies with various legislative amendments at national and European level. In times with little wind and sun, we still need controllable power plants in addition to more flexibility and storage in the system. That’s why the focus must now be on ensuring that all power plants are operated in a climate-neutral manner in the future. This is an enormous transformation task. Not only must power plants be technologically advanced and converted to renewable fuels (especially hydrogen), but at the same time extensive investments must be made in the generation, transportation and storage of hydrogen and its infrastructure.
In recent months, the German Federal Ministry of Economics and Climate Protection (BMWK) has therefore worked with the European Commission to develop a common understanding on the promotion of hydrogen-fueled power plants. This progress made with the European Commission encompasses both the power plants already authorized by ordinance in the Renewable Energy Sources Act (EEG), which are operated directly with hydrogen when they are commissioned (§ 39 o and p EEG), and the hydrogen power plants that are initially allowed to run on natural gas for a few more years and then have to switch to operation with hydrogen by 2035 at the latest (H2 power plant with mandatory switch).
The progress achieved with the EU Commission in very intensive and constructive talks is not yet equivalent to approval of the intended measures under State aid rules, but initially comprises the central components and the relevant framework conditions for the future measures. To a certain extent, this sets out the guard rails within which the state subsidy programs must operate in order to comply with the State aid rules and energy legislation at European level. On this basis, the new draft measures of the power plant strategy are to be published at the end of the parliamentary summer recess and subsequently subject to public consultation, which will determine the details of the planned measures.
The common understanding with the European Commission includes the following points:
Hydrogen Sprinter Power Plants: Plants for the generation of electricity from renewable hydrogen (§ 39p EEG)
This concept is aimed at locations where a connection to an infrastructure such as a large hydrogen or ammonia storage facility, to a regional network or hydrogen cluster, or an import option for hydrogen or ammonia is available at a comparatively early stage. The subject of funding here is the generation of electricity from renewable hydrogen as soon as it is commissioned.
A total of 4.4 GW is planned as a tender volume for the years 2024 to 2028. The program is open to new projects and the conversion of existing natural gas-based power plants.
Hydrogen hybrid power plants: Innovative concepts with hydrogen-based electricity storage (§ 39o EEG)
This concept is designed to develop and test the entire hydrogen chain from variable renewable electricity generation to electrolysis, storage, and re- conversion of the generated hydrogen into electricity. The overall system therefore combines wind and PV plants with a hydrogen-based electricity storage (electrolyzer, a local hydrogen storage and a hydrogen power plant), creating a controllable renewable electricity generation based on renewable hydrogen. It is thus particularly suitable for locations where hydrogen infrastructure is only available at a comparatively late stage.
A total of 4.4 GW of tender volume is planned. The tender volume refers to the capacity of the reconversion, i.e., the output of the hydrogen power plants.
H2-ready power plants / convertible power plants with fuel switch obligation by 2035
These are new or existing power plants that initially run on natural gas for a clearly limited period of time and must switch to running on hydrogen by 2035 at the latest in order to succeed in decarbonizing our power plant fleet.
This measure is intended to address 15 GW of power plant capacity. Of this, a total of 10 GW would be put out to tender in 2024 to 2026, of which up to 6 GW could be reserved for new power plants. Such volumes that are not subsidized with new power plants are open to the conversion of existing power plants to hydrogen operation.
All three tenders for hydrogen power plants and convertible / H2-ready power plants have in common that they will allow broad participation of market players. In addition, precautions will be taken to minimize the risk of government over-subsidization and to keep the intensity of competition in the tenders high.