German industry warns on electrolysis restrictions

German industries federation BDI has criticised government plans to limit the exemptions applicable for renewable power used in the electrolysis process for producing hydrogen.

The federal government last month proposed rules on exempting the renewable power used by electrolysis sites for producing green hydrogen from the renewable energies law (EEG) levy, as part of several changes to the EEG.

The rules propose that renewable power used by electrolysis sites for producing green hydrogen will from 1 January 2022 be exempt from the EEG levy. At least 85pc of the exempted power must be generated within the German bidding zone, and a maximum 15pc outside the zone. The relevant renewable power must not be subsidised under the EEG or the combined heat and power (CHP) law, but must instead be certified through guarantees of origin (GOOs) coupled with data from the generation sites. For power generated outside Germany, GOOs will suffice.

The exemption applies to relevant renewable power plants' first 5,000 load hours of every calendar year.

But limiting low-cost electrolysis power procurement to unsubsidised, predominantly domestic renewable power, and to just 5,000 hours/yr, risks undermining the profitability of hydrogen projects, BDI head of energy and climate policy Carsten Rolle warned at a parliamentary hearing this week.

Most renewable project developers are assuming annual load hours of 6,500-7,000, and will have problems operating profitably at such a low load, unless their investment support is raised, Rolle said.

But the main problem is the limited pool of available power, given that EEG-supported power is excluded, Rolle said. This could turn out to seriously hamper the growth of electrolysis sites in Germany, Rolle warned.

To remedy the situation, Germany will need to encourage strong growth of renewable power outside the EEG, or the country will need to overturn the so-called "multiple sale ban" — that is to allow EEG-supported sites to also qualify for GOOs.

Policy makers will need to face the issue of location, transmission system operator Amprion's chief executive, Hans-Jurgen Brick, said. It will be difficult to secure local acceptance in south Germany, if new power lines will need to be built to transport the necessary power from the wind-rich north to the south's electrolysers, Brick warned.

The EEG levy, which finances feed-in tariffs and market premiums for renewable generation, is capped at €65/MWh this year and €60/MWh in 2022. The levy alone would add costs of about €3/kg for the hydrogen, compared with costs of "grey" hydrogen produced from fossil fuels of €1-1.50/kg, Rolle said.

The Bundestag is preparing to pass several legislative packages touching on the energy sector before the end of this month, when parliament will break up ahead of federal elections in September.

The SPD-led environment ministry has calculated that Germany will need 100 TWh/yr more power in 2030. Energy and water association BDEW estimates power demand in 2030 at about 700TWh.

By Chloe Jardine