'Germany agrees €16bn plan to subsidise first 10GW of hydrogen-ready power plants'

After months of negotiations, German ministers have today (Monday) agreed a plan to spend a reported €16bn ($17bn) subsidising the construction of up to 10GW of “hydrogen-ready” gas-fired power plants.

The tenders will be launched in the “short term”, said Germany’s Ministry for Economic Affairs and Climate Action (BMWK), without revealing a more specific timeframe, while the switch from gas to 100% hydrogen must take place between 2035 and 2040, with the exact switchover date to be decided in 2032.

Subsidies for the programme will be financed from the country’s giant €212bn ($228bn) Climate Transformation fund.

The plants will be built in places that serve the system, said the BMWK today.

However, it is not yet clear whether the tender will finance four giant 2.5GW hydrogen-ready plants, or if officials want to spread the 10GW capacity between more smaller plants.

The power plant plan will also see Germany developing its own “technology-neutral” capacity market mechanism by 2028, which the hydrogen-ready plants will also be able to bid into when they are operational and connected to the grid.

This means that power plants will be paid by the government to have a certain amount of capacity permanently on standby, largely to back up intermittent renewable energy sources.

And the government also put forward a proposal to streamline the fiscal and planning regimes for green hydrogen installations in Germany, most likely in order to ensure a local supply for power producers.

“It was also decided that existing obstacles to the construction and operation of electrolysers should be removed without restriction and that all opportunities should be used to accelerate the expansion of electrolysers in particular, which should be operated in a system-supporting manner,” the BMWK said. “Furthermore, there must be no double charging of levies and fees on electricity for storage and electrolysis, so that there are market-based and system-beneficial incentives to produce hydrogen.”

“The use of surplus electricity will be made possible without restriction; all existing regulatory hurdles will be removed as far as possible.”

The previous proposal envisaged a tender for a total 23.8GW of gas fired plants, of which 15GW were to be hydrogen-ready by 2035. However the trio of ministers tasked with finalising the plan, from the three coalition parties — BMWK minister Robert Habeck, finance minister Christian Lindner and federal chancellor Olaf Scholz — appear to have ditched plans to subsidise any gas-only plants.

Moreover, it is not clear how much switching to hydrogen will end up costing Germany’s electricity users. Hydrogen has to be produced either from fossil gas or renewable electricity, making it significantly more expensive to use as a fuel in power applications.

Germany now intends to apply for state-aid clearance from the EU, and will then consult with the public.