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'More important problems to solve' | IEA head criticises German focus on green hydrogen

Fatih Birol warns that renewable H2 will remain expensive, with only 7% of projects set to be built by 2030

Fatih Birol, executive director of the IEA
Fatih Birol, executive director of the IEAPhoto: Flickr/Friends of Europe
International Energy Agency (IEA) executive director Fatih Birol warned that Germany’s optimism around green hydrogen could be misplaced in an interview published this week with newspaper Handelsblatt.

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“I always ask how many of these green hydrogen projects will actually be completed by 2030,” he said.

“One thing is certain: only 7% of global hydrogen projects will be completed by 2030,” Birol added.

This reflects the IEA’s most recent renewables forecast, which estimated that while 360GW of electrolyser projects were in the pipeline for development by 2030, only 12GW had started construction or reached a final investment decision (FID).

While more projects could reach FID in the coming years, particularly as subsidies in the US and Europe promised last year start to flow, developers have previously estimated that construction of large projects could take around four years — which could mean a deadline of two years for all 360GW to start construction for commissioning by the start of next decade.

“The costs will be very high. And it is still completely unclear who will demand the hydrogen,” Birol continued.

“Hydrogen will definitely become more important, but we first have to create demand for it in order to reduce costs. The current excessive expectations could distract from the fact that there are more important problems to solve.”

While H2 can be used to displace existing grey hydrogen produced from natural gas for oil refining or fertiliser production, green molecules are predicted to be much more expensive in the short-term even accounting for Europe’s carbon prices — meaning companies will be unlikely to switch without subsidies to fill the price gap.

Meanwhile, it is difficult to predict short-term uptake for new uses, such as direct iron reduction for steelmaking, fuels for heavy-duty trucking, shipping and aviation, or co-firing in gas-fired power plants.

Some analysts have warned that Germany’s predicted hydrogen demand of 95-130TWh (2.4-3.3 million tonnes) by 2030, compared to its current 1.4 million tonnes of demand, would involve a massive rollout of these new use cases, particularly for power generation due to the relatively long lead times for use in shipping or aviation.

The German government plans to hold a series of tenders for up to 23.8GW of hydrogen-fired power, of which 15GW would be for “hydrogen-ready” gas-fired power plants.

Birol also strongly criticised Germany’s decision to shut down all its nuclear plants, the last of which were closed in 2023, describing it as a “historic mistake”.

“If I had to choose between building new gas power plants and keeping existing nuclear power plants online, I would choose nuclear power plants,” he added.

Birol also cautioned against attempts to revive the moribund German solar manufacturing industry, warning that “governments should look at which areas they can be competitive in”, particularly given manufacturers in China are not even producing at full capacity.

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GermanyEuropeIEAGreen H2Power
Published 24 January 2024, 10:42Updated 25 January 2024, 14:12