Germany gets serious about decarbonising its prized heavy industry

Germany places a large bet on hydrogen produced using renewable energy in its highly anticipated national hydrogen strategy that serves to underpin the country's ambitions to become a global leader in the technology. The strategy puts a clear focus on this "green" variety at the expense of support for using controversial carbon capture and storage (CCS) to produce hydrogen from natural gas. While environmental activists mostly welcomed this approach, industry was critical. But many experts still agreed the strategy opened a new chapter in Germany's energy transition. Read the report here.

In the fight against climate change, hydrogen made with renewable electricity is increasingly seen as a silver bullet for sectors with particularly stubborn emissions, such as heavy industry and aviation. As a result, the emission-free gas has become a big energy-policy talking point in a growing number of countries. As one of the key drivers behind a pan-European effort, Germany has set out to become a global leader in "tomorrow's oil" by beating Asian countries – not only to launch the next stages of its landmark energy transition, but also to secure a promising growth market for its internationally reputed industry. The country will flesh out its ambitions in a highly anticipated National Hydrogen Strategy expected in the coming weeks, which might become part of a "green stimulus" programme to restart the economy after the coronavirus crisis. Central questions remain unanswered: How much green hydrogen should Germany aim to produce? Should it support hydrogen produced with controversial carbon capture and storage (CCS) for a transitional period? Read the article here.

After balking at the Energiewende for many years, German industry has made a notable shift - embracing the energy transition with a new fervour. To be sure, efforts to curb climate change through a far-reaching shift to clean energy will produce winners and losers in the world’s fourth-largest economy, both in industry and regions. But business increasingly sees money to be made from a low-carbon future, alongside benefits for the economy as a whole. With the economy chugging along, many say now is the time to ensure Germany stays a global economic powerhouse – not by shunning the Energiewende, but by harnessing its innovative momentum. Read the analysis here.

The power prices paid by industry are one of the most contentious aspects of Germany's energy transition and its economic impacts. Business lobby groups routinely call the price of electricity a central threat to industry competitiveness. But sweeping claims in this debate hide the fact that there is no single power price for industrial consumers, but instead an exceptionally broad range of prices. Due to a complex system of taxes and levies, they depend on how much power companies need, when they need it, how they source it, whether they compete with rivals abroad, and many other factors. Because wholesale prices have fallen in the course of the Energiewende while taxes and levies have increased substantially, the price of power for industrial consumers in Germany can be both extremely high and extremely low. As German industry plans to use massive amounts of renewable electricity to reach climate targets, the power price is set to become even more important in the years to come. Read the factsheet here.

Volker Hille’s passion project could cut Germany’s entire CO2 output by almost one percent. He is head of corporate technology at Salzgitter Group, one of Europe’s largest steelmakers, which currently emits around eight million tonnes of CO2 per year due to its use of coal in metallurgy. Hille is an enthusiastic advocate of Salzgitter’s proposal to replace the fossil fuel with renewable hydrogen, which could slash company emissions by 95 percent. But, as the engineer explained to the Clean Energy Wire, there is a catch: Salzgitter can’t realise his plan yet because it will cost billions of euros and would result in steel that is virtually climate neutral, but couldn't be sold at present because it is too expensive. Read the interview here.

German industry heavyweights including chemical maker BASF, HeidelbergCement, gas supplier Linde and steelmaker Salzgitter say they are prepared for profound emissions cuts, but still lack the necessary market signal from policymakers. At a Berlin conference this week, unions, politicians and environmental think tanks agreed with the companies that existing policies are blocking the massive investments necessary for deep industry decarbonisation. Participants stressed there is no time to lose because of the sector’s long investment cycles – new plants tend to operate for many decades. Read the report here.

Energy-intensive basic industries – such as steel, chemicals and cement – have to quickly introduce and scale up key low-carbon technologies to avoid wrong investments at a time when governments aim for a climate neutral economy by 2050, says a study conducted by Agora Energiewende* and the Wuppertal Institute for Climate, Environment and Energy. As there is not yet a business case for these technologies and new facilities could have a lifetime stretching beyond mid-century, the government has to introduce the right policy framework now, say the researchers, and propose an emergency programme to make German industry a pioneer for green hydrogen, electrification and process emissions mitigation. Proposed instruments include a carbon contract for difference, a green hydrogen quota and the right government procurement strategy. Read the report here.