German industry calls for hydrogen contracts for difference to boost lagging rollout

An alliance of German industry and energy groups has urged the government to step up support for the hydrogen sector with dedicated so-called contracts for difference (CfDs) to stir demand, warning that rollout is being held back by high costs and regulatory hurdles.

In a joint paper and press release, business organisations including BDEW, VIK and BdWR said a key obstacle is the gap between hydrogen production costs and what buyers are willing to pay.“As long as this gap is not closed, final investment decisions across the entire value chain will not materialise,” the groups said.

They added that renewable and low-carbon hydrogen remain uncompetitive with fossil fuels, pointing to regulatory burdens and uncertainty, including EU electricity sourcing rules and network charges. Hydrogen made using renewable electricity, known as green hydrogen, is widely seen as key to cutting emissions in sectors that are difficult to electrify, such as steel and chemicals. Germany has put the green gas at the heart of its industrial decarbonisation plans, but the sector has so far struggled to scale up beyond pilot projects.

To address this, the groups proposed introducing CfDs alongside state guarantees to cover risks such as building out transport infrastructure and uncertainty over whether enough buyers will emerge in the early years. Under the model, support would be awarded through competitive bidding, favouring projects that require the least public funding. The approach would give investors and the government more certainty, the groups argued.

The proposal comes as Berlin prepares its 2027 federal budget. The associations called on policymakers to allocate sufficient funding to establish the scheme. “The time for waiting in the hydrogen rollout is over. There is no knowledge problem, but an implementation problem,” said Kerstin Andreae of BDEW.

Research into hydrogen projects in Germany from the past years have revealed a persistent gap between ambition and reality, with high production costs, weak demand, and infrastructure uncertainty continuing to hold back the sector. While the country has approved a plan for a national hydrogen pipeline network, the so-called core network, its actual size and timeline depend heavily on how quickly hydrogen-ready gas power plants are built, leaving the infrastructure picture uncertain.