Government defines “green hydrogen”, decides rules for rapid market ramp-up

The government cabinet has agreed on a set of rules accompanying the latest version of the Renewable Energy Act (EEG) which specify support for new hydrogen production facilities and other renewable installations such as biogas plants and agri-solar PV.

Energy minister Peter Altmaier said: "We are creating clear and pragmatic requirements for green hydrogen. In doing so, we are ensuring a rapid market ramp-up of this technology of the future and implementing an important goal of the National Hydrogen Strategy."

To make the ramp-up of electrolysers more attractive, they will be partially exempt from the renewable energy surcharge (EEG levy). This will make the electricity used in the process cheaper.  The EEG levy is generally paid by all electricity consumers with their power bills and the money is used to pay for feed-in support of renewable installations. Producers of green hydrogen, who use renewable energy for the process, are exempt. So are energy intensive companies, such as large chemical plants, who largely focus on electrolysis, regardless of the origin of the electricity used in production. “The EEG levy exemption makes the electrochemical production of green hydrogen significantly more economical and thus more competitive compared to conventional hydrogen production,” the energy ministry writes in the bill.

In the interest of a rapid ramp-up of hydrogen production, the ministry decided against a stricter definition of green hydrogen and against rules for the location of electrolysers. “Electrolysis plants should be installed in particular at locations where a high renewable energy potential and geological storage facilities can be used for hydrogen storage and where access to a hydrogen infrastructure is possible. In this way, electricity grid bottlenecks and additional grid expansion requirements can be reduced,” the ministry writes. The final decision on such location rules was however postponed “until a later date”.

Ingbert Liebing, head of the Association of Municipal Utilities (VKU), criticised the new rules as a “step backwards” instead of a market ramp-up for hydrogen. He told Tagesspiegel Background that electricity from storage facilities for electrolysis and plasmalysis (the splitting of wastewater into hydrogen and oxygen) should also be exempt from the levy, but was omitted by the ministry.

Renewable Energy Association BEE said that all hydrogen production should have sustainability criteria, something that is missing for energy intensive industries. "Only green hydrogen serves the climate goals," said BEE president Simone Peter. "It is important that electrolysers are operated in a way that serves the system and that the electricity comes exclusively from renewable energy plants,” she added.

Parliament committee proposes use of “orange” hydrogen

On the same day when the cabinet passed the rules for “green” hydrogen, the environment committee of the German federal parliament (Bundestag) opened up prospects for another type of hydrogen – so called orange hydrogen made directly from biogas or biogenic waste. It will be included in the law on the greenhouse gas reduction quota in transport. Accordingly, the use of orange hydrogen is to count towards the GHG quota that mineral oil companies must meet when placing fuel on the market.

More space for agri-photovoltaics and follow-up support for biogas plants

The ordinance also includes an extension of the area for agri-photovoltaic plants, specifications on the so-called innovation tenders for storage capacities and follow-up support for small-scale liquid manure biogas plants. The follow-up subsidy for smaller liquid manure plants after the expiry of the previous feed-in support under the Renewable Energy Act (EEG) in 2024 was criticised by the German Biogas Association (Fachverband Biogas) and the German Farmers’ Association (DBV). They argued that the planned remuneration was “far removed from any economic viability” for the plant owners. Instead of using more liquid manure in biogas plants, the draft bill would exclude many plants from continuing operations, because it prohibits the downsizing of existing plants and the increased use of liquid manure.