15 Feb 2024, 13:30
Ruby Russel

Green hydrogen production at German refineries stalls due to lack of incentives

Tagesspiegel Background

Projects to build green hydrogen electrolysers at refineries are being cancelled because oil companies lack guarantees that the investments will be profitable, even though the sector is often considered an ideal application, reports energy and climate newsletter Tagesspiegel Background. Experts told the publication there are not sufficient financial incentives for them to switch to electrolysers that run on renewable power, instead of using fossil fuels-based hydrogen. In November 2023, the Heide refinery in northern Germany scrapped a 30MW electrolyser project due to costs. The transition of refineries to green hydrogen is often regarded as relatively simple and cheap relative to other sectors such as steel, because they already depend on hydrogen to produce diesel and other fossil-fuel products and don't face massive massive conversion costs when switching to the green variety,  according to the report.

As a relatively new technology that is yet to reach scale, green hydrogen producing equipment is expensive, according to the Tagesspiegel report, but oil companies could afford to stump up the cash if they were sure of a return on their investments, which have been threatened by a crash in the price for greenhouse gas quota certificates. Companies that sell transport fuels must meet a target for reducing emissions, which they can either do by producing their own low-emission fuels, or by buying certificates from companies that overachieve their targets. Green hydrogen that is used in the transport sector can be counted several times in the quota system. However, the price of GHG quota certificates crashed last year – allegedly because it was flooded by wrongly declared biodiesel from Asia, making the use of green hydrogen less worthwhile, the Tagesspiegel reports. “The drop in prices on the quota market poses a risk for the financing of large electrolysis projects,” Christian Küchen, head of the Fuels and Energy Business Association en2x, told Tagesspiegel.

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