For the German and European energy transitions as well as globally, green hydrogen will play a major role as a future energy source. Germany, in particular, will have to import a large proportion of the green hydrogen and synthetic products it needs, since it only has limited renewable energy sources at its disposal combined with high demand.

In this context, the recently completed HYPAT project set itself the goal of identifying sustainable locations for the green hydrogen economy of tomorrow. It conducted technical, economic, regulatory and social analyses to develop a global hydrogen atlas that uses interlinked energy system models to provide detailed information about the production of green hydrogen and the associated infrastructure required, including international transportation options and the demand situation. The analyses also considered the needs of the potential partner countries, identified the opportunities resulting for them, and conducted acceptance and stakeholder analyses.

A key finding is that the global demand for green hydrogen and its synthesis products will increase significantly, especially if ambitious greenhouse gas reduction targets are set. The total hydrogen demand worldwide in 2050 ranges between 4 and 11% of global final energy demand. Germany’s demand is higher, at around 20% of its final energy demand, partly because of the structure of its industries and the major role played by steel and chemicals as potential demand sectors.

More investment is needed

The analyses conducted within the project also show that the global supply potential of green hydrogen is sufficient to meet this global demand, even when including restrictions such as water scarcity. This offers Germany good opportunities for diversifying its imports and thus hedging risks. However, it would be more favorable economically to focus on a few supply countries to achieve economies of scale and avoid high costs for production and transportation. The market ramp-up is currently very sluggish. Multiple uncertainties such as geopolitical unrest, supply disruptions, unknown purchase quantities or high prices for energy and raw materials mean that the necessary investments are not being made.

According to calculations made in the project, the costs of importing hydrogen to Europe are expected to be between 3.5 and 6.5 EUR/kg in 2030 and between 2.5 and 4.5 EUR/kg in 2050. Wholesale prices for Germany are likely to remain comparatively high even in the long term, at more than 4 EUR/kg in 2050. Germany can expect to have the highest hydrogen prices within the EU and globally.

Challenges to competitiveness

The expected high prices will have an impact on the competitiveness of German industry - especially those industrial applications that will have to rely on green hydrogen in the future to reduce greenhouse gas emissions. Countries such as the United States or Canada, which have large and low-cost resources to produce and then use green hydrogen in the relevant industrial applications, have competitive advantages here.

Furthermore, limited supply in the short and medium term means that hydrogen use should be focused on those sectors where there are hardly any other viable options, such as steel and basic chemicals, international aviation and shipping, or refineries. For hydrogen and derivatives to be used in other areas, such as heating buildings or in road transport, prices would have to be very low, which does not seem to be indicated at present.

Regarding the supply situation, the HYPAT project concludes that the EU can largely supply itself economically with hydrogen, but is reliant on imports of synthesis products, both in terms of the quantities required and for economic reasons. Exporting countries and the development of international transport capacities should therefore be actively supported by Germany. Within the EU, more is currently being invested in countries that have a high demand for hydrogen but less in countries with low-cost production potential such as France. Here, it is important to set the right EU-wide priorities in the future.

Germany is one of the few countries with a high demand for imports

As there is only moderate demand for imports at a global level, global trade between 2030 and 2050 is likely to only account for one-third of final demand. Above all Germany, but also the Netherlands, Belgium and Italy in the EU, as well as Japan and South Korea at a global level, will have high demand for imports.

Spain, France, Denmark, Great Britain and Poland are especially suitable for supplying the EU countries that cannot supply themselves. A well-developed European hydrogen pipeline infrastructure is therefore in Germany’s interests. Germany should also cooperate with importing countries both within and outside the EU to accumulate buying power.

As potential export countries, Morocco, the United Arab Emirates, Canada, Brazil and Chile are especially interesting from a techno-economic viewpoint, since these have favorable renewable energy conditions in addition to access to low-cost capital. It is also important to consider other criteria such as geopolitical interests, human rights and democracy aspects. Water availability, national regulations and domestic energy use also play an important role here - hydrogen projects intended for export should not crowd out local energy transition activities or increase local emissions. The local population should benefit from any projects established. Hydrogen projects often harbor the potential for conflicts in these countries.

The project’s conclusion regarding Germany

At the end of the project, Prof. Martin Wietschel, Head of the Competence Center Energy Technology and Energy Systems at Fraunhofer ISI and coordinator of the HYPAT project, sums up the results as follows: “In the HYPAT project, it became clear that Germany, as a country with future high demand, must ensure a stable and sustainable supply of the promising future energy source of hydrogen, especially with a view to its future competitiveness, since there is no alternative to using hydrogen for the decarbonization of important industrial sectors. This is why efforts must be made to establish international collaborations with other importing countries and with exporting countries. Past mistakes, such as one-sided dependencies, should be avoided and social and political factors should play a major role in addition to economic ones when selecting future partners”.

Led by Fraunhofer ISI, research in the project “HYPAT – H2 POTENTIAL ATLAS” was conducted by the Department for Environmental/Resource Economics and Sustainability at the Ruhr University Bochum (RUB), the Fraunhofer Research Institution for Energy Infrastructures and Geothermal Systems IEG, the Fraunhofer Institute for Solar Energy Systems ISE, the German Institute of Development and Sustainability (IDOS), the Energy Systems Analysis Associates – ESA² GmbH, the Institute for Advanced Sustainability Studies (IASS), the German Energy Agency (dena), and the German Corporation for International Cooperation (GIZ). The project was part of the “Hydrogen Republic of Germany“ ideas competition, funded by the German Federal Ministry of Education and Research (BMBF).