In its most recent statement (Link in German), the National Hydrogen Council (NHC) made an appeal for the establishment of an advanced energy union. In so doing, the German government’s 26-strong advisory body is calling on German and European policymakers to coordinate an overall concept at the EU level. The objective is that European industry assume a trailblazing role in technologies for producing and using hydrogen.
The Council declared that this requires subsidy tools that can be used more swiftly along with a much-simplified subsidy framework with low hurdles for companies that qualify to receive financial assistance. The advisory body further believes that German industry will not stand a chance in the face of global competition without a more ambitious hydrogen strategy and that this does not only hold true for the hydrogen business.
The NHC substantiates the dire urgency by referring to the war in Ukraine and its consequences for the European energy system. The Council sees European companies suffering an additional disadvantage in the world’s competitive arena as a result of the Inflation Reduction Act (IRA) introduced by the US administration, which affects various branches of industry, while bolstering the US energy sector in particular.
With a volume of 269 billion US dollars, the IRA is considered to be the biggest subsidy programme for renewable energy in US history. It is supplemented by 110 billion dollars from the Infrastructure Investment and Jobs Act (IIJA).
A large portion of the funds has been earmarked for the Clean Hydrogen Strategy through which the government is promoting the establishment of a national hydrogen industry. According to the NHC experts, this will immediately make green and blue hydrogen in the US more economical than the grey variant.
The USA has been promoting the hydrogen sector with two types of tax relief. Businesses can deduct up to 30 percent of their investment in the development of projects for producing clean hydrogen from their tax liabilities or receive a tax credit of up to three dollars per kilogramme of hydrogen they produce.
The level of reimbursement depends on the emission reduction compared to fossil hydrogen obtained from natural gas, which must amount to at least 60 percent.
Thanks to this dual-pronged subsidisation, which businesses can receive with relatively little red tape, it is impossible to produce climate-friendly hydrogen more profitably anywhere else in the world. The NHC experts further claim that effective costs are at a level that would otherwise have been projected for 2050. They add that, by providing this support, the US government is ensuring “a high degree of investment certainty along the entire hydrogen value chain.”
The expert committee has identified a series of systemic advantages over the German and European subsidy framework, which so far has consisted above all of carbon dioxide pricing by the European Emission Trading System (EU ETS) and financial support for individual projects.
Supply-side tax relief combined with the requirement to ensure that a substantial part of value added must be allocable to the USA provides incentives to build a national hydrogen economy covering production, transport and application across all sectors. Unlike project subsidies, the US subsidy concept is entirely technology-independent, as subsidy levels are determined solely by climate effectiveness. By contrast, European certification processes are “subject to massive uncertainty.”
Europe will fall behind in vying for technology leadership, especially in view of the supply bottlenecks experienced by commodities, materials, components and the production capacity of required factories. “It is safe to assume that the foreseeable bottlenecks in value and supply chains especially in relation to electrolysers will make it nearly impossible to ramp up production in both regions at the same time.”
In other words, the experts proclaim that if European politicians fail to take action soon, Europe may not be able to create a hydrogen industry until the US has built its own hydrogen economy: “In turn, this would have serious consequences for the competitiveness, employment figures and transformation of industry and the economy as a whole as well as in terms of hitting climate targets.”
The National Hydrogen Council is thus of the opinion that building a hydrogen economy is by no means an end in itself, but rather the foundation of a sustainable, competitive economy in general.