The North Sea and North Africa: if you ask Jens Burchardt, these will soon be the two most important places in Germany’s energy supply. Huge offshore wind farms here, huge solar systems there will produce unprecedented amounts of renewable electricity in the future. And a considerable part of this energy will not flow into the power grid – it will be converted into hydrogen.
This scenario is outlined by the energy expert at the Boston Consulting Group, who has sounded out the potential of the in Germany and Europe. And in the study, excerpts of which are available exclusively to WirtschaftsWoche, he also finds surprising answers to the question of how expensive this scenario will be.
If Germany wants to achieve its climate goals by 2050 and reduce greenhouse gas emissions so much that global warming is limited to two degrees Celsius, the country will need huge amounts of hydrogen. BCG estimates the possible local demand at 350 to 400 terawatt hours per year. For comparison: In 19 EU countries plus Norway and Switzerland, industry today consumes 150 terawatt hours of hydrogen, which was previously produced from gas.
According to the BCG analysts, this existing demand will be the first to be gradually converted to green hydrogen. Hydrogen is used in refineries, for the production of ammonia in fertilizer production and methanol in the chemical industry. 230 terawatt hours per year would be needed to generate the hydrogen for these markets alone – in 2019, 224 terawatt hours of electricity were generated from renewable energies in Germany.
In the medium term, according to BCG, a significant market for hydrogen will also emerge in steel production, where manufacturers will have to build new plants to eliminate their emissions that will replace today’s blast furnace steelworks. This is technically feasible:. BCG estimates that the German steel industry could spend five billion euros per year on green hydrogen in the future.
In addition, there is also a completely new demand from the transport sector: The German company could in future spend 20 billion euros annually on five billion euros and fleet operators three billion euros. In the long term, the hydrogen business in Europe could become a three-digit billion market, according to the BCG analysis.
It’s almost as cold in the transport ship as in space
In the short term, it would be cheapest to always produce the gas where it is needed. Because the transport of hydrogen is complicated and expensive. But because demand is likely to increase enormously in the coming years, Germany will primarily have to use the potential of offshore wind power for hydrogen production, says BCG partner Burchardt.
He sees the best opportunities for this in the North Sea in particular. In addition, the wind blows steadily, the electrolysis systems can run for thousands of hours a year – which makes hydrogen cheaper than at many locations on land. In order to bring the gas in large quantities to the German industrial areas, pipelines would have to be built.
However, according to the BCG analysis, electrolysis with offshore wind power will not be enough. “In a few years, the demand for hydrogen will be higher than we can realistically produce in the North Sea,” says Burchardt. “We have to think about where we can get hydrogen beyond the German borders.”
North Africa in particular is an option, according to the BCG analysis. The authors justify this with the transport costs: If you want to transport hydrogen by ship, the gas has to be cooled to minus 253 degrees Celsius – almost as cold as space – and thus compressed so that it fits into the tanks of the transport ships. Energy is lost in the process, and the cost per kilogram of hydrogen increases.
A new connection to North Africa
For hydrogen from Australia and other distant countries, Burchardt hardly sees a market in Germany. Instead, synthetic kerosene, made from hydrogen, could be imported from overseas. Both are relatively easy to transport.
In contrast, hydrogen in pure form is economical, especially from North Africa, according to the BCG analysis. On the one hand, the costs of generating electricity are very low due to the many hours of sun and wind there. On the other hand, the gas can be transported. According to the analysis, this could cost around or less than two euros per kilogram of hydrogen in 2050.
In Germany, the gas can be produced for less than two to around three euros, hydrogen imported by ship would cost around three euros – similar to domestic production with imported green electricity from North Africa.
“The expansion of a pipeline network is crucial for the future of the hydrogen economy in Germany,” says Burchardt. It is important to start making plans for this today. Otherwise imports will remain significantly more expensive than domestic hydrogen production in the long run.
The Nel share has tripled within a year. Subsidies are spurring the hydrogen industry, but the Norwegian market leader is still a long way from making a profit.