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“Enormous opportunities”

15. August 2023

Green hydrogen is still a rare and hence expensive commodity. Can it replace fossil fuels, and if so, in which areas? DIMENSIONS discussed these questions with Professor Claudia Kemfert. In an interview, the renowned energy economist set forth her views on the promise and limitations of this climate-friendly gas.

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(Image: Oliver Betke)

Professor Claudia Kemfert

Born in 1968, she has headed the energy, transport and environment department of the German Institute for Economic Research (DIW) in Berlin since 2004 and is professor of energy economics and energy policy at Leuphana University in Lüneburg. The recipient of multiple awards, Professor Kemfert also serves as an external expert and political consultant on various sustainability advisory boards and commissions. Her new book, Shockwave, has just been published.

Professor Kemfert, will climate friendly hydrogen be our most important energy source in future?

The energy system of the future will be fossil-free, and therefore largely emissions-free, efficient and economical. For two reasons, green hydrogen produced with green electricity will be one of the most important sources of energy. First, green hydrogen will be produced at times when there’s a surplus of green electricity and will thus be an important means of storage. As a long-term storage system, it can be used at times when green electricity is in short supply. Second, you need green hydrogen in places where direct electrification isn’t possible. Direct electrification is basically always the most efficient solution, but it’s not feasible everywhere.

Which sectors do you see as having potential for green hydrogen?

In industry, mostly, but also in heavy transport, shipping and aviation; the last will use e-fuels that depend on the methanization of hydrogen. You’ve always got to remember one thing: producing hydrogen is a complicated business, meaning that the degree of effectiveness declines with each additional transformation. Of the initial energy, 50 to 80 percent is lost in the transformation and application process. This makes green hydrogen precious, something that should only be used in special situations – it’s basically the champagne of energy sources. This means that the direct use of green electricity for electromobility, for example, or heat pumps, will always be the cheapest, most efficient approach.

Presuming that demand for green hydrogen rises sharply in the next few years, what would you want to see governments do?

Demand for green hydrogen will have to increase or we won’t be able to achieve our climate goals. I’d like to see governments back this growing market with comprehensive support. First of all, we’re going to need to generate a lot more green electricity, because without it we can’t produce green hydrogen. We have to pick up the pace significantly to expand green electricity capacity all over Germany. Moreover, electrolysis plants shouldn’t be subject to unnecessary fees and restrictions: they should be subsidized instead. And the parameters need to be adjusted to make sure they can grow. Especially in places where there’s surplus green electricity, it should be used and not capped. In Germany we need less red tape and to encourage digitalization. When it comes to permits, Germany needs to be leaner and more innovative.

… and what about industry?

Industry has finally got its act together and is investing massively in the green economy. Companies have abandoned their former hesitation and sometimes even their intentional obstruction of the process of transformation to truly emission-free ways of running their businesses. This process is now in full swing. Investing in a fossil-free, emission-free economy creates added value and jobs with a secure future. This strengthens resilience and immunizes us from global geopolitical crises. It doesn’t get more win-win-win than that.

Germany has set itself the goal of playing a leading role in hydrogen technology in Europe and the world. Do we have a chance of achieving this goal?

Yes, we do – but only if we generate more green electricity. Lots more. We’re competing with countries in sunny parts of the world that can produce green hydrogen at much lower cost. However, Germany enjoys competitive advantages in three areas: 1) Technology and expertise; 2) it still has a robust industrial base, with plenty of innovative medium-sized companies; and 3) political stability thanks to being a proper democracy. In a time of global instability, the last of these three shouldn’t be underestimated. If we make effective use of all of these, we have a good chance of taking the lead in hydrogen technology.

Basically speaking, what do you think we need to do to create the infrastructure and parameters for transport and storage, for instance?

In future, Germany is going to have to import a large share of the green hydrogen it needs. This means having to have adequate infrastructure in the form of terminals and pipelines. Building this infrastructure will require well-targeted financial inducements and the right parameters for industry.

What factors could prove to be the greatest obstacle to the widespread use of hydrogen in transport – or possibly even prevent it altogether?

Transport isn’t where the greatest potential for using green hydrogen lies, since the direct use of green electricity is much more efficient, because it has a higher degree of effectiveness. In other words, using hydrogen or e-fuels for transport involves five to eight times more green electricity than if it’s used directly. E-fuels are necessary in some areas of heavy transport, for shipping and aviation. To use them there, you need the right infrastructure. Therefore, a lack of adequate infrastructure, high costs and other, technologically more efficient alternatives could all prove to be obstacles.

Can we learn from other countries when it comes to hydrogen strategy? What countries are ahead of us?

Decades ago, voices could be heard in many industrialized countries calling for a “hydrogen society”, but nothing really came of this. Japan pinned its hopes on hydrogen very early on, creating infrastructure and enabling a wide range of applications. Of course, Japan has plenty of nuclear energy, providing it with large amounts of electricity necessary for producing hydrogen. Carmakers were quick off the mark, too, turning to hydrogen for fuel cell vehicles. Since electric vehicles have established themselves as a more efficient alternative, they’re steering toward hydrogen there too, at least in the passenger car segment. Hydrogen production is starting all over the world, in Holland, for example, but also in Asia and the Arab world. But as far as I’m concerned, there isn’t a clear, comprehensive hydrogen strategy anywhere, at least not on the scale that would be necessary. Here and there you see the occasional project or plan.

Is Germany too late to seize this opportunity?

In fact, the best time to have started would have been twenty years ago. If – and for no good reason – we hadn’t hit the brakes on the Energy Revolution and throttled the expansion of renewable energies and let important industries and know-how slip away, we’d have enough green electricity and could produce plenty of hydrogen with surplus green electricity, making us the number-one nation for environmental protection. Unfortunately, we squandered this opportunity. Now we’ve got to play catch-up and do better. The Energy Revolution offers enormous technological and economic opportunities.

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