Monday, February 26, 2024

Germany announces €16bn gas expansion

German ministers have approved a €16bn plan to subsidise four gas-fired power plants that can supply up to 10 gigawatts of electricity.

According to the ministerial announcement on Monday (5 February), the proposal creates a “framework for investments in modern, highly flexible and climate-friendly power plants” that can shift to hydrogen.

The announcement follows less than a year after the German government closed down its last remaining nuclear reactors and was made under increasing pressure from the country’s industrial sector.

However, the subsidy scheme has been scaled-back considerably since the plan was first announced in August last year when a potential 23.8GW were envisaged, although it still represents one of the biggest gas expansions in Europe.

Plans for the power stations to shift to hydrogen made from solar and wind power should be drawn up by 2032, enabling the plants to fully switch to hydrogen between 2035 and 2040.

Tenders will be launched in the “short term” according to the German ministry for economic affairs and climate action communication.

The government hopes to attract private investment in the new plants by offering subsidies for 20 years. The subsidies will be financed from the country’s €212bn climate and transition fund.

The plans indicate that power plants that run exclusively on hydrogen are supported by up to 500 megawatts for energy research purposes. But the ministry provided no further financial details under which conditions the power plants will be put to tender.

“As soon as we have been able to examine the details, we will decide whether and with which investments we will participate,” Michael Lewis, chief executive of the German energy utility Uniper SE, said in a statement.

Hydrogen is currently produced with gas and is used only in niche industrial applications like steel, chemicals or cement production, but it is not used for power production.

Therefore, the German ministry’s plans could constitute a significant expansion of hydrogen production in the country.

“All opportunities should be used to accelerate the expansion of electrolysers,” the ministry noted, referring to a process that uses the power of wind and the sun to produce renewable hydrogen.

The plan is to produce it when solar and wind supply are abundant and exceed demand, and then to use it as backup during months when there is less of both.

But with many green hydrogen projects delayed, it is unclear whether enough supply will be available to (partially) replace gas by 2035; or whether supply will be supplemented with hydrogen made from fossil gas and carbon capture and storage technologies, which past failed projects suggest may be more polluting than gas or even coal.

The EU Commission, which previously raised concerns over Germany’s gas expansion plans, must still approve the subsidies.

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