Germany to Fund Only a Fraction of Its Gas-to- Hydrogen Plan

(Bloomberg) -- Germany plans to contribute €7.55 billion ($8.3 billion), just a fraction of the €60 billion needed to build new gas-fired power plants that can later be converted to hydrogen. That’s likely to disappoint both industry and climate experts studying how the nation will plug its power gap in the future.

The Finance Ministry’s draft budget plan, seen by Bloomberg, will be discussed by the parliament’s budget committee on Jan. 18 and is expected to be voted on later this month. According to the plan, the funding for the gas power plants will only start in 2028, two years later than previously planned.

The Economy Ministry had earlier set out an estimate of €60 billion for constructing these backup plants needed to keep the lights on as the country switched off its remaining nuclear power plants last year and moves out of coal. However, those numbers were preliminary, and the government expected the market to fund part of the cost.

The Economy Ministry’s calculation now factor in “significantly lower costs,” a spokesperson said in an email. It also assumes hydrogen will become cheaper over time. The country’s existing fleet of power plants will also need modernization over the next 15 years.

The country’s hydrogen plan is part of a push to make electricity supply almost entirely based on renewable energy and fuels as early as 2035. Germany has seen a sharp dip in its climate-warming emissions in 2023, but that’s mostly been on the back of poor off take from power-intensive industries and the nation is still lagging on its wider green goals. 

The earlier coal exit also hinges on the country’s planned 2024 tenders for hydrogen-ready gas power plants. RWE AG — which plans to build 3 gigawatts of these plants by 2030 — recently said that an accelerated exit from the dirty fuel by the end of the decade would be at risk if the tenders don’t take place on schedule.

In mid-November, Germany’s top court ruled that the allocation of €60 billion ($65 billion) in unused pandemic aid to special funds for climate protection, outside the regular budget, was unconstitutional, causing the government to declare an emergency for 2023. For this year, the Finance Ministry had to fill a €17 billion gap in its finances.

(Updates with economy ministry reaction in fourth paragraph)

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