Germany leads pack of countries pouring finance into hydrogen

Germany is at the forefront of a group of countries planning on consuming and producing hydrogen, analysis of government funding shows.

UK consultancy Cornwall Insight has released an index ranking the countries that have the strongest market potential for both natural-gas-sourced blue and renewable-electricity-sourced green hydrogen on 22 March.

The firm looked at state funding for hydrogen in 15 countries which have pledged to become hydrogen market leaders. Its ranking puts Germany in the lead, followed by South Korea, Spain, Japan, and the UK.

The ranking is not strictly based upon countries' existing and planned hydrogen production capacity. While Germany has 124 hydrogen production locations at various stages of completion, Spain has 73, South Korea has 17, Japan has 19, and the UK has 79, according to S&P Global Platts data.

The countries topping the ranking not only included European states like France, but also Canada, the US, and Australia. The sole South American country making the list, Chile, has an ambition to become a major green hydrogen exporter based upon its potential for 1,700 GW of solar power.

With significantly higher investment than countries like the UK and a new pledge to boost hydrogen targets to triple the speed of emissions cuts, Germany is currently the global leader on hydrogen policy, wrote Cornwall Insight's Lead Research Analyst Naomi Potter.

Germany not only has a strong government subsidy framework, pledging €7 billion ($7.7) to expand domestic green hydrogen pilots, but it also invests €2 billion ($2.2 billion) in hydrogen exports abroad through international partnerships.

Germany is also a hydrogen imports market for multiple pipelines aiming to feed expected industrial demand as the country tightens its decarbonization aims.

South Korea, Japan spend on hydrogen

South Korea plans to grow its hydrogen market using private sector funding of at least $38 billion.

In February, the Ministry of Trade, Industry, and Energy said companies including five domestic conglomerates—Hanwha, Hyosung, Hyundai, SK Group, and POSCO—had committed to spend this amount by 2030.

The country passed the Hydrogen Economy Act in February. The act mainly deals with the expansion of hydrogen's use in vehicle filling stations and fuel cells and provides for related government subsidies.

The act backs a Hydrogen Economy Implementation Roadmap that will see the country install 310 stations serving fuel cell electric vehicles (FCEVs) by end-2022, and 1,200 stations serving 2.9 million fuel cell EVs by 2040 in addition to creating "hydrogen cities."

Japan, on the other hand, wants hydrogen and ammonia to make up 1% of both the primary energy mix and the electricity supply mix by 2030, including through co-generation with coal and natural gas, under a Strategic Energy Plan passed in October, according to law firm Allen & Overy.

The government also plans to spend at least $3.4 billion to accelerate research and marketing of hydrogen over the next decade, aiming for annual hydrogen demand of 20 million tonnes by 2050.

A Japanese shipyard also took delivery of the world's first seaborne shipment of liquefied hydrogen in February.

Japan and South Korea have both pledged to reach net-zero GHG emissions by 2050.

UK could accelerate hydrogen plans

Hydrogen will also help the UK reach its net-zero target. "With Russia's invasion of Ukraine threatening energy supply and increasing prices across Europe, investment in hydrogen will ... help the UK move away from its reliance on unstable and costly energy imports," said Potter.

The country's industrial sectors are set to use hydrogen to decarbonize, for example in the chemicals and steel sectors.

The current UK administration included both carbon capture technology used to produce blue hydrogen and electrolyzer technology used to produce green hydrogen in the industrial decarbonization strategy launched last year.

Separately, it aims to allocate £240 million ($317 million) in government funding in the next few years through the Net Zero Hydrogen Fund. Subsidies for both blue and green hydrogen production offered from the fund between 2022 and 2025 will attract private investment of £4 billion from the time they launch through 2030.

The UK aims to not only use hydrogen to decarbonize its energy system, but also hopes to reap the competitive and economic advantages of offering hydrogen industry jobs, one of the aims of its oil and gas sector transition strategy.

While the UK already targets 5 GW of blue and green hydrogen production capacity by 2030, Cornwall's analyst believed it could aim higher.

The UK's high renewables output especially from offshore wind, its geographical advantages including salt caverns for carbon capture, and skilled workforce are all promising for hydrogen. "It is clear from our findings that the UK government needs to up its game if it wants to become and remain a major player in the low carbon hydrogen market," Potter said.

Posted 24 March 2022 by Cristina Brooks, Senior Journalist, Climate and Sustainability

This article was published by S&P Global Commodity Insights and not by S&P Global Ratings, which is a separately managed division of S&P Global.