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US to share in Germany’s offshore wind leadership under G7 net-zero deal

27 May 2022 Cristina Brooks

Germany's offshore wind, hydrogen, and electric vehicles (EVs) technology has a role to play in advancing the US towards its net-zero target.

US Special Presidential Envoy for Climate John Kerry signed the joint declaration of intent on a German-American climate and energy partnership in Berlin during the G7 Climate, Energy, and Environment Ministers meetings on 27 May.

Building on a July US-German climate and energy partnership, the new declaration details which technologies will be chosen for technology transfer between the two countries.

Since then, the countries have set up working groups on offshore wind, hydrogen, and zero-emissions vehicles, three technologies that the US Ambassador to Germany Amy Gutmann called "really important" for preventing climate change at the press conference that hosted the signing.

The declaration will help Germany and the US reach their respective deadlines for net-zero by 2045 and 2050. Kerry hoped they could serve as examples for other countries.

Gutmann praised Germany's "remarkable steps [taken] to diversify energy sources away from Russia," indicating its pledge to reach nearly 100% renewable power under the Easter Package of policies.

"Our two counties have held multiple discussions on how the US can help Germany achieve its energy security goals," she said.

Kerry acknowledged Germany's leadership in renewable energy. "The fact is that Germany was a first mover. It was a nation that took a significant chance on investment in renewable energy way before it was fashionable, or even before it was economic," said Kerry at the press conference.

"Germany as a result has been a huge contributor to the global capacity for wind and solar and is making a huge difference today," Kerry added.

"What Germany and the US have both shown is that, if you're a country that is a first mover and that invests now … there are enormous economic, social, and security benefits, and we are anxious to grow this by working in this partnership," said Kerry.

Offshore wind technology transfer

As part of the declaration, a German-American climate and energy partnership could transfer some of Germany's world-leading offshore wind technology to US interests.

In June, a US delegation was invited to Germany to visit a wind farm near Helgoland.

Germany commissioned its first offshore wind farm, 60 MW Alpha Ventus, in 2010, while the first US project, 30 MW Block Island, didn't start until 2016.

Germany has the third-most offshore wind capacity of any country after the UK and China, according to the Global Wind Energy Council.

German utility RWE is one of the companies investing in the nascent US offshore wind sector. In February, RWE's Bight Wind joint venture won an American seabed lease enabling it to build a 3 GW offshore wind project off New York and New Jersey.

In offshore wind, the countries also plan to produce a joint paper on tackling sector "bottlenecks."

Trade group WindEurope has criticized permitting problems in the EU. It also warned European wind turbine manufacturers were struggling with high prices for steel and other commodities.

Meanwhile in the US, manufacturer Siemens Gamesa has recently paused production at its wind turbine factories amid supply chain problems and uncertainty around subsidies.

Hydrogen certification

Through the partnership, the US and Germany plan a joint workshop on hydrogen certification in June.

The US is both a major producer and a consumer of fossil-fuel sourced hydrogen, according to a supplementary information note on the new partnership.

However, Germany is one of the top countries in the world for renewable-energy-sourced hydrogen production investment, according to a recent ranking by consultancy Cornwall Insight.

Germany has also announced plans to follow the Netherlands by offering subsidies for renewable hydrogen production using a mechanism known as carbon contracts for a difference.

Certifications that define what hydrogen production can be considered renewable is a crucial step for enacting hydrogen subsidy schemes.

The EU's executive body is pursuing certification, having released a draft delegated act on standards for renewable hydrogen and other similar fuels on 20 May.

The executive arm proposed raising the bloc-wide target for renewable hydrogen production and pledged subsides under the March REPowerEU policy package.

Electric, zero-emission vehicles

The pair of countries will continue with their working group on zero-emission vehicles, which includes both all-electric and all-hydrogen-fuel-cell varieties.

Germany is the largest European market for EVs, and EVs account for 25% of new cars sold, according to the 23 May Global EV Outlook 2022 report.

Germany also offers some of the highest EV subsidies in Europe, the report found.

But in the US, S&P Global expects sales and registrations of EVs to be limited by 2022 and likely into 2023 due to both constrained production and availability.

Investing in net-zero globally

Central and Eastern Europe and Southeast Asia, which the White House called a "growing emitter," were the regions the US had singled out for clean energy investment in July's climate pledge.

The US and Germany also sought to boost the energy security of Ukraine in the pledge, made months before Russia's invasion.

Countries that invest in energy transition will enjoy an economic boost while avoiding long-term costs, said Kerry at the press conference.

As part of the declaration, Germany and the US will keep working together on existing projects to fund net-zero tech in emerging economies.

The pair will continue to support the existing First Movers Coalition, a group of companies including Microsoft and Boeing committed to green procurement, established at COP26 climate conference last November.

Another effort is the Net-Zero World Initiative, a net-zero investment project led by the US Department of Energy and American philanthropists, targeting decarbonization in places like Argentina, Chile, Egypt, Indonesia, Nigeria, and Ukraine.

Separately, G7 member UK released a statement calling on countries to fulfill their pledges in the COP26's Glasgow Climate Pact, which called for more climate finance for developing countries.

Since the start of the year, German Chancellor Olaf Scholz has used Germany's G7 presidency to urge for the creation of a "Climate Club," an international bloc that would impose costs on countries failing to do their share to reach global net-zero.

Posted 27 May 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.


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