The cost of building a hydrogen network in Germany is paid by the citizen for 30 years

The Federal Agency for Networks has defined frameworks and mechanisms for financing the construction of the hydrogen network in Germany in the coming years, in a new step on the road to the transition to more sustainable energy sources to carbon neutrality in 2045.

According to data monitored by the Washington-based Specialty Energy Platform, the grid spans more than 6,000 miles (9,700 kilometers) and costs about 20 billion Euros ($21.6 billion).

According to the new decision, private sector companies will take over the task of building the basic network for the transport of hydrogen and will recover their investments through fees to be paid by consumers.

The fees, which will last until 2055, will be imposed on all entry and exit points of the network, and the fees will be reviewed by the authorities every 3 years, and in the short term, the government will provide temporary financial assistance.

In November 2023, the government unveiled a draft plan to build the network, which will begin transporting hydrogen next year (2025).

By 2037, the grid will be able to connect ports to power plants and production and storage centers in various parts of Germany, Europe’s largest economy.

The Agency President Klaus Miller says, “Network operators and investors now have a reliable regulatory framework that facilitates the financing of the core network by the private sector… At the same time, consumers can count on uniform and affordable fees across Germany”.

He added, in a press release published by the agency on its official website, “The ball is now in the court of the network operators to start the hydrogen economy”.

The next step for Germany’s hydrogen grid is for hydrogen grid operators to submit formal applications to start by mid-2024, according to the Washington-based Specialized Energy Platform.

The agency says Germany’s hydrogen network represents an entirely new infrastructure that, while crucial, is prohibitively expensive.

The plan relies on financing from private sector companies, to be fully recovered through network usage fees added to the bills.

The IEA expects demand for hydrogen in the first few years to be low, but in the long run there will be a well-established hydrogen market that will include more consumers.

Therefore, initially, the agency will set network fees at a level lower than that which covers the cost during the early years to prevent exorbitant tariffs from hindering the network’s launch.

According to the agency, which is responsible for determining the tariff method, consumers who use the hydrogen network after the first phase with lower tariffs will bear the costs of building the network.

The results of a recent study show that the cost of building a hydrogen pipeline network in Germany will be 87% more expensive than using the existing gas network.

The study, by the University of Cologne’s Institute for Energy Economics, says that extending the core hydrogen network to serve homes, small businesses as well as industry consumers would cost end consumers prohibitively even before the actual costs of producing hydrogen itself were taken into account.

The report, titled “Estimating Future Hydrogen Network Usage Fees,” analyzed the construction costs of the 9,700-kilometer network, consisting of existing gas transmission pipelines and hydrogen pipelines, as well as the costs of converting an existing gas distribution network with more than 450,000 kilometers of hydrogen pipelines.

According to the findings, the average fee to be paid by all German consumer groups is expected to be about 0.018 Euros ($0.0195) per kilowatt-hour by 2045, according to a report by the hydrogeninsight platform seen by the specialized energy platform.

When adjusted for inflation, the cost to consumers will be 87% higher than using the current gas grid.

Currently, fees for using Germany’s gas network account for about 18% of consumer bills, plus fuel costs, environmental fees and other taxes.

Small businesses are expected to bear the largest increase among hydrogen network customers by up to 126% based on the region.

The rise for households will range from 83% to 88%, with the smallest increase going to the industrial sector, ranging from 49% to 74%.