Germany's Electrical Dissociation Potential

Germany's hydrogen strategy, outlined in the National Hydrogen Strategy published in 2020, has seen significant progress in the past two years. The country's operational electrolysis capacity currently stands at approximately 170 Megawatts (MW), a near five-fold increase since the strategy's publication.

According to a comprehensive database, around 230 projects with commissioning dates ranging from 2007 to 2040 are in various stages of development. Of these, projects with a total capacity of 626 MW are currently under construction, with 210 MW expected to come online this year.

In the coming years, electrolyzers with capacities in the two- to three-digit MW range will increasingly come online, contributing to the total electrolysis capacity of all projects planned to come online by 2030, which, according to the database, stands at 8.1 Gigawatts (GW).

However, securing financing remains a crucial challenge for the realization of electrolysis projects in Germany. Many projects compete for limited funding in competitive procedures, which can lead to German projects losing out to projects in other European countries.

Long-term offtake agreements are key to securing reliable demand for hydrogen and realizing electrolysis projects. Companies indicate that specific funding programs for hydrogen projects are still needed to support market ramp-up. The likelihood of realization is high if financing is considered largely secured.

Project developers recommend creating incentives to strengthen hydrogen demand by implementing the revised Renewable Energy Directive (RED III) into national law. They also emphasize the need for innovative financing instruments like special funds (Sondervermögen), securing bankable contracts, risk reduction mechanisms, and supportive policies for energy efficiency and renewables adoption.

The database includes a variety of projects, not just energy projects but also infrastructure projects such as transportation infrastructure and sustainable construction developments. Current activities involve modernizing infrastructure, expanding renewable energy with wind and solar projects, and stabilizing power grids in Ukraine with equipment deliveries since 2023.

It's worth noting that more than 80% of the currently operational electrolysis plants in Germany are supported by public funds. Projects funded under the Important Project of Common European Interest (IPCEI) Hydrogen and the Real Labs of the Energy Transition account for 45% of the installed capacity.

However, less than one-third of the total electrolysis capacity planned by 2030 is supported by a funding program at the national or European level. Strict requirements for green hydrogen by the EU increase production costs, which negatively affects projects.

Most projects planned until 2030 have not yet made a final investment decision (FID). Only projects with known location, electrolyzer capacity, and planned commissioning year are included in the data visualization. The share of projects funded through Real Labs decreases significantly by 2030, as they primarily serve to test new technologies in smaller projects.

Despite these challenges, Germany remains committed to its hydrogen strategy, aiming to significantly increase its hydrogen production capacity in the coming years.