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2 minutes read

Germany Approves €3 Billion Hydrogen Core Network

The European Commission has approved an estimated €3 billion German scheme under EU State aid rules to support the construction of the Hydrogen Core Network (HCN).

The HCN will serve as the main infrastructure for long-distance hydrogen transport pipelines in Germany, forming a crucial part of the European hydrogen backbone that connects multiple Member States.

The first major pipeline is expected to be operational by 2025, with the entire HCN projected to be completed by 2032.

Margrethe Vestager, Executive Vice-President in charge of competition policy, emphasized the importance of the HCN in stimulating investments in hydrogen production and consumption, thus accelerating the green transition. She stated, “The German scheme approved today will significantly contribute to the development of a European hydrogen market while minimizing any potential distortions to competition.”

This measure aligns with the objectives of the EU Hydrogen Strategy and the ‘Fit for 55’ package by enabling the creation of hydrogen transmission infrastructure necessary to promote the use of renewable hydrogen in industry and transport by 2030.

The scheme aims to facilitate investments in the construction of the HCN, which involves repurposing existing gas pipelines for hydrogen transport and building new hydrogen pipelines and compressor stations.

Hydrogen transmission system operators (TSOs) will finance the construction and operation of the HCN. These TSOs will be selected by the German federal network agency, Bundesnetzagentur.

On November 15, 2023, FNB Gas submitted the draft application for the HCN to the Federal Network Agency and the Federal Ministry of Economics and Climate Protection. The core network will primarily consist of converted natural gas pipelines (60%).

The aid will be in the form of a State guarantee, allowing TSOs to obtain more favorable loans to cover initial losses during the HCN’s ramp-up phase. Initially, Germany expects a limited number of consumers to use the network, and tariffs will be set lower to encourage uptake and facilitate hydrogen adoption.

The loans will be provided by the German national promotional bank Kreditanstalt für Wiederaufbau (KfW) at its own refinancing cost, below market rates. The repayment period will extend until 2055, with repayments progressively backloaded in line with the expected increase in hydrogen demand.

The estimated aid amount corresponds to the additional financing costs that the TSOs would incur without the State guarantee.

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