KfW Development Bank has approved a €24bn loan to support the construction of Germany’s national hydrogen core network.
The ambitious 9,040km link, which aims to be completed by 2032, will see existing natural gas pipelines repurposed and new hydrogen pipelines built.
Integrating potential hydrogen production sites and connecting key industrial centres will enable the industrial use of hydrogen as a climate-neutral energy source.
Stefan Wintels, CEO of KfW, said the construction of the network is a pioneering project and crucial for the ramp-up of hydrogen. The Federal Network Agency approved the core network of pipelines last month.
He said, “A successful transition to hydrogen is particularly critical for energy-intensive industries. The amortisation account will play a key role here: the funds provided by KfW via the account will make a significant contribution to a viable financing concept for the hydrogen core network.”
The core network is generally financed privately. By capping network fees, the Federal Network Agency will ensure that the costs for users are affordable from the outset.
A compensation mechanism will finance the difference between the high investment costs of the core network operators and the low revenues from network fees in the initial phase.
As soon as the hydrogen core network operators’ revenue from the network fees exceeds the costs, additional revenue will be returned to the amortisation account.
The financing move is welcome news for a sector which has been grappling with funding challenges, amid ongoing regulatory and offtake uncertainties, and marks a fillip for ‘macro’ project financing.
In September, Equinor scrapped a proposed blue hydrogen network between Norway and Germany, citing high costs and insufficient demand.
The Federal Government expects national demand for hydrogen and derivatives to reach between 95-130 TWh by 2030, rising to 360-500 Twh by 2045.
