The core network mainly involves converting natural gas pipelines
The core network mainly involves converting natural gas pipelines

Germany €3bn Hydrogen Core Network gets go ahead

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

The HCN will be the backbone of long-distance transport pipelines for hydrogen in Germany and part of the European hydrogen backbone connecting several Member States.

The first major pipeline is expected to be operational from 2025, while the completion of the entire HCN is expected in 2032.

Margrethe Vestager, Executive Vice-President in charge of competition policy, said a core network of pipelines to transport hydrogen is crucial to trigger investments in hydrogen production and consumption, and can help accelerate the green transition.

She said, “The German scheme approved today will significantly contribute to the development of a European hydrogen market while minimising any potential distortions to competition.”

The measure will contribute to the achievement of the objectives of the EU Hydrogen Strategy and ‘Fit for 55’ package, by enabling the creation of hydrogen transmission infrastructure that is needed to foster the use of renewable hydrogen in industry and transport by 2030.

The measure aims to facilitate investments in the construction of the HCN. Necessary investments include repurposing of existing gas pipelines to transport hydrogen, and building new hydrogen pipelines and compressor stations.

The construction and operation of the HCN will be financed by hydrogen transmission system operators (TSOs), who will be selected by the German federal network agency, Bundesnetzagentur.

Source: FNB

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 comprises mainly converted natural gas pipelines (60%).

The aid will take the form of a State guarantee which will allow the TSOs ‘to obtain more favourable loans to cover initial losses’ in the ramp-up phase of the HCN.

At first, Germany expects only a small number of consumers to be using the network, and the tariffs will be lower than otherwise needed to cover relevant costs, to encourage this use and facilitate the uptake of hydrogen.

The loans will be provided by the German national promotional bank Kreditanstalt für Wiederaufbau (KfW) at its own refinancing cost, below market rates. The loans will be paid back over a period ending in 2055, with reimbursements being progressively backloaded in line with expected increase in hydrogen demand.

The estimated aid amount corresponds to the additional financing costs that the TSOs would have had to bear absent the State guarantee.

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