German court ruling puts hydrogen funding at risk

Market: Hydrogen
16/11/23

A German federal constitutional court ruling could put close to €20bn of funding for the hydrogen economy at risk and may hold back plans to stimulate renewable or low-carbon hydrogen use in industry.

The court ruled on 15 November that a government decision to reallocate €60bn of unused debt from Covid-19 pandemic support measures to its climate and transformation fund (KTF) is unconstitutional. Finance minister Christian Lindner consequently blocked all non-committed financing from the €60bn pot, with the exception of subsidies for energy efficiency and renewable energy measures in buildings.

The €60bn were part of an overall KTF budget of €211.8bn for 2024-27. Of that, €18.6bn had been earmarked for building out the hydrogen industry, with €3.8bn to be allocated to the sector in 2024 and the remainder over the following three years.

Berlin had not specified all of the exact measures for which the funds would be used in the hydrogen space. But it is planning a wide range of support mechanisms, including tenders to stimulate production and demand, such as use of hydrogen for power generation. Based on its updated hydrogen strategy published in July, Germany wants to have 10GW of electrolyser capacity installed by 2030.

Some funds from the €60bn pot were intended to partly finance the planned carbon-contracts-for-difference (CCfD) mechanism. The CCfD scheme is intended to support large industrial consumers of fossil fuels in their switch to less polluting energy sources, specifically renewable electricity and hydrogen made from renewable power or from natural gas with carbon capture and storage or utilisation.

It remains to be seen to what extent plans will have to be shrunk or even halted because of the court ruling. The government may seek other ways of raising funds, although this might require temporarily lifting its "debt brake".

The KTF, formerly known as the energy and climate fund, was originally financed by proceeds from the tender of allowances under the EU emissions trading scheme (ETS), and from the domestic ETS. Berlin in February 2022 decided to put in unused debts from pandemic relief retroactively — for the already-completed 2021 budget — to be used in the following years.

But this move was contested by members of the CDU/CSU opposition parties, who successfully challenged it at the constitutional court.

By Stefan Krumpelmann

Measures to reach 10GW electrolyser capacity
	Expected contribution in GW

Annual tenders for 500MW of electrolysis from offshore wind in 2023-28	3.0
Projects supported with public funds as Important Projects of Common European Interest	2.5
Investment incentives for electrolysers targeting H2 use in refineries, transport	2.0
Tender for offshore H2 production	1.0
Support for small energy transition pilots	0.2
Other (indirect) measures	1.3
— German government

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