Germany's KfW to provide $25 bln loan for hydrogen network
Companies sceptical if hydrogen reliance is realistic
Germany trying to integrate renewable energy into grid
60% of hydrogen network will utilize gas pipelines
Big investment needed for retrofitting or building pipelines
By Christoph Steitz
LONDON, Nov 26 (Reuters) -KfW KFW.UL will provide a 24 billion euro ($25 billion) loan to help develop a future hydrogen network in Germany, the state lender told Reuters, at a time when companies have warned that the technology will take longer than expected to take off.
Germany is betting on hydrogen, which can be used in part to replace natural gas, as it seeks to decarbonise the economy and find ways to absorb intermittent renewable supplies into the power grid.
A core 9,040-kilometer network for hydrogen, to be built by 2032, is an essential part of the planned shift to the fuel.
While existing natural gas pipelines will make up 60% of the network -- connecting ports, industry, storage facilities and power plants -- their operators and owners will still have to shoulder billions of euros in investments to either retrofit lines for hydrogen or build new ones.
In order to keep user fees for the network at an acceptable level, KfW will compensate operators via a so-called amortisation account, with plans to have the costs paid back by 2055, KfW said.
As revenue from network fees increase in the future, surplus income will be redirected to the amortization account, facilitating gradual repayment of the loan, KfW added.
If the amortization account is not balanced by the planned end of the hydrogen ramp-up in 2055, the federal government will assume 76% of the risk with the remaining 24% to be borne by the core network operators.
KfW's announcement comes amid growing scepticism among German companies about whether Berlin's plans to rely more heavily on hydrogen to cut emissions are realistic and affordable.
In September, Norway's Equinor EQNR.OL scrapped plans to export hydrogen to Germany, citing high costs and insufficient demand.
Earlier this month, German state-owned utility Uniper UN0k.DE warned it was likely to slow down a planned 8 billion-euro investment in cleaner fuels amid slower than expected demand for hydrogen from industry.
($1 = 0.9514 euros)
Reporting by Christoph Steitz; Writing by Riham Alkousaa; Editing by Bernadette Baum
Latest News
Disclaimer: The XM Group entities provide execution-only service and access to our Online Trading Facility, permitting a person to view and/or use the content available on or via the website, is not intended to change or expand on this, nor does it change or expand on this. Such access and use are always subject to: (i) Terms and Conditions; (ii) Risk Warnings; and (iii) Full Disclaimer. Such content is therefore provided as no more than general information. Particularly, please be aware that the contents of our Online Trading Facility are neither a solicitation, nor an offer to enter any transactions on the financial markets. Trading on any financial market involves a significant level of risk to your capital.
All material published on our Online Trading Facility is intended for educational/informational purposes only, and does not contain – nor should it be considered as containing – financial, investment tax or trading advice and recommendations; or a record of our trading prices; or an offer of, or solicitation for, a transaction in any financial instruments; or unsolicited financial promotions to you.
Any third-party content, as well as content prepared by XM, such as: opinions, news, research, analyses, prices and other information or links to third-party sites contained on this website are provided on an “as-is” basis, as general market commentary, and do not constitute investment advice. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, it would be considered as marketing communication under the relevant laws and regulations. Please ensure that you have read and understood our Notification on Non-Independent Investment. Research and Risk Warning concerning the foregoing information, which can be accessed here.
