This image shows a hydrogen pipeline.

    Hydrogen as a key technology: everything depends on infrastructure

    Hydrogen plays a significant role in decarbonising the CO₂ intensive economy. As a clean energy source, it can replace fossil fuels and pave the way for a sustainable future. To achieve this requires a functioning infrastructure. In this context, KfW is supporting the construction of the hydrogen core network in Germany – the crucial foundation for market ramp-up.

    Hydrogen is considered a key technology for the energy transition and combating climate change. Green hydrogen in particular, produced using renewable energy sources such as wind or solar power, has the potential to significantly reduce CO₂ emissions. As a clean fuel, it can be used in areas that are difficult to electrify, such as industry, air travel and shipping.

    The hydrogen economy in Germany

    In the study “The green hydrogen economy is taking off – Where does Germany stand?” (German only), Anke Brüggemann (KfW Research) highlights the central role of green hydrogen in achieving carbon neutrality in Germany. “Green hydrogen is currently not yet competitive in Germany compared to fossil fuels,” she explains. “After all, a completely new market has to be established.” Given the limited potential space for the expansion of renewable energies in Germany and better location conditions and cost advantages in other countries, Germany will be highly dependent on imports. Against this background, both national and international cooperation is of great importance.

    Anke Brüggemann also stressed the need for political incentives to advance the hydrogen economy. “Government policies are needed to stimulate the hydrogen market and offset existing cost disadvantages compared to fossil alternatives.” Despite existing challenges, the supply of sufficient green hydrogen will be considered a decisive factor in choosing locations for industry in the future – especially in the context of foreseeable increases in CO₂ prices and the growing importance of climate-friendly products on the global markets.

    This image shows Anke Brüggemann and a quote of hers.
    Anke Brüggemann works at KfW Research on topics relating to the implementation of the energy transition in the energy and industrial sectors in particular.

    Decisive for the future: the hydrogen core network

    Effective infrastructure is central to the marketability of hydrogen. “The hydrogen core network is an essential building block for the hydrogen economy in Germany,” explains Eva Witt, Head of Customised Finance and Public Clients at KfW. The core network is an expandable network for hydrogen. It is intended to create a basis for the widespread use of hydrogen as an energy source, in particular with regard to the decarbonisation of industry and the energy sector. The hydrogen core network connects the most important production sites, import corridors and storage facilities for hydrogen with the major consumption centres and forms the basis for the development of a nationwide hydrogen market.

    Quite Eva Witt: Anke Brüggemann works at KfW Research on topics relating to the implementation of the energy transition in the energy and industrial sectors in particular.
    Eva Witt, Head of Customised Finance and Public Clients at KfW

    Building a nationwide hydrogen core network requires high levels of investment and close cooperation between all stakeholders. This is where KfW comes in. It plays a central role in financing the hydrogen core network in Germany on behalf of the Federal Government.

    The amortisation account helps with financial stability

    The core network will be built and operated by the private sector and financed by fees paid by hydrogen customers. Costs are spread over a longer period by means of a so-called amortisation account. “This innovative financing instrument makes it possible to reduce network costs for the initially few users and also distribute the costs to future customers,” explains Jochen Schwarz, Director of Project and Corporate Finance at KfW. KfW funds the amortisation account through a loan facility of EUR 24 billion. The funds are used to finance the initial compensatory payments to grid operators and offset the difference between investment costs and revenue from network fees.

    Quote Jochen Schwarz: The amortisation account supports the private-sector construction of the hydrogen core network by overcoming the initial hurdles of high investment costs and low numbers of users, thereby contributing to a climate-neutral future.
    Jochen Schwarz oversees the funding of the amortisation account at KfW.
    Hydrogen core network and amortisation account (German only, source: KfW)

    Particularly noteworthy in this context is the excellent cooperation between the various stakeholders: “The key success factors for this large and important infrastructure project are the shared willingness to deliver and the targeted interaction between the many players involved,” explains Jochen Schwarz.

    Further information

    KfW Research study: “The green hydrogen economy is taking off – Where does Germany stand?”

    Hydrogen core network: An investment in the future for Germany

    German Federal Ministry for Economic Affairs and Climate Action FAQ on the hydrogen core network

    Federal Network Agency: Hydrogen core network