Outlook 2025: What can we expect from the H2 ramp-up?
2025 will be the acid test for the hydrogen ramp-up. Despite the approval of the H2 core network last year, the ramp-up still lacks the necessary speed. The reason: production, transport infrastructure and demand are insufficiently harmonised. In order for the ramp-up to gain momentum, these areas must be more closely interlinked by 2025. It will be crucial that all players - from producers and grid operators to consumers and politicians - work together in a coordinated manner and pull in the same direction.
What needs to happen along the H2 value chain in 2025? The most important points at a glance:
- Production: Current electrolysis capacities are insufficient. In order to meet H2 demand, long-term subsidy incentives and a clear import strategy with international partners are needed
- Transport infrastructure: The approval of the H2 core network is a milestone, but now feeders and consumers must follow suit. Grid operators need commitment and the right framework conditions to be able to drive the expansion forward. In particular, this includes attractive financing models to trigger further investment.
- Customers: The industry is hesitant due to a lack of economic incentives. A viable business case can facilitate investment and create demand. The use of blue hydrogen will be indispensable until green hydrogen is competitive. Measures to close this economic viability gap must be significantly expanded.
The election campaign for the early general election in February 2025 is in full swing. The debates are heated and the challenges are enormous. We are looking at an economy that is under massive pressure and at the same time climate targets that can no longer be postponed. One question is becoming ever louder: how can we create an energy supply that is secure, emission-free and competitive at the same time? Because one thing is clear: without a reliable energy future, there will be no economic stability. No growth. No prosperity.
Hydrogen (H2) is seen as one of the key building blocks on the road to climate neutrality. The energy carrier is to be used wherever decarbonisation cannot be achieved with electricity from renewable sources alone. Heavy industry, the chemical industry and heavy goods transport rely on hydrogen to reduce their emissions. The approval of the H2 core network in October 2024 was a ray of hope on the road to the hydrogen economy, but this milestone is only a first step. Rather, it shows that the development of the H2 ramp-up is not a sprint, but a marathon. A project that requires the right political framework conditions, technological prerequisites and close cooperation between all players at the right time - along the entire H2 value chain.
Will 2025 be the year in which the hydrogen ramp-up really takes off? How far along are we really? And what hurdles still need to be overcome? It's worth taking a closer look.
Transport: the foundation for the H2 ramp-up?
An efficient transport infrastructure is essential to get hydrogen to where it is needed. 2024 brought decisive progress here: the Federal Network Agency approved the H2 core network at the end of October. This was the official starting signal for the implementation of the "hydrogen motorways" in Germany. In just 18 months, we transmission system operators (TSOs), together with politicians and the Federal Network Agency, have created the regulatory framework and completed the network modelling. This is an example of what is possible in Germany when all players pull together.
The Germany-wide core grid forms the centrepiece of the future H2 transport infrastructure. It solves the often cited "chicken and egg problem" by creating a binding basis for producers and customers to concretise their H2 plans. This grid creates the basis for a functioning market - but its success now depends largely on how feeders and consumers cooperate.
Grid operators need clear purchase agreements in order to plan capacities accurately. Without binding commitments, expansion remains a balancing act. A grid that is too large causes unnecessary costs, while expansion that is too hesitant hinders the ramp-up of the market. As a TSO, we have a responsibility to provide the infrastructure in good time without risking a prolonged vacancy. Reliable framework conditions that also closely dovetail infrastructure development with the synchronisation of the H2 ramp-up and offer sufficient flexibility are crucial for this. In addition, effective monitoring tools are needed to make progress measurable, monitor the pace and make targeted adjustments where necessary.
Fair financing models are another key factor. Investments in hydrogen transport infrastructure are only profitable if the risk/reward ratio is right. The deductible in the amortisation account and a competitive return on equity are key factors here. However, the framework conditions for H2 grids currently lag behind those of the electricity sector - a structural deficit that could seriously jeopardise the ramp-up.
However, the H2 core network is only the beginning of the development of the H2 infrastructure. Along the planned "motorways", we need to identify potential connection points for future customers now, including those located away from the core grid routes. Forward-looking planning and a suitable regulatory framework are essential in order to realise later expansions without major adjustments. In order to bring hydrogen to the area, TSOs and potential customers must start talking about connection concepts now. This is because a connection line can only be realised later where a "T-piece", i.e. an "exit", has been planned.
The fact is that the approval of the H2 core network marks the start of the H2 ramp-up, but its success depends on the coordinated interaction of all players along the H2 value chain.
What needs to happen in 2025
- Attractive financing models: Investments in H2 transport infrastructure must be made economically attractive by balancing the risk/reward ratio.
- Binding commitments: Declarations of intent must now be converted into concrete contracts. This is the only way to create the planning security that grid operators and producers need.
- Forward-looking grid planning: Connection points should already be taken into account during the construction phase in order to implement subsequent expansions in a cost-efficient manner.
The market: How do we create a business case for hydrogen?
Demand creates investment, and investment drives the ramp-up. Many companies are reluctant to report their demand because the economic conditions are unclear. There is a lack of a viable business case that creates confidence and makes the decision easier. The importance of establishing a functioning capacity mechanism is particularly clear with regard to large consumers such as power plants and CHP plants. Such a mechanism could secure long-term investments and guarantee the availability of hydrogen - a task that the new German government urgently needs to tackle.
A key lever could be to orientate the mechanism on proven mechanisms from the natural gas market. A market model that is transparent, predictable and attractive for investors creates trust.
Another obstacle to the development of a business case is the strict EU regulations: Currently, only hydrogen from renewable sources may be subsidised by the state. This regulation makes production considerably more expensive and hinders the expansion of electrolysis capacities. Without more flexible approaches, it will be difficult to attract investors and producers.
I am convinced that blue hydrogen is indispensable! As a transitional solution, it plays a crucial role in bridging the initial phase until green hydrogen is available in sufficient quantities. Such pragmatic approaches are essential to stabilise and accelerate the market ramp-up at the same time.
What needs to happen in 2025
- Blue hydrogen as a bridge: Long-term purchase agreements could promote the use of blue hydrogen as a transitional technology and stabilise the market.
- Proven market models: Successful approaches from the natural gas market should be transferred to hydrogen in order to accelerate the market ramp-up.
- Targeted promotion of demand: Clear measures and support programmes can create incentives for the widespread use of hydrogen and compensate for economic disadvantages.
Into the energy future with a political tailwind
2025 will begin as 2024 ended - with great uncertainty in politics, business and society. However, the general election offers the opportunity to set a turning point. The decisive factor will be whether the new government consistently brings the economy and climate protection together. After all, stable economic policy and ambitious climate targets are not opposites - they are mutually dependent and can only be achieved together.
Hydrogen can enable precisely this interaction. It is the key to combining Germany's decarbonisation and economic sustainability. But it is equally clear that the integration of a new energy market is a mammoth task. Network operators such as Thyssengas can create the necessary transport infrastructure, but this alone is not enough.
The H2 ramp-up is a joint task that can only succeed if all players along the H2 value chain work closely together. 2025 must be the year in which the interests of all market participants are better coordinated. Only a coordinated approach will create the momentum that the ramp-up urgently needs.
At Thyssengas, we see it as our task to actively help set the course for this future. We continue to drive forward the development of the H2 transport infrastructure and at the same time advocate reliable political and regulatory framework conditions. As a link between the market, politics and authorities, we promote dialogue and solution-oriented cooperation. Our goal? A coordinated and future-proof H2 ramp-up that unites interests, utilises synergies and paves the way to a sustainable energy future.
Sources:
1- https://www.bundesregierung.de/breg-de/aktuelles/wasserstoffausbau-beschleunigen-2289130#:~:text=Die%20Bundesregierung%20hat%20vor%20fast,2030%20auf%20zehn%20Gigawatt%20verdoppelt.
2- https://h2-news.de/wirtschaft-unternehmen/h2-bilanz-von-ewi-und-eon-wasserstoffmarkt-haengt-am-foerder-tropf/
3 - https://h2-news.de/foerderprogramme/milliardenfoerderung-startschuss-fuer-23-deutsche-wasserstoffprojekte/
4 - https://www.bundesregierung.de/breg-de/aktuelles/faq-wasserstoffimportstrategie-2300536#:~:text=Die%20Bundesregierung%20rechnet%20gegenw%C3%A4rtig%20damit,200%20TWh%20f%C3%BCr%20Wasserstoffderivate%20steigen.
