Niklas Becker: Germany's energy transition

Germany is fundamentally restructuring its energy supply to rely on renewable energies in the future. The country’s political leadership is helping to massively accelerate their expansion.

By 2030, renewable energies are to cover at least 80 percent of Germany's electricity consumption. What seemed very ambitious ten years ago is now within reach. As early as this year, around 60 percent of German electricity will come from renewable energy sources

Unlike in Finland, Germany’s expansion of renewable is being subsidized by the state providing economic incentives. In 2023 alone, more than one million new solar systems were installed in Germany.

Germany shut down its last three nuclear power plants on April 15, 2023. The Bundestag had decided to phase out nuclear power in 2011 following the nuclear disaster in Fukushima. Germany is also phasing out coal-fired power generation by the end of 2038 to reduce carbon emissions and become climate-neutral by 2045 at the latest. Germany decided to phase out coal in July 2020.

Fossil fuels are to be replaced by electricity by electrifying more and more areas of the economy and society and by replacing fossil fuels such as gas with hydrogen with emissions-free electricity from renewable sources. There are areas of transportation and industry that are currently difficult to electrify. These include steel and cement production as well as air and sea transport. Germany is relying on hydrogen and suitable derivatives. Hydrogen can be used more flexibly as an energy source and is easier to transport. It will play a decisive role in Germany as a substitute for natural gas, oil and coal. Hydrogen is nothing new in industry. Until now, however, it has been produced using fossil fuels.

Germany wants to ensure that a European market for hydrogen is created more quickly. In addition to investment, this requires clear political signals. Germany is therefore providing both funding for infrastructure and clearly formulated targets. The National Hydrogen Strategy lays out the German government's goals: The required infrastructure is the so-called hydrogen core network. The details have been finalized since October 2024 and the core network has been approved. The network will have a total pipeline length of more than 9,000 kilometers. 56 percent of the existing natural gas pipelines will be converted to hydrogen for this purpose. The rest will be newly built. The costs are immense: experts estimate they will be almost 19 billion euros. The network s will gradually go into operation by 2032. It will then connect consumption centers with hydrogen production regions.

Germany cannot produce enough hydrogen on its own. The prerequisites, for example for additional wind farms, are lacking. The German government estimates that the total demand for hydrogen and its derivatives will be between 95 and 130 terawatt hours in six years' time. According to estimates, Germany will have to import 50 to 70 percent of this amount. By 2045, Germany's demand for hydrogen may increase more than tenfold compared to 2023. According to government estimates, the import share could thus increase further. This means excellent sales opportunities for international hydrogen producers.

Germany sets out where the hydrogen is to come from in its hydrogen import strategy, adopted in summer 2024. It is intended to ensure that investments can be made in hydrogen production in German partner countries and that the infrastructure, for instance, for transport, can be built reliably. The strategy focuses on the Baltic Sea region in particular: "The Baltic Sea region is another important building block for the German hydrogen supply due to the high potential of onshore and offshore wind power as well as the good hydrogen storage potential." The two pipeline projects Baltic Hydrogen Collector and Nordic Baltic Hydrogen Corridor are intended to facilitate the import of hydrogen from the Baltic region.

Both pipelines will connect Germany, Finland and many other Baltic states. Finland is an ideal partner for the whole of Europe and the Baltic states. Finland has set itself the goal of supplying around 10 percent of the hydrogen produced in the EU by 2030. With the help of the pipelines, surplus Finnish hydrogen could be stored in Germany and either re-imported to Finland or sold to other countries when needed. This would mean greater security of supply for the whole of Europe. Closer cooperation between Germany and Finland in the hydrogen sector would have the advantage that the Finnish market ramp-up could not only be faster, but above all more voluminous - in line with Finnish potential. Germany as a customer therefore offers Finnish producers the security they need that their hydrogen will find a buyer.

There are already many examples of positive cooperation between Germany and Finland in the energy sector. For example, the Finnish company P2X Solutions installed the first industrial-scale electrolyzer in Finland in February 2024. The machine was supplied by the German company Sunfire. A number of German companies - for example, Energiequelle, ABO Wind, CPC Finland and WPD Finland - have also played a key role in driving the development of the Finnish onshore wind energy sector.