German green hydrogen producers will not pay EEG levy

Out-Law News | 01 Dec 2020 | 2:22 pm | 1 min. read

The German government has said that it will exempt producers of green hydrogen from an electricity levy imposed by an incoming law as part of plans to boost uptake of green hydrogen and prevent developers of the technology from moving abroad.

The German Federal Ministry of Economics wants to exempt producers of green hydrogen - hydrogen produced using renewable energies - from an electricity levy for renewable energies. The exemption is to be established in the current reform of the Renewable Energy Sources Act (EEG 2021).

 

The EEG 2021 is already in the final phase of legislation and is expected to come into force at the beginning of next year. A corresponding government draft was recently discussed in the Bundestag and passed on to the Economic Committee for further consultation.

The Ministry of Economics has now submitted guidance for the wording of the EEG 2021, which states that the EEG levy "is reduced to zero for electricity consumed by a company producing green hydrogen in a plant, regardless of its intended use." This is to apply to all plants commissioned before January 2030.

Dr. Sönke Gödeke, energy law expert at Pinsent Masons, the law firm behind Out-Law, said: "This move responds to the continuing high cost of hydrogen production and the public pressure to further expand the promotion of hydrogen production and hydrogen technology in Germany. Apparently other hydrogen colours such as blue hydrogen will also be privileged in the EEG levy, albeit to a lesser extent."

A new special compensation scheme will promote the production of hydrogen produced using natural gas, for example. However, this would not mean a complete exemption from the EEG levy, but only a possible substantial reduction. "The aim of the adjustments in EEG 2021 is also to prevent the key technologies from migrating abroad by means of a more attractive funding regime," said Dr Gödeke.

In June, the German government adopted its National Hydrogen Strategy for the use of hydrogen for energy storage and as an energy carrier and committed itself to the comprehensive promotion of hydrogen technology.

According to the German government, the use of hydrogen should help to drive forward the energy transition and achieve greenhouse gas neutrality in Germany by 2050. When combusted, hydrogen causes almost no emission. For this reason, some experts believe hydrogen technology will pave the way for a climate-friendly future. On the other hand, a lot of electricity is required to produce hydrogen and use it as an energy carrier.

According to the Frankfurter Allgemeine Zeitung, a German daily newspaper, the Ministry of Economics announced that the state aid investigation of the proposed funding regime has not yet been completed.