It is no longer a secret: If Germany’s energy transition is supposed to succeed in the long-term, the country needs an alternative to nuclear and fossil fuels. The highly anticipated approval of the National Hydrogen Strategy (NHS) on June 10th, 2020 represents a milestone on the way to establishing a hydrogen economy in Germany. The Federal Government hereby supports the expansion of hydrogen technology with more than EUR 9 billion, including funding for technology and international partnerships. In this article, we want to lay out how economic development organizations (EDOs) can benefit from this considerable investment and are encouraged to take advantage of the various emerging opportunities for regional development.
With a total of 38 measures, the NHS promotes the development of the market along the entire hydrogen value chain and thereby significantly contributes to climate protection efforts. Hydrogen is considered an important problem solver on the way to a climate-neutral world, as it can be used in diverse ways as an energy carrier and storage medium. Also known as the “oil of the future”, it enables the reduction of greenhouse gas emissions wherever the direct use of electricity from renewable energies does not suffice.
To this end, Germany needs to create a domestic market for hydrogen technologies. Hydrogen should be established as an alternative energy carrier and embedded in the German energy mix. In concrete terms, Germany will build up to five gigawatts of electrolysis capacity by the end of 2030 and another five gigawatts by 2040.
At the same time, hydrogen should become a principle component in industrial production. Linde Praxair, the industrial gases specialist, is already cooperating with the British hydrogen specialist ITM Power to use green hydrogen (produced without CO2-emissions) in large-scale industrial projects. In the steel industry, Salzgitter AG intends to use hydrogen for the direct reduction of iron ore instead of the emission-intensive blast furnace process.
But hydrogen will also play a key role in the transportation sector and for heat generation in residential buildings. For example, fuel cell vehicles can supplement electrical battery mobility in public transport (bus, train), in parts of heavy road traffic (trucks), in commercial vehicles or in logistics.
But how can this potential be lifted by regions and states through concrete economic development approaches? The following impulses serve as a good orientation guideline for the development of capacities in the hydrogen sector:
- Evaluation of growth potential: First and foremost, an important requirement for the development of an intact hydrogen market is a fundamental understanding of existing market structures and drivers, as well as the sectoral value chain. Which areas and segments are anticipated to grow the most and in which segments will investments be realized?
- Analysis of value chains: Which (supra-)regional structures already exist, which essential key elements for value creation are still missing? These aspects provide indications regarding the significance of existing supply chains and potentially even the creation of new ones, right up to the formation of complete ecosystems.
- Development of a targeted FDI-attraction strategy: In order to implement these structures, a collaboration between industry, research and politics is indispensable. EDOs play a central role in the management of activities and can therefore set the direction through a coherent and visionary strategy for the attraction of value-adding structures. The potential evaluation on the demand-side and the location factors on the supply-side provide a strategic window, which can promote the proactive settlement of investors in the hydrogen sector.
- International location marketing: The global market boost in hydrogen technologies offers an ideal basis for promoting existing competitive advantages in the field of renewable energies. The targeted search for relevant partners and potential investors should therefore be a priority for EDOs. Activities and measures of proactive investor acquisition should be aimed at the right target markets in order to achieve sustainable economic effects.
As a renowned partner and service provider with relevant experience in the field of foreign direct investment, OCO Global has already advised various regions and industrial clusters on their regional economic diversification and attraction of investment projects.
We look forward to working with regional, national and international EDOs to implement the goals of the NWS and to build on the potential in the field of hydrogen technologies.
