Daily Management Review

Energy Crisis In Germany Drives Switch To Hydrogen For Energy


Energy Crisis In Germany Drives Switch To Hydrogen For Energy
German company Kelheim Fibers started looking for alternatives to keep its engines running as soon as Russian gas exports to Germany were first disrupted in June.
As a result, starting in the middle of January, the Bavarian company, whose fibers are used in everything from teabags to tampons, will be able to use heating oil rather than gas.
The drawback is that this will result in an increase in carbon emissions. Longer term, the company is thinking about switching to hydrogen, which is a much cleaner energy source, provided that it is produced using renewable energy.
"We want to be one of the first large companies in Bavaria to switch to hydrogen," Craig Barker, managing director of the 87-year-old firm, told Reuters.
According to Barker, energy costs make up more than 60%–70% of the company's variable costs, surpassing the cost of its main raw material.
The majority of small and medium-sized businesses in Europe's largest economy, including Kelheim Fibers, are looking to diversify their energy sources in order to maintain output.
Following Moscow's invasion of Ukraine in February, Russia cut off its gas supplies to Germany, which has forced Berlin to restart or prolong the life of its coal-fired power plants, jeopardizing its commitment to reducing greenhouse gas emissions.
The crisis, according to ifo economist Klaus Wohlrabe, may ultimately result in more environmentally friendly production.
"Relying on fossil fuels for the long term ... has proven to be a risky path. So in the medium term, at least, companies have no choice but to reorientate themselves," Wohlrabe said.
Barker added that Kelheim Fibers, which has so far met 85% of its energy needs with gas, is in discussions with stakeholders about importing hydrogen, with an anticipated annual consumption of around 30,000 tonnes, starting in 2025.
"We definitely need infrastructure," he said, adding that a pipeline will be needed to connect to the German refinery Bayernoil and a port to cover the demand the company cannot meet from domestically produced hydrogen.
Germany's Economic Affairs Ministry granted approval earlier this month for the development of the nation's first hydrogen pipeline network. Additionally, a strategy for helping small and medium-sized businesses transition to climate-neutral production, including the expansion of hydrogen infrastructure, was unveiled.
According to utility industry association BDEW, more must be done to speed up investments in hydrogen, including the passage of a Hydrogen Act to reduce red tape and quickly regulate the ramp-up of hydrogen production.
"2023 must provide new impetus for investments in renewable energies, hydrogen, hydrogen-capable gas-fired power plants and energy networks," BDEW president Kerstin Andreae said.