Willingness to pay for low carbon hydrogen
As part of the project, the willingness to pay of selected customer groups for “low carbon hydrogen”, also known as blue hydrogen, was determined in order to estimate its market potential in Germany. A key basis for the use of low carbon hydrogen is the regulatory framework and its expected development. The results were used to identify possible barriers to market acceptance. Finally, the necessary incentive mechanisms that are required to increase the willingness to pay and thus promote the introduction and use of low carbon hydrogen were evaluated.
Methodology
The project’s methodology to the analysis of low carbon hydrogen was divided into two central work packages, which systematically investigated the relevant issues.
In the first work package, the legal and regulatory aspects of low carbon hydrogen were analyzed:
- The existing legislation in Germany and the EU were comprehensively analyzed.
- The most important points were summarized and the German legislation was compared to the European legislation. Relevant specialist literature was also consulted.
- An overview of existing regulatory gaps was compiled and expected regulatory developments, such as upcoming publications and new legislative initiatives, were documented.
- Critical points and uncertainties in the regulatory environment were identified for business models for the production and export of low carbon hydrogen.
The second work package determined the willingness to pay for low carbon hydrogen:
- Important customer industries were identified.
- Calculationof willingness to pay:
- For the selected customer groups, the costs for existing conventional technologies were calculated, which determine the parity price for low carbon hydrogen.
- Various cost scenarios were calculated for the use of low carbon hydrogen, namely domestic production and pipeline import.
- The difference between the customer groups’ willingness to pay (= parity price with conventional technologies) and the costs for low carbon hydrogen was then calculated and analyzed, considering regulatory framework conditions such as the CO₂ price and greenhouse gas reduction quotas (GHG quotas).
This structured procedure allowed to analyze both the regulatory framework and the economic factors for low carbon hydrogen in detail and to deduce well-founded recommendations for action.
Results
The analysis of the regulatory framework revealed that low carbon hydrogen currently cannot contribute to the fulfillment of GHG quotas, industrial quotas, and quotas in aviation and shipping. There are still considerable uncertainties, particularly in the areas of marketing proofs of origin, green lead markets, and a potential import prohibition on fossil gas without CCUS. At the end of the project, regulatory gaps for the use of low carbon hydrogen were identified, like for example the definition of the calculation method for GHG emission savings in a delegated act.
The willingness to pay for low carbon hydrogen depends significantly on the development of the price of natural gas and CO₂. The results also highlight that different industries are variously dependent on incentive mechanisms and price developments to be able to use low carbon hydrogen economically. In addition, the market potential is highly dependent on uncovered regulations regarding the creditability of low carbon hydrogen for companies’ emission savings.