Saxony the Hydrogen State – Dawn of a Sustainable Future

Expert Interview – January 9, 2024

Next to photovoltaics, batteries and thermal storage systems, green hydrogen is a new beacon of hope for a sustainable energy industry. What’s the state of progress in hydrogen technology? Is hydrogen a fuel of the future or is it already in use today? We spoke to several experts from the German region of Saxony, whose energy sector is undergoing a major transformation. Will the transition to sustainable energy be successful?

Interview with Dr. Olga Naumov & Christoph Friedrich (Leipziger Gruppe), Dr. Peter Lucas (Saxon State Ministry of Economy, Labour and Transport) and Klaudia Wackerman (Saxony Economic Development Corporation)

Saxony is undergoing a major transformation in the energy sector. Will the transition to sustainable energy be successful?

Klaudia Wackerman: Saxony has a long industrial history and has become a dynamic business region. With its two lignite mining areas – the Central German mining area and the Lusatian mining region – Saxony is an established center for energy and environmental technology. With its know-how, the region is well on its way to a successful transition from fossil to renewable energy sources and is becoming a stronghold of energy supply. Examples of this commitment are LEAG’s GigawattFactory and the EMIR scheme implemented by MIBRAG in former mining areas. Of course, hydrogen plays a key role in Saxony’s energy-intensive industry by decarbonizing industrial processes, such as in steel production or in the chemical industry. Hydrogen also offers other industries the opportunity for economic diversification and industrial value creation.

What framework conditions – including political ones – would it take to make this German federal state a hydrogen state?

Dr. Peter Lucas: Saxony was in a good starting position, with many companies that contribute to the hydrogen value chain already being located in the area. Saxony has to provide the regulations and incentives that will help create an attractive environment for investors and develop new value creation potential. Saxony started fostering research well before 2020. Back then, our focus was not necessarily on green hydrogen. We were much more concerned with the reuse of fossil by-products from fossil fuel production. These technologies are adaptable and have since been developed for green hydrogen applications. This transformation was supported by many companies, some of which went back to the communist era.

New developments obviously also need to be implemented. How does Leipzig municipal utility approach this mammoth task, now that the energy sector is undergoing such fast and fundamental changes?

Dr. Olga Naumov: The energy industry has had to keep adapting to new challenges for decades. Hydrogen is one of these challenges. Hydrogen is not yet completely commercially available and has not been extensively tried and tested, so we need to think about the technical applications. It is also not yet financially viable. As a utility company, we need to ensure an affordable energy, heat and electricity supply. At the same time, we invest in research which should help us use this technology in the future. We expect that hydrogen will be an element of our energy supply. The regulatory framework for hydrogen has not yet been finalized, so we are following the developments with great interest.

Who is responsible for the regulatory framework – the federal state or the central government?

Dr. Olga Naumov: It is, in fact, the responsibility of the central government. But our ministries here in Saxony represent the interests of our local industry. They figure out if new technologies are suitable to be implemented in companies, how this should be done, and pass that information on to the federal ministries.

Dr. Peter Lucas: The Free State of Saxony is clearly committed to a bright and clean future for its companies and citizens. Our energy policy contributes to this goal. Of course, cross-ministerial meetings are held to discuss new topics, agree on key issues with industry, and inform the federal ministry. To make our goals reasonable and affordable for all citizens of Saxony, these issues must be assessed in as much detail as possible.

L-Gruppe from Leipzig covers all hydrogen applications in the city, doesn’t it?

Christoph Friedrich: We don’t cover it completely, but we look at hydrogen from a holistic perspective. That’s why, together with EDL, ONTRAS and VNG AG we have created the joint project LHyVE to establish the central German hydrogen economy. This allows the development of an entire value-added chain, creating a hydrogen economy.

Who is involved in the hydrogen strategy and what are the fields of application?

Christoph Friedrich: The hydrogen infrastructure of central Germany is currently based on gray hydrogen. Depending on whether the hydrogen ramp-up is successful, the regional demand will be 0.1 to 0.3 terawatt-hours by 2050, making us one of the largest hydrogen hubs of Europe. To continue creating value in our region and to securing prosperity and jobs, we need an effective structural change. The greatest immediate potential for hydrogen is in industry and the heating sector. I am referring to the waste heat from electrolyzers, which we would like to feed into the district heating network of Leipzig. Next in line are logistics and mobility, with some individual applications added further down the line.

How will we cover the demand for green hydrogen and where will the hydrogen come from?

Dr. Olga Naumov: The federal government’s hydrogen strategy is pretty pragmatic. To ensure the ramp-up by keeping green hydrogen affordable, there will be cooperations with countries where electricity is relatively cheap. For technical reasons, Germany will probably be unable to produce enough green hydrogen to meet the energy demand of industry and final consumers. But there will still be regional hydrogen production units, requiring more renewable sources of energy to be deployed. The municipal utility of Leipzig is planning to build a hydrogen production plant which should supply regional green hydrogen by the end of the decade. And if the hydrogen transportation network, or rather, the core network is sufficiently established by the beginning of the 2030s, delivering imported hydrogen through parts of today’s gas grid will also be possible.

How much of this huge project has been implemented, and how much work still needs to be done?

Dr. Peter Lucas: Apart from planning, some pretty big investment decisions have been made. For instance, Linde GmbH is building a 24 MW electrolyzer at the location of the Leuna refinery, which will produce green hydrogen for refining fuels. Our infrastructure projects were launched as part of the IPCEI projects, which was long before the hydrogen network project. The IPCLEI projects developed important infrastructure lines across Europe and a major junction in the Leipzig area. This includes storage systems being built, or rather flushed and retrofitted to make them hydrogen-ready.
At these locations, electrolyzers with an output of between 20 and 100 megawatts are being built to produce hydrogen which will primarily be used in the chemical and petrochemicals industry. Companies are to be motivated to use green hydrogen through greenhouse gas reduction quota. The government is taking measures to kick-start the market ramp-up. There are fixed quota for companies. Mobility is next on the agenda. The high gas prices are providing an incentive to invest in hydrogen mobility. A hydrogen car will not be any more expensive than a normal passenger car is today.

Does mobility also include the private sector in Saxony?

Dr. Peter Lucas: Within the mobility sector, the most sensible use of hydrogen is for commercial vehicles. The choice of available hydrogen cars in the market is limited, and most of them are from Asian suppliers. For trucks and commercial vehicles, on the other hand, European OEMs have announced some interesting products. At the moment, we still have to contend with the insufficient number of hydrogen fueling stations, but this should improve significantly by 2026/27.

This is not a local issue for Saxony though – we will a wide coverage of refueling options. Which brings us back to LHyVE – Leipzig Hydrogen Value chain for Europe. What is that exactly?

Christoph Friedrich: Two and a half years ago, L-Gruppe formed a consortium with ONTRAS, EDL and VNG to submit a project outline in the context of IPCEI. The outline covered the entire regional value-added chain, forming a wholistic system to coordinate consumption and generation. From production, storage, transport, distribution to the application. If we can’t keep a stable balance between generation and consumption, the system can be connected to the European Hydrogen Backbone, a pan-European hydrogen grid. The Leipzig region is a hydrogen hub where hydrogen transportation lines from various directions meet and are integrated.
This has led us to the idea of designing a hydrogen ring around Leipzig that provides a secure supply for the overall system and is easily accessible for potential buyers of hydrogen. Within the consortium, each partner is responsible for different tasks. L-Gruppe is responsible for LHyVE systems. Its core it the heating power plant, which is currently 30 percent hydrogen-ready and will be 100 percent hydrogen-ready by 2030.
L-Gruppe also has expertise in water management, which will allow us to exploit water resources. We are also able to lay hydrogen lines and create grid connections. LHyVE Flexibilization, a sub-project led by VNG, includes the provision of hydrogen on a needs basis. VNG will operate a cavern storage facility in Bad Lauchstädt and has excellent trade expertise. ONTRAS is a transportation grid operator, and EDL produces green, synthetic kerosene, which will be indispensable for air traffic in the future.

What will Saxony’s industry of the future look like if all of these hydrogen projects and visions become a reality?

Klaudia Wackerman: Hydrogen is already an important economic factor for Saxony. Numerous Saxon companies, research institutions and networks, such as HZwo and Energy Saxony, are working on achieving this vision. The first tram powered with hydrogen fuel cells is being developed in Leipzig, and EDL, a local plant construction company, is working on making sustainable flying a reality. In Dresden, Sunfire is developing and producing efficient electrolyzers as well as Alkaline electrolyzers. As far as research is concerned, a Hydrogen Innovation Center is being constructed as research and certification campus for hydrogen drives in Chemnitz. Light house projects such as LHyVE in Leipzig are showing us how smart sector coupling can be achieved. HINT.CO, a German hydrogen distributor based in Leipzig, is to enable investments in green hydrogen and establish a transparent market. All of this provides an excellent basis for developing a future center of the hydrogen industry in this region.

How is the population benefiting from these efforts?

Dr. Peter Lucas: Many companies rely on hydrogen to decarbonize their products, which is a matter of survival in the market. This means that hydrogen is the key to preserving jobs. Hydrogen will create new products, above all in the mobility sector, which will lead to the creation of new jobs. The German Federal Ministry for Economic Affairs and Climate Action supports this effort of preserving jobs and creating new ones. Saxony also has potential access to European funding through the ERDF or ESF, which can foster technological research, corporate development and the creation of new products.

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