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11 January 2023

Germany’s foreign investment strategy amid modern economic woes

At the beginning of the year, Germany signed a deal with Norway that will see the two European countries move a step closer to building a large-scale pipeline, by 2030, that pipeline will transport hydrogen towards the German state and CO2 back towards the Scandinavian country. Or at least that’s the plan.

Chancellor Scholz and Prime Minister Støre first signed a partnership a year earlier that explored the possibility of such infrastructure to be set in place. One year later and both countries are committed to helping one another sail through the rough seas represented by climate change, energy crisis and war. All with the help of hydrogen!

Even though the pipeline will initially transport blue hydrogen in what is regarded as a “transitional period”, both parties are keen to scale up their individual production of renewable energy in order for the pipeline to then transport green hydrogen exclusively.

The press release states that Norway “will ensure environmental and climate integrity by establishing the highest possible standard for Carbon Capture and Storage” – a vital part of blue hydrogen production, as opposed to grey hydrogen where the emissions generated as a result of steam methane reformation are allowed to escape into the atmosphere.

The hydrogen will be supplied by Norwegian oil giant Equinor, which signed a deal with German utility firm RWE which unveiled plans for an initial 2GW capacity of hydrogen by 2030 and up to 10GW by 2038. The two companies will also collaborate on building 3GW of ‘hydrogen-ready’ gas fired power plants in Germany by 2030 which will use the hydrogen supplied by Equinor in addition to any green hydrogen generated from wind powered projects in Norway. The German state has a target of achieving a share of 80% clean energy by 2030. Rethink believes that Germany will come close to that figure, missing out by around 11% – this analysis can be access as part of our Annual Primary Electricity report which will soon be available here.

But this is not the first hydrogen import deal signed by Germany. Besides access to the North and Baltic Seas, Germany lacks in renewable resources. One could also argue that it placed too much reliance on countries with questionable leaderships for things like energy imports and supply chain for which it’s paying the price now, although it is not the only European country with this problem.

In order to address this, Germany is now looking to build alliances with countries like Norway, Belgium, Canada, Kenya and Namibia. The energy islands located in the North and Baltic Seas will streamline the transmission of wind energy towards the likes of Belgium, Denmark, Germany and the UK – Rethink covered this topic here – while hydrogen and ammonia import deals have been agreed upon with Canada for what could prove an invaluable trade route for many decades to come between America and Europe – Rethink wrote about these transatlantic deals here.

In terms of foreign affairs in Africa, Germany signed a deal with Kenya in the last month of 2022 that will see the European country invest €112 million in Kenya’s energy industry. The investment will help Kenya achieve 100% carbon free energy generation by 2030 while also setting up a green hydrogen industry. Other commitments made by Germany as part of the deal include enlarging power grids, feeding renewable energy into the electricity network and providing advice on issues of national climate policy.

This particular monetary figure is dwarfed by another deal that Germany agreed with Namibia earlier that year, for a project by Enertrag which will cost €12 billion and consists of hundreds of wind turbines and solar arrays that will produce around 350,000 tons of green hydrogen annually, shipped in the form of ammonia towards Europe.