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24 August 2022

Transatlantic imports to solve Germany’s energy problem?

Canada’s EverWind Fuels has signed a detailed Memorandum of Understanding with one of E.ON’s subsidiaries, to export green ammonia at scale to Germany starting in 2025 from EverWind’s initial production facility in Nova Scotia.

As part of the deal, EverWind and E.ON intend to work towards an offtake agreement for up to half a million tons of green ammonia per year. The multi-phase production and export facility is in the advanced stages of development and is expected to reach commercial operation in early 2025.

E.ON is committed to making green hydrogen accessible to small and medium sized German businesses, which account for the majority of the country’s economic output.

The partnership will also aim to support the decarbonization of Canada and Europe, at a time when various European countries are looking for alternatives to natural gas due to the Russian invasion of Ukraine and the tightness in the supply of natural gas.

Germany in particularly is making huge efforts to transition away from using natural gas, as ties with Russia have been suffering because of the sanctions applied to Moscow by the US and Europe. Around 27% of Germany’s energy mix is covered by natural gas, out of which about half comes from Russian imports.

Germany has been rumored to be postponing plans to pull the plug on its nuclear reactors in an attempt to cover for the drop in natural gas imports, but this week the German Economy Minister, Robert Habeck ruled this out saying that at best it would save 2% of gas use – but still the rumors persist.

The problem really is that in the short term Germany’s options are limited because most of the gas used is for heating homes. Arguably, a stream of demand that is perhaps the most difficult to satisfy with other sources of energy on such short notice.

Countries can instead choose to divert natural gas from other sectors towards home heating and switch to new sources of energy like green ammonia and hydrogen for those instead, but that will be a slow process likely taking 5 years – not much comfort in the short-term.

In the long term though, just like other European countries, Germany’s plans revolve around green energy with hydrogen at the forefront.

Last week, Rethink reported that Germany was set to sign a deal with Canada for a new zero emission power plant that will use green electricity to produce hydrogen and ammonia for export towards Europe. As part of the deal up to 164 onshore wind turbines will power the first phase, but World Energy GH2, the Canadian side of the deal, said that number is likely to triple over time.

Additionally, when the German Chancellor, Olaf Scholz, sits down with the Canadian Prime Minister to finalize this deal, he is expected to also sign a deal for LNG imports, which will offer far better short term help.

Also this week we came across plans for the construction of another green hydrogen and ammonia plant to unveiled in the city of Belledune, New Brunswick. The port authority of the Canadian city has reached an agreement with Connecticut-based infrastructure developer Cross River Infrastructure Partners to build the facility which is expected to be supplied by 200 MW of clean power and fully operational by 2027. The plant is projected to export its products to multiple markets including Germany.

Sceptics are questioning the decisions mostly due to the fact that the Canadian hydrogen export market is still very underdeveloped. Germany won’t be able to import enough LNG or green hydrogen and ammonia from Canada to plug the gap left by Russian natural gas in its energy mix, but it does mean that a bridge has been built between Europe and North America which can evolve and serve parties on both sides of the ocean in the future.