June 10, 2020 / 9:09 AM / a month ago

UPDATE 1-German cabinet agrees on national strategy for building hydrogen economy - sources

* Long-awaited plan gives starting signals for industry

* Green hydrogen the target, money to flow

* Foreign partnerships to be sought

* Gas industry not out of the picture if it transforms (adds detail, context)

BERLIN, June 10 (Reuters) - Germany’s cabinet on Wednesday passed a national hydrogen (H2) strategy to help decarbonise the economy and cut CO2 use once coal and nuclear generation is phased out in the coming years and its industry must turn green, government sources said.

As expected, the government proposes that Germany build electrolysis capacity of 5,000 megawatts (MW) by 2030 and 10,000 MW by 2040 to produce the new fuel.

Electrolysis is a carbon-free process - if powered by renewable electricity - to extract “green” hydrogen from water.

The government’s economic stimulus package for the economy - announced last week - included 9 billion euros ($10.22 billion) for the build-up, including 2 billion for international partnerships to source it.

Germany wants to scale this alternative fuel up to use its wind and solar energy to replace fossil and nuclear power and to apply it in the heating and transport sectors - foremost in heavy goods and aviation - to eventually replace gas and oil.

It must get rid of “grey” - fossil hydrogen - won from natural gas in order to get nearer to carbon neutrality in coming decades.

Germany consumes 55 TWh each year of CO2-intensive H2 in the processes used in the energy, steel, chemical or fertiliser industries, among others.

Green hydrogen products comprise H2, derived from running renewable power through electrolysers, synthetic methane made from newly produced or stored H2, while biomethane won from fermented crops can play a complementary role.

These products are not yet competitive because of high costs and big energy losses during conversion, and because of legislative hurdles.

The strategy aims to help cut costs and remove hurdles.

While stressing only ‘green’ hydrogen is sustainable, it keeps open a lifeline for natural gas for a transition time during which the hydrogen economy can be made greener.

$1 = 0.8808 euros Reporting by Markus Wacket and Vera Eckert Editing by Michelle Martin

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