The German Hydrogen Sector in Global Production Networks

Abstract

The hydrogen sector is considered crucial for the energy transition. In Germany, the national government supports domestic companies in their plans to export hydrogen technologies and import green hydrogen to replace fossil fuels. However, these efforts face significant challenges: green hydrogen remains economically uncompetitive and its transportation is more expensive than that of fossil fuels.<br /> This study examines the structural challenges the green hydrogen sector faces, the agency of different actors in enhancing its competitiveness, and the uneven developments the German hydrogen sector fosters. Conceptually and empirically, the thesis contributes to understanding the economic implications of energy transitions and contemporary economic policies, especially regarding state agency in defossilizing global production networks. The thesis is based on two years of qualitative data, incorporating interviews, documents, and participant observations.<br /> The central argument is that hydrogen raises high expectations in Germany, as it appears to support both the energy transition and industrial development. Therefore, a broad alliance of companies, labor unions, and environmental organizations advocates for state support, even when it diverges from neoliberal ideas. However, the sector's development falls short of expectations due to the material properties of green hydrogen – specifically, its transportation costs, which will remain higher than those of fossil fuels. This poses a competitive disadvantage for energy-import-dependent countries like Germany and its energy-intensive industries.<br /> Despite this, the German state and other actors primarily use their agency to facilitate the import of green hydrogen and hydrogen derivatives rather than supporting the relocation of energy-intensive industries from Germany to regions with abundant renewable energy. While the state currently covers the costs of replacing fossil fuels with green hydrogen, regulations will shift this burden to companies in the future. In turn, companies will pass on additional costs to consumers through higher prices, risking a decline in public support for the energy transition. An alternative hydrogen strategy could enable German companies to produce energy-intensive intermediate goods abroad, thus maintaining participation in global production networks while contributing to international development.