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29 March 2023 | Article

Germany's new decisions boost Finland's energy exports again

Yesterday, the German government made several decisions on energy policy that may also have an impact on Finland, especially through the development of the hydrogen market. Here are a few highlights.

Visa Noronen
Visa Noronen
Communications, BotH2nia Network
Germany's new decisions boost Finland's energy exports again

Germany's strategy for synthetic fuel imports 

Although passenger car traffic is also electrifying in Germany, Germany wants to keep the way open for the use of synthetic fuels—partly because of the luxury car market.  

Yesterday, the German government decided to prepare a strategy for the import of electrofuels, that is, CO2-neutral synthetic fuels. Regarding tax legislation, all CO2-neutral vehicles, both electric cars and cars using synthetic fuels, will be treated equally. 

Finland can become a major power in the production of synthetic fuels, as it has exceptionally good possibilities to produce them at low cost. They can be produced from hydrogen made from cheap renewable energy and from biogenic carbon dioxide produced by, for example, the forest industry. 

For instance, German investors are already building a plant in Kristiinankaupunki, Finland to produce synthetic fuels for the German transport market. For Kristiinankaupunki, this means jobs and tax revenue,, and, for nearby sources of carbon dioxide, this means transforming emissions to money. 

Of course, it remains to be seen how much the government's decisions will ultimately increase the use of synthetic fuels in Germany. Heavy goods vehicles are likely to switch to synthetic fuels and hydrogen because of the current size of batteries, and electricity is in principle a cheaper alternative for passenger cars. However, no one knows for sure how things will develop in the future. 

For those who know German, here is a link to a good article by the German automobile association ADAC comparing how many passenger cars can be driven with the same amount of energy using electricity, hydrogen or synthetic fuels. 

Hydrogen and processed hydrogen products for heating houses 

The German government is still pursuing the goal of a complete ban on gas and oil heating within a couple of decades, as already advocated by the Greens in the government programme, but it has decided to soften the earlier plan. The Social Democrats fear the renovation costs incurred by those with low income.  

If possible, 65% of the heating of every new building should come from renewable energy from 2024 onwards. Old buildings may be brought under the same obligation in a couple of decades—or they may not. In any case, subsidies for the modernisation of heating systems are on the way, and they will certainly be used to move away from natural gas and oil heating. According to the decision, the new “law will be designed pragmatically, avoiding undue hardship, including social compensation, and with due regard to social considerations”—whatever that means.  

What is interesting for Finns is the announcement by Christian Lindner, leader of the Liberal Party FDP, that CO2-neutral heating systems using renewable energy sources or CO2-neutral hydrogen produced from natural gas or biomass—the production of which does not emit carbon dioxide into the atmosphere—will still be possible. In simple terms, this again increases the possibility of exporting various hydrogen products from Finland to Germany, as they could be used for heating houses, among other things. 

But here also lies a caveat: it may not make sense to use hydrogen for heating houses when, for example, industry with its extensive needs can use all the produced hydrogen. But if, for some reason, a hydrogen market for heating houses were to emerge in Germany, Finnish companies, workers and municipalities would again have their share of the increased export revenues.  

Boosting renewable energy production 

Germany still aims to be climate neutral by 2045. Europe's emissions trading scheme, including its planned extension to other sectors, will play a crucial role in achieving this goal. 

Although Germany represents a huge future energy market for Finland, it is certainly in Finland's interest that Germany is also able to increase its own renewable energy production. The better the German economy does, the better Finland's overall exports to Germany will do. 

The German government is doing everything possible to make more room for new wind power plants. For example, the government is making it compulsory to build solar power plants along new motorways. Solar power plants are also to be built along railways, and wind power plants are to be built along traffic routes. This is a good way to use wasteland productively. These are sensible decisions that Finland could also consider taking. 

 

Original article in Finnish