New law will multiply demand for green gases in Germany
Demand for hydrogen-based gases in Europe is set to grow rapidly in the coming years. Germany is currently in the process of passing a law requiring that synthetic methane, hydrogen, or biogas be added to natural gas used for heating, with the required proportion increasing over time. Germany’s own production is nowhere near sufficient for this, so more environmentally friendly gases must be imported from elsewhere—for example, from Finland.
In Germany, homes are most commonly heated with natural gas. Now the German government has decided to introduce quotas for environmentally friendly gas and oil in home heating. Starting in 2029, at least 10 per cent of the gas and oil used for heating must be low-emission fuels if a new or renovated oil or gas heating system is installed in a home. This quota will continue to increase until 2040.
In practice, this means that consumers must choose a fuel supplier for heating that can provide a suitable gas or oil blend. Biomethane, synthetic methane, and hydrogen are all eligible as quota gas to be blended with natural gas. According to a statement by the ruling party, hydrogen must be either green—i.e., produced from water via electrolysis— blue—i.e., produced from natural gas with carbon dioxide capture, turquoise—i.e., produced from natural gas via a pyrolysis process (thermal decomposition), or orange—i.e., produced by binding carbon to iron-rich mineral deposits through water injection. Bio-oils and suitable liquid synthetic fuels can be blended with oil in the same way.
Biogas is not enough despite the slurry fever
Above all, there is now talk in Germany of the increasing use of biogas. The situation has already sparked a veritable slurry fever in Germany. Eight major biomethane producers in Germany now plan to invest 1.6 billion euros in expanding their operations.
Industry players are even dreaming that German fields could grow enough raw materials for an annual production of 100 terawatt-hours (TWh) of biomethane, and that an additional 100 TWh of biogas could be produced from waste. In addition, at least 100 TWh of biogas and other gases would be imported from abroad.
These estimates can be assessed for realism by comparing them to the figures for 2024. German households consumed 225 TWh of conventional natural gas that year. In the same year, Germany produced 10 TWh of biomethane and imported an additional 3.5 TWh. Virtually none of this was used for heating.
It may not make sense—but Finland could benefit
Many experts strongly criticise the new bill. Many consider it a waste to use biogas, hydrogen, and hydrogen-derived fuels for heating homes when industry needs these gases, and home heating can generally be managed more cost-effectively using air-source heat pumps and by expanding district heating.
For Finns, this means in any case that Germany’s need to import environmentally friendly fuels will grow. The main beneficiaries could be Finnish producers of electrolytic hydrogen, companies that produce methane from it, biogas producers, and producers of pyrolytic hydrogen.
If the Germans want gas for heating, Finland would be better off selling synthetic methane—produced using biogenic carbon dioxide in addition to hydrogen—rather than pure electrolytic hydrogen. This way, in addition to hydrogen, we can also sell carbon dioxide from factory stacks and the added value generated by processing to Germany. Methane is also significantly easier to transport to Germany than hydrogen—even through existing gas pipelines.
Finnish biogas producers can also use the same existing natural gas pipeline network to transport their gas to Germany. The main problem here is that biogas production in Finland can only be increased to a limited extent.
Hycamite, based in Kokkola, has developed technology to produce turquoise hydrogen, or pyrolysis hydrogen. Germany’s decision opens up opportunities to use this technology to produce quota hydrogen from natural gas in an emission-free manner in Germany as well.
Dissatisfaction guaranteed
The government decided to enact a new heating law in Germany because the previous government’s heating law sparked a great deal of outrage, and the right-wing populist AfD exploited it without restraint to boost its support. The previous law would have effectively forced all gas-heated homes to switch to heat pumps over time. Air source heat pumps are significantly more expensive than gas appliances, even though their operation becomes cheaper over time.
The new law, which takes effect at the beginning of July, will likely also draw a lot of criticism once its impact on gas prices becomes apparent to ordinary consumers. Only time will tell how many properties will decide to continue using gas and how many will ultimately switch to air-source heat pumps or opt for district heating.
