Germany and Morocco’s partnership signals that Europe is receptive to green hydrogen’s potential, and willing to deepen partnerships to secure access. But supply-side interventions alone cannot deliver green hydrogen’s full decarbonization potential.
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Germany and Morocco to Form Green Hydrogen Alliance
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NEWS
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On June 28, Germany and Morocco announced their intention to form a collaborative climate and energy alliance, which will intensify green hydrogen production in, and export by, the North African state. The partnership, whereby Germany will financially support Moroccan renewable electrolysis plant developments, increases pledged German subsidizations of Morocco's growing renewable energy industry to over €1 billion. The first of these subsidies were pledged in 2012.
Germany's Economy Ministry stated that an international public tender for off takers will begin this year, whereby buyers can formally agree to purchase quantities of Moroccan green hydrogen when available. Production is expected to begin in 2028/2029.
A Continuation of Germany's Renewable Energy Strategy
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IMPACT
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The alliance reiterates Germany’s strategy of developing renewable bilateral relationships, exemplified by its partnership with Norway. The Norwegian-German partnership encompasses agreements on Carbon Capture and Storage (CCS), renewable energy, batteries, supply chains, and, crucially, hydrogen. The partners will collaborate to build a 10 Gigawatt (GW) per annum connective hydrogen pipeline by 2038, 3 GW of hydrogen-ready power plants in Germany by 2030, and fund hydrogen projects off the Norwegian coast.
Germany, like many northern European nations, lacks suitable weather conditions and available space for large clean hydrogen projects, but commands robust investment flows and recognizes hydrogen as essential for meeting climate commitments. In contrast, Morocco has an abundance of conditions and capacity, but lacks investment and developed end markets. The newly proposed alliance promises to leverage these advantages, using subsidies to lay foundations for a future hydrogen trade relationship.
Subsidizing production is necessary to make green hydrogen viable. Approximately 96% of global hydrogen is produced using fossil fuels, with adoption of clean alternatives limited by prohibitive costs—green alternatives are often 2X to 3X more expensive than dirtier hydrogen per unit. However, as subsidies support production of more, increasingly efficient, renewable electrolysis stacks and related infrastructure, green hydrogen will benefit from economies of scale, reducing costs. According to current forecasts, per unit prices will significantly undercut alternatives in the next 5 years. Consequently, German industries will soon be able to rely on supplies of cheap, clean hydrogen to decarbonize processes and products.
How Can Europe Maximize the Decarbonization Potential of This Partnership?
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RECOMMENDATIONS
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While supply-side partnerships are essential, Germany’s government and industry must also collaborate to transport green hydrogen to market, ensuring that demand can accommodate supply, and reduce risk.
Hydrogen pipeline projects must be prioritized. Europe’s pipeline network is underdeveloped: 30,000 Kilometers (km) of pipeline is planned, with 4,000 km in stages sufficiently advanced to be ready by 2028. At present, only 1,300 km are in service. European industrial and regulatory decisionmakers will need to commit to timely delivery of pipeline infrastructure and ensure that internal distribution networks, which will receive imported hydrogen, are adequate. Otherwise, bottlenecks may drive undersupply and increase costs.
Demand will also require significant stimulation. Europe must consume 10 Million Tons per Annum (MTPA) of green hydrogen to meet the region’s 2030 climate commitments. However, European demand is unlikely to exceed 5 MTPA by this deadline. Without incentivization, this disparity will undermine decarbonization efforts. Taxes levied on Carbon Dioxide (CO2) emissions will need to be increased, and widespread adoption of clean hydrogen end-use cases encouraged. Several key sectors, including the chemical and steel industries, need not significantly adjust or reconfigure to accommodate green hydrogen. For example, producers of ammonia, which is essential for fertilizers, chemicals, plastics, and textiles, already depend on hydrogen as an ingredient. For these industries, fiscal interventions to lower prices and improve the availability of green alternatives would suffice to stimulate consumption.
Risk—a major concern for potential adoptees—should be mitigated via financial sector involvement and governmental guarantees. Supply-side support is already emerging, with Zurich Insurance Group and Aon recently announcing new insurance products for clean hydrogen projects. Yet, financial institutions also need to innovate to protect prospective buyers from unforeseen supply disruptions. The German government could contribute to risk reduction by acting as a guarantor for early off-taking agreements, with support gradually reduced as the viability, and reliability, of green hydrogen is proven.
By bolstering subsidies with supply-chain and demand-side interventions, the German-Moroccan partnership could evidence green hydrogen’s profitability and practicality on a cross-regional scale. However, if these measures are neglected, hydrogen’s contribution to European decarbonization will be, at best, significantly delayed.
