Germany is investing significantly in green hydrogen for industry and transport, and several Danish hydrogen projects are set to receive substantial funding from Germany and the EU. This creates opportunities for Danish hydrogen exports. In order for the Danish hydrogen producers to enter into the necessary contracts and make investment decisions, greater certainty that the infrastructure is needed.
The Danish Government and a majority of the parties in the Danish Parliament have therefore agreed that the state will assume a greater share of the risk. The agreement entails that the pipeline will be built if at least one project commits to using it. The state-reserve of support for the pipeline operation will be increased by DKK 5.6 billion (over 30 years), so hydrogen market participants will have improved conditions for committing to the project.
Minister for Climate, Energy and Utilities Samira Nawa says:
“With this agreement, we can create a new export market for Denmark and contribute to a more energy-independent Europe. I am pleased that a broad group of political parties are taking responsibility and support the opportunity to develop a Danish hydrogen market.
“We are entering into this project with our eyes open. The hydrogen market is still at an early stage, and building a hydrogen pipeline is a major undertaking with several risks. But the pipeline must be built. It can contribute to a greener and more secure future for Europe while creating promising new export opportunities for Denmark.”
The hydrogen pipeline will be built by Energinet and will connect hydrogen production facilities in Denmark with off-takers in Germany.
With the agreement, the existing state reserve of DKK 10.9 billion for operating support will be increased by DKK 5.6 billion for the period 2030–2059. The purpose is to ensure that tariffs for using the pipeline remain within users’ willingness to pay.
This brings the total amount allocated for operating support for the Danish Hydrogen Backbone 1, as the project is known, to DKK 16.5 billion.
The states requirement for the total capacity to be booked by companies by December 1st 2026 remains at 0.5 GW. However, market participants will only be required to make a financial commitment corresponding to 0.1 GW. At the same time, the deadline for providing a financial guarantee to Energinet will be postponed until January 1st 2028.
These changes will provide hydrogen producers with significantly greater certainty as to whether the pipeline will be built and what it will cost to use it.
Until hydrogen market participants are required to provide their guarantees to Danish transmission system operator Energinet, the state will support the continued development of the project by providing a guarantee covering stranded costs of up to DKK 2.1 billion. This will allow Energinet to continue advancing the project until hydrogen market participants make binding commitments and provide the required guarantees.
The agreement concerns the Danish Hydrogen Backbone 1 running from Esbjerg in the southwestern Denmark to the German border, forming the shape of a figure seven
Germany has a significant interest in green hydrogen from Denmark, and five hydrogen projects in Denmark have been awarded close to DKK 12 billion in funding from the German Government and the EU.
The agreement can help bring the German and European funding into play and provide necessary support for the emerging hydrogen market.
Energinet is working on a very tight schedule, which entails a risk of delays. The pipeline is nevertheless expected to be commissioned before the end of 2030.
More information about hydrogen and the Danish Hydrogen Backbone 1 is available on Energinet’s website.
Facts about the agreement
- State operating support for the hydrogen pipeline will increase from DKK 10.9 billion to DKK 16.5 billion for the period 2030–2059.
- The state will provide a guarantee of DKK 2.1 billion to cover potential stranded costs incurred by Energinet.
- The requirement for hydrogen producers regarding the total capacity they must book by December 2026 will remain at 0.5 GW.
- The guarantee that hydrogen producers must provide to Energinet by January 1st 2028 will be reduced to 0.1 GW.
- While hydrogen producers must collectively book 0.5 GW of capacity, the capacity for which they are required to make a financial commitment is reduced to 0.1 GW.
- The deadline for hydrogen producers to provide financial guarantees to Energinet will be postponed until 1 January 2028.
- The construction of the pipeline will be subject to social clauses throughout the supply chain.