German industry criticises government cuts to green projects and hydrogen investment

The sharply reduced budget for supporting hydrogen projects and industrial decarbonisation, presented by Germany’s new government, threatens the future of German industry, according to the German Association of Energy and Water Industries (BDEW). The plans also fail to account for urgently needed investment in a sustainable and resilient energy system. The international news outlet Clean Energy Wire reported.

The German government approved a draft budget last Tuesday, proposing, among other things, a massive increase in defence spending, measures to lower energy prices and more funding for the Climate and Transformation Fund.

In response to the published draft budget, BDEW chief executive Kerstin Andreae pointed out that, for example, the medium-term budget for funding the national hydrogen strategy had been cut by a third.

“The draft budget sends a totally wrong signal, especially when it comes to supporting the development of hydrogen use,” Andreae said.

According to BDEW, even deeper cuts are proposed to funding for measures explicitly aimed at decarbonising industry over the medium term. Funding has been reduced from 24.5 billion euros to less than two billion euros.

“The government is making the same mistake as the European Commission: the demands of the transition are not aligned with the reality of the underlying conditions,” the BDEW chief executive added.

According to BDEW, the proposed drastic cuts threaten German industry and Germany’s competitiveness as a location for industrial production more generally.

Projects cancelled and postponed

BDEW’s criticism came several days after ArcelorMittal cancelled its decarbonisation plans for two German steelworks in Bremen and Eisenhüttenstadt. This was despite having secured a total of 1.3 billion euros in support for the projects from the German government and federal states. The company said the projects were not economically viable even with the approved support.

German energy company LEAG, part of billionaire Daniel Křetínský’s EP Group, has also indefinitely postponed its hydrogen plans in eastern Germany.

“We are now postponing our plans to produce hydrogen in Boxberg and focusing on other technologies for generating and storing electricity and providing flexible power supplies,” Reuters quoted a LEAG spokesperson as saying.

The company said it was reassessing its approach because political and economic conditions had not developed as expected. It noted that the previous government, led by Social Democrat Chancellor Olaf Scholz, ultimately failed to introduce the relevant law, which would have provided a key regulatory framework. Among other things, the law would have supported the construction of gas-fired power plants capable of using hydrogen.