Balancing Coal Phase-Out and Energy Security: Germany’s Hydrogen-Enabled Transition

Germany to become a hydrogen country

I. Current Transformation: Slowing Coal, Accelerating Renewables

Germany’s energy transition has reached a decisive turning point. In 2024, renewable energy accounted for 62.7% of net public electricity generation, with solar power alone reaching a record 72.2 TWh  Fraunhofer-Institut für Solare Energiesysteme ISE  Bundesnetzagentur. Wind and solar together made up nearly half of the mix, while coal’s share fell to 21.9%, down from 43% in 2015 ideas.energy  World Energy Council. This decline reflects both lignite (-8.4%) and hard coal (-27.6%) reductions Fraunhofer-Institut für Solare Energiesysteme ISE. The government has legislated a complete coal phase-out by 2038, with proposals to advance the target to 2030. Hydrogen is increasingly seen as a bridge in this process: surplus renewable electricity can be converted into hydrogen, stored, and later used to generate clean power or industrial heat, ensuring reliability when wind and solar output fluctuate.

II. Building Consensus: The Coal Exit Commission

The smooth progress of Germany’s coal exit is rooted in strong social consensus. In 2018, the government established the Commission on Growth, Structural Change and Employment, widely known as the Coal Exit Commission, bringing together 31 representatives from government, industry, unions, environmental groups, and affected regions Clean Energy Wire  IEA – International Energy Agency. Within six months, the commission produced a nearly unanimous exit strategy, setting 2038 as the latest coal phase-out date Clean Energy Wire. To ensure fairness, the government pledged €40 billion to support regional economic transition and worker resettlement. Hydrogen investment is now part of this consensus, offering new industrial opportunities in former coal regions and creating jobs in electrolyzer manufacturing, pipeline construction, and hydrogen-ready power plants.

III. Exit Mechanism: Auctions and Buyouts

Germany combined administrative orders with market-based mechanisms to retire coal plants. Large lignite facilities were bought out directly to prevent market manipulation, while smaller lignite and hard coal plants were retired through auctions. Between 2020 and 2023, seven auction rounds retired around 10 GW of coal capacity at an average cost of €68/kW, corresponding to an additional carbon price of €2.4/tCO₂ opus4.kobv.de. The final auction in 2023 retired 542 MW, though undersubscribed, marking the transition to mandatory closures without compensation Bundesnetzagentur  Clean Energy Wire. Hydrogen-ready gas turbines are deliberately included in this framework, ensuring that retiring coal units are replaced with dispatchable, low-carbon alternatives rather than fossil lock-in.

IV. Security of Supply: Reliability Under High Renewables

Despite coal’s decline, Germany’s electricity grid remains one of the most reliable in Europe. In 2024, average outage time fell to 11.7 minutes per customer, down from 12.8 minutes in 2023 Bundesnetzagentur. This resilience is supported by reforms in feed-in tariffs, shifting from fixed subsidies to auctions and market premiums, and by strict balancing group mechanisms that penalize forecasting errors. Cross-border interconnections also play a crucial role: Germany is linked to nine neighboring countries through 64 transmission lines, with interconnection capacity exceeding 45% of peak load TenneT  Energy. Hydrogen adds another layer of resilience, acting as long-duration storage and providing backup through hydrogen-ready plants. In 2024, the government announced tenders for 7.5 GW of hydrogen-ready gas capacity, including 500 MW of pure hydrogen plants and 500 MW of long-term storage Hydrogen Insight  Hydrogen Insight  news.sustainability-directory.com.

V. Hydrogen as a Strategic Enabler

Hydrogen is central to Germany’s next phase of energy transition. The updated National Hydrogen Strategy (2023–2024) emphasizes hydrogen’s role in industry, heavy transport, and power generation Nationaler Wasserstoffrat  Oxford Institute for Energy Studies  Mondaq. Seasonal storage is a key advantage: unlike batteries, hydrogen can store energy for weeks or months, balancing seasonal fluctuations in wind and solar. In industry, hydrogen is already being piloted in steelmaking and chemicals, replacing coal and natural gas. Hydrogen clusters in former coal regions provide new economic lifelines, ensuring that the transition is socially sustainable. By mandating that new gas plants convert fully to hydrogen between 2035 and 2040, Germany avoids fossil lock-in while securing dispatchable backup capacity news.sustainability-directory.com.

VI. Lessons for China

Germany’s experience offers valuable lessons for China’s energy transition. A clear roadmap aligned with “dual carbon” goals is essential, involving government, enterprises, and the public in policymaking climateandenergypartnerships.org  energypartnership.cn. Market-based integration of renewables should be accelerated, with price signals guiding resource allocation. China’s vast geography provides opportunities for cross-regional balancing, while distribution networks must be strengthened for local resilience. Demand-side resources, including smart meters, demand response, and virtual power plants, should be prioritized to avoid Germany’s early shortcomings. Finally, hydrogen should be integrated as a strategic enabler, supporting industry, providing seasonal storage, and ensuring flexible backup for renewables.

Commentary

Germany’s coal exit demonstrates that energy transition is not a simple teardown but a dynamic balance. Market auctions identified the lowest-cost pathways, while cross-border interconnections transformed regional instability into systemic resilience. Hydrogen strengthens this balance further: it provides clean flexibility, industrial feedstock, and long-term storage, ensuring that phasing out coal does not compromise supply security. For China, the transition is both a technological challenge and a test of institutional innovation — and hydrogen can be a decisive tool in that experiment.

Sources: Fraunhofer ISE Fraunhofer-Institut für Solare Energiesysteme ISE  Fraunhofer-Institut für Solare Energiesysteme ISE  Bundesnetzagentur, Bundesnetzagentur Bundesnetzagentur  Bundesnetzagentur, Clean Energy Wire Clean Energy Wire  Clean Energy Wire  Clean Energy Wire, IEA IEA – International Energy Agency, OPUS4 study opus4.kobv.de, Hydrogen Insight Hydrogen Insight  Hydrogen Insight, Sustainability Directory news.sustainability-directory.com, Oxford Institute for Energy Studies Oxford Institute for Energy Studies, Sino-German Energy Partnership climateandenergypartnerships.org  energypartnership.cn. Hovogen www.hovogen.com