Global Challenges: Value Creation Is Rearranged – Politics

Global Challenges is a brand of DvH Medien. The new institute aims to promote discussion of geopolitical issues through publications by recognized experts. Today a contribution from Prof. Dr. Veronika Grimm, professor of economics, in particular economic theory, at the University of Erlangen-Nuremberg and member of the expert council. Further authors are prof. Dr. Ann-Kristin Achleitner, Sigmar Gabriel, Günther H. Oettinger, Prof. Dr. Volker Perthes, Prof. Jörg Rocholl PhD, Prof. Dr. Bert Rürup and Prof. Dr. Renate Schubert.

Will the export-oriented companies of Europe and especially Germany fall between the fronts if the conflict between China and the US continues to escalate? The concern has existed since the term ‘disconnection’ became popular.

Germany and the world’s largest coal exporter Australia are currently launching a project that involves nothing less than establishing a global trade in renewable energy – a critical prerequisite for climate change policy towards a de-fossilized economy. Both countries want to demonstrate within two years that a stable hydrogen chain based on renewable energy can be realized between the continents.

The findings won’t just point the way to a post-fossil era. Global trade in renewables will also lead to a reorganization of global value chains.

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But why do two geographically distant countries come up with the idea of ​​generating electricity in Australia from renewable energy sources and transporting it to Germany? The answer: with the global trade in green hydrogen, long-term transport costs are negligible. Climate neutral energy sources can be transported over long distances by ship. Locations where large amounts of electricity can be generated from renewable energy sources such as photovoltaic energy, wind energy, geothermal energy or hydropower are suitable for the production of green hydrogen and its by-products.

Import of green hydrogen is possible

There, hydrogen can be produced in a climate-neutral way by splitting water by means of electrolysis. To be able to transport the hydrogen by sea, it is advisable to liquefy it by cooling or chemically binding it. Analyzes show that the import of green hydrogen from all parts of the world is technologically possible.

Germany and Europe would do well to prepare in time for the global race for hydrogen in order to compete on a long-term level with technology-leading nations like Japan. Because even with ambitious renewable energy expansion scenarios, Germany, like most European countries, will always remain an energy importer on the road to climate neutrality.

Current estimates assume that, in the long term, Germany will import more than 80 percent of the demand for climate-neutral hydrogen, which plays a key role in the defossilization of trucks and air traffic, as well as in the production of CO2-neutral steel. The feasibility study agreed between Canberra and Berlin in September is an important step towards a reorientation of global energy trade.

Worldwide there are many potential suppliers of renewable energy sources, for example Iceland, Canada, Morocco, Patagonia or Australia. Trade in renewable energy sources is also conceivable with some countries such as Russia, which already supply us with fossil fuels. It makes sense to move these partnerships forward and gradually convert established energy trading relationships into renewable energy sources.

Stability in choosing a partner

Partnerships with countries such as Morocco, from which we have not yet extracted significant amounts of energy, can help to diversify dependencies. In the search for long-term partnerships, the respective political environment and the expected stability or instability of the regions play a role.

These aspects in particular have delayed the ambitions in the past to import green electricity from the desert via high-voltage lines to Europe as part of the Desertec project. However, if the sea route is used in place of permanently built power lines through politically unstable terrain, supply chains are likely to be significantly less vulnerable.

Many countries hope that the export of climate-neutral energy sources offers growth opportunities in the future. Argentina and Chile, for example, have good opportunities to export wind and solar energy, create highly skilled jobs and set up production steps directly related to on-site hydrogen production. This is supported by the fact that pure hydrogen in gaseous form is difficult to transport by sea.

The direct production of fuels or synthetic by-products such as ammonia and methanol in the country of origin, which are easy to transport in liquid form, would therefore be the logical consequence.

The added value that is currently taking place in, for example, the German chemical industry, would be shifted abroad. The transition to a resource-efficient economy therefore inevitably leads to a reorganization of value chains.

Added value for the people of Africa

In return, the switch to renewable energy sources offers significant potential for German industry to export capital goods for the production, further processing and transportation of hydrogen and its secondary products – such as electrolysis plants, chemical plants or compressors.

Africa also has excellent conditions for producing green hydrogen. Many African countries have much more solar and wind potential than European countries. The entry into exports of this energy could create jobs and development opportunities – as well as greater long-term political stability. Non-governmental organizations rightly point out that energy partnerships must also add value to the people of Africa.

It is criticized that the supply of renewable electricity to the local population could be limited by the use of plants and areas for export. But in many places it is precisely the inhospitable tracts of land far away from the metropolitan areas that are ideal for energy exports. These areas are often not connected to an electricity grid, but are close to the coast and therefore cheap for the export of material energy sources by sea.

Although the climate neutrality that Germany is aiming for in 2050 is still a long way off, the race for future partnerships in global energy trade has already begun. Feasibility studies such as the one between Australia and Germany will reveal many things that still need to be mastered – for example the possibilities but also the limits of using existing infrastructure and the advantages and disadvantages of different forms of logistics.

But it is already clear today: if Germany and Europe are to be heard more on the geopolitical stage, they must put a lot of energy into the green hydrogen race.

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