Chemical Reaction

Germany’s chemical industry is large and prosperous but it’s also one of the biggest emitters of greenhouse gases. That needs to change if Germany is to meet its 2045 climate goals – and green hydrogen is at the heart of the solution.

September 2022

For a glimpse at the future of the German chemical industry, look toward the sun-soaked expanses of southern Spain. That’s where Viridi RE, a German company specializing in renewable energy installations, is planning to produce hydrogen and methanol using electricity from dozens of hectares of photovoltaic panels and wind turbines. By the end of 2025, it aims to be pumping out over 60,000 tons of green hydrogen each year – all of it to be taken by train to German chemicals factories in Baden-Württemberg, more than 2,000 kilometers to the north.

Viridi’s senior manager for policy and innovation, Daniel Argyropoulos, estimates that when they begin operations in 2025 his company will save more than 200,000 tons of CO2 emissions annually. By buying methanol manufactured using regenerative energy, Viridi’s chemicals customers can move closer toward their carbon neutrality goals.

“Right now, the chemical industry relies on natural gas, which is a fossil fuel and will have to be replaced,” Argyropoulos says. “As a green methanol provider, we expect a huge demand.”

The growing market for green hydrogen (H2) and methanol (CH3OH) is part of the German government’s new push to use H2 production to decarbonize large segments of the country’s industry, covering everything from automobiles to chemical plants.

“In order to further decarbonization, the hydrogen has to be green,” Argyropoulos says. “That means renewable energy targets have been dramatically increased – and at the same time, industry needs a lot more decarbonized gas.”

The Bottom Line

Germany wants to clean up its greenhouse-gas-intensive chemical industry. Hydrogen will be at the center of that transition, and international companies with ready-to-go solutions will stand to profit.

The time is now

Germany’s massive chemical industry is one of the four largest in the world and represents over 10 percent of the country’s GDP. On the downside, chemical synthesis is responsible for 15 percent of the country’s total carbon emissions. Chemical producers are also the largest industrial consumers of gas, oil and electricity globally.

“The whole process is accompanied by the use of energy, mainly from fossil fuels,” says Gerold Neumann, head of Vivevo Energy. “To get away from that, the energy needs to come from renewables.”

The new climate targets set by the recently elected German government have accelerated change. “There’s a lot of pressure on the industry in Germany to be carbon neutral by 2045, and in Europe by 2050,” says chemist Jörg ­Rothermel, head of the energy, climate change and raw materials department at the German Chemical Industry Association (VCI). “That’s not that far away, especially when it comes to new chemicals plants being planned today that will still be working in 2045.”

But there’s another incentive to decarbonize the industry. As the world approaches the peak of its reliance on oil, fossil fuel prices will fluctuate more than in the past, encouraging chemicals companies to turn to more predictable energy and raw materials resources.

Changing the equation

“Hydrogen will be at the heart of this process,” explains Germany Trade & Invest’s Chemicals expert Raphael Goldstein. His prediction is based on a long-established practice. “The chemical industry is already the biggest user of hydrogen in Germany,” Rothermel says.

As one of the country’s biggest CO2 emitters, the responsibility for decarbonization should fall at least proportionally on the industry. At present, the vast majority of hydrogen used to make chemicals is produced by breaking natural gas into H2 and CO2. The result is millions of tons of greenhouse gas emissions. The industry knows that this equation will have to change.

“What’s going to happen in the next decade is replacing the conventional H2 production process with green hydrogen,” Rothermel says. In theory, the chemistry is simple: Renewable electricity is used to power electrolyzers, which break water into its component elements O2 and H2.

Given enough renewable electricity, there is no limit to the amount of carbon-neutral hydrogen that can be produced. And a vast amount is going to be needed. Germany’s Ministry for Economic Affairs and Climate Action (BMWK) says the country will need up to 110 terawatt-hours (TWh) of hydrogen by 2030 – and all of it has to be sourced from renewables like solar, wind and geothermal. For comparison, Germany’s total electricity mix presently amounts to ca. 500 TWh. “Under no circumstances will it be possible to produce the amount of green hydrogen needed solely in Germany,” Rothermel says.

That means that Germany will have to import lots of green hydrogen. So, in addition to building electrolyzer plants in parts of Germany with easy access to renewable energy sources, Viridi and others are beginning to work with companies outside the country.

Logistical solutions

Because transporting large amounts of hydrogen is logistically complicated, there’s a pressing need for expertise and solutions in this field. In the short to medium term, investors have been betting on green methanol (produced by renewables) as an energy carrier. Extensive infrastructure already exists to transport and store liquid methanol, and the production of it binds H2 and CO2 – in other words, it captures carbon as well as being a fossil fuel substitute for gas-intensive chemical processes.

Viridi has located enough solar energy in Spain to produce methanol at sites already fitted out with hundreds of hectares of photovoltaic panels. They then plan to ship it north on special train cars to the Karlsruhe area, a chemical industry hotspot. Once there, “it will form the basis for all sorts of chemical products,” Argyropoulos says.

Another approach is to build electrolyzers and chemicals plants close to renewable energy sources. Vivevo is planning a hydrogen plant at ChemCoast Park Brunsbüttel, an industrial area in Schleswig-Holstein with easy access to wind energy produced on the North Sea and future pipelines that can also be used to transport green hydrogen to customers across Germany

Chemical Footprint


Decrease in energy-related CO2 emissions of the chemical-pharmaceutical industry in Germany from 1990 to 2019


Turnover in the German chemical-pharmaceutical industry in the year 2020

Big opportunities for investors

Both approaches leave lots of flexibility for foreign investors to get involved. “The technology exists, but it needs to get a lot more efficient,” Rothermel says. “Right now, it requires a lot of power, and the equipment is expensive.”

The transition is likely to be subsidized in the same way renewables were 30 years ago. The European Union is creating a framework to make subsidies for hydrogen production in the form of Important Projects of Common European Interest (IPCEI) funding.

Some major questions remain unanswered, however: for example, whether it makes more sense to transfer old chemicals plants and build new ones close to renewable energy sources – like on the windy North Sea coastline – or build power lines to move green electricity to existing chemical manufacturing hotspots like southeastern Bavaria’s “chemical triangle” or chemical industry hubs like Baden-Württemberg and Karlsruhe.

Vivevo hopes that its Brunsbüttel park will be a forerunner of the future. The 100-megawatt electrolyzer there will make H2 and combine it with CO2 produced by a nearby waste-to-incineration plant to synthesize methanol. It will then be sold to other companies in the ChemCoast industrial park as a green alternative to traditional natural gas.

“We have industry consumers right on our doorstep, plus green energy is here,” Neumann says. “And it’s a modular concept that can be replicated in other areas.”

As Germany pivots to the hydrogen economy, companies with ready-to-go solutions for the chemical industry will be in a strong position to profit. “Germany is where you want to go,” Neumann says. “The market is huge – and so is the interest from international businesspeople.”


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