Technology Rollout Program Not Before Mid-2016

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Thorsten Herdan, © BMWi

Most of his working life, Thorsten Herdan held jobs in the industry developing combustion technology. After having been elected secretary-general of the International Council on Combustion Engines, the mechanical engineer also served as chair of the Research Association for Combustion Engines for fourteen years. Since 1999, he has headed Power Systems, a sector group of the German Engineering Federation – from 2000 on, he has been responsible for Energy Policy there as well. The now 49-year-old switched roles in June 2014, when he went into politics and took up the position as Director General Energy Policy at the Federal Ministry for Economic Affairs and Energy (BMWi). Current events have had us contact him about the latest news on the Technology Rollout Program (TEP) and the goals of his ministry.

H2-international: Mr. Herdan, if I may ask, what prompted you to change sides by leaving the industry and going into politics?
Herdan: I was very delighted about the offer I received and, of course, it is and has been a very interesting challenge. Today, I can confirm it was worth the effort. I really enjoy working on energy policies, as it allows me to play an active role in shaping the country’s energy transformation.

Hydrogenics

H2-international: Shortly after you started working for the BMWi, you quoted the ministry’s website during an online interview when saying that not only does “nuclear energy need to be replaced by renewables, but an integrated approach” was required. What role do fuel cells have in this integrated approach?
Herdan: The energy transformation is Germany’s path to a safe and secure, as well as sustainable and economically successful future. Its core element besides the growing expansion of renewables is the penetration of the market with efficient energy conversion technologies. Regarding overall efficiency, the aim must be to develop an integrated energy approach incorporating the consumption sectors power, heat and transportation. Hydrogen and fuel cell technology will play a key role in reshaping the industry.

H2-international: You also spoke a lot about efficiency increases and said: “The decrease in power and heat consumption is what will really bring the country’s energy transformation forward.” However, not once did you mention fuel cells as an option. Why not?
Herdan: That the fuel cell is key to covering future energy demand is indisputable. Its conversion efficiency, the combination of heat and power and the local zero-emission output offers many advantages for stationary and mobile energy supply.

H2-international: During another interview in March 2015, you explained that it was your intent to give the heat segment more priority within the Market Incentive Program (MAP), for instance, by providing more subsidies for solar thermal and biomass. You did adjust the MAP accordingly, but excluded fuel cells in the revision of the law. Why?
Herdan: We use several, technology-specific subsidy measures to advance the energy transformation in the heat market. Anyone thinking about using fuel cells had already been able to apply for the KfW programs for CO2 building renovation. We will now expand financial assistance even further by offering a separate program at the KfW to boost the mass market rollout of the fuel cell. The market incentive program for renewable energies is a horse of a different color: With it, we try to encourage the installation of – as the name says – renewable energies. The fuel cell would not match the program’s objective.

H2-international: All right, then we move on to NIP: Currently, fuel cell professionals are eagerly awaiting the announcement of a political decision and they are asking themselves what the new National Innovation Programme Hydrogen and Fuel Cell Technology, NIP 2, will actually look like. First, could you confirm that there are actually plans for another ten-year subsidy program?
Herdan: At the NIP general assembly held last year in conjunction with the status seminar of the BMWi Energy Research, our Parliamentary State Secretary Uwe Beckmeyer stressed the success of NIP in his opening words and promised further support for the NIP follow-up program. In other words: The program will continue. At present, all departments involved in NIP – BMVI, BMWi, BMBF and BMUB – are working out the details.

H2-international: The transportation ministry contributed much more financial resources to NIP 1 than your ministry did. Which of them will be managing NIP 2?
Herdan: As I already mentioned, there are four ministries participating in the NIP 2 consultations. Because of the greater financial contribution, the program will – again – be headed by the transportation ministry.

H2-international: During the NIP general assembly, the BMVI already pledged EUR 160 million to the project until 2018 – primarily intended for the transportation sector, for expanding the H2 infrastructure. Regarding your contribution to the program – with a greater focus on stationary systems – which amount of financial resources are we talking about?
Herdan: Your question refers to the fields mentioned in the NIP list of measures. The BMWi will continue its support for applied research, having allocated more than EUR 20 million per year to it within the budget of the energy research program. A new field is the market uptake of stationary fuel cell technology. From 2016 on, we plan to support the market uptake of stationary fuel cells with a power of up to 5 kWel through the Technology Rollout Program. To implement it, we have a million-euro budget in the double digits available for 2016 through 2018.

H2-international: As you already mentioned, the negotiations about the design of the so-called Technology Rollout Program for stationary fuel cells continue. Could you please elaborate on what is being negotiated about still?
Herdan: The follow-up first required an update of the available forecasts and assessments, which allowed us to develop the cornerstones of the new subsidy program. This task was given to IZES, which had already developed a TEP design in 2012 on behalf of the BMWi. Additionally, we needed to make sure that our subsidy program was in line with the competition policies of the EU Commission. Moreover, the program needed a sensible alignment with other mechanisms (e.g., the ones based on the CHP Act revisions). Finally, there were and there are many rather administrative issues to resolve regarding application and approval. I expect the program to be ready for launch in mid-2016.

H2-international: What actually are the exact goals of the program?
Herdan: As part of the current NIP, the national pioneering project Callux proved successfully that fuel cell heating systems are ready to enter the residential market. Based on the experiences with this program, we are now taking the next step: Starting this year, we will use a grant program to support the market uptake of highly innovative stationary fuel cell heating systems in smaller sizes of up to 5 kWel as part of the Market Incentive Program Energy Efficiency. The demand-based approach with subsidies being reduced over time is intended to up sales, reduce costs and sharpen the technology’s competitive edge. It will be closely monitored by NOW to track technological and economic milestones and to give recommendations on further research and development whenever possible.

H2-international: This translates into which fields of application at which power levels?
Herdan: TEP is limited to power levels of up to 5 kWel, as this segment is seen as the most promising in terms of demand and the manufacturers of these systems are ready for mass production. The program primarily addresses private homes whose owners are in the middle of deciding with what to replace the old heating system and may be interested in a highly efficient fuel cell system to generate power and heat. Support for these systems at industrial and commercial businesses may follow a bit later.

H2-international: What about bigger plants, meaning fuel cell systems above 5 kWel?
Herdan: Our first priority is to give the industry a noticeable boost by subsidizing smaller systems in higher quantities. In our view, which was affirmed by the IZES study, it would be too early to establish a technology rollout program for plants above 5 kWel. The currently available fuel cell systems have very different specifications and applications, and some of them are very technologically advanced whereas others are not. There is still some research and development work to be done to make the systems market-ready. This means that the BMWi will continue its efforts into researching and developing fuel cell CHP systems for commercial or industrial use in order to advance those systems and reduce their price.

H2-international: Will this program stay limited to German products or is it also available to manufacturers from abroad?
Herdan: The program is open to all fuel cell manufacturers on the market. Limiting the program to German manufacturers only wouldn’t even be possible because of competition regulations. One should not forget as well: The more suppliers are on the market, the greater the competition will be and naturally, this will also benefit the end customer.

H2-international: In the end, the Renewable Energy Law was the downfall of many local manufacturers because of systems at cutthroat prices coming from Asia. How do you want to prevent a similar development during the rollout of fuel cell technology?
Herdan: I do not believe there is a risk of Asian manufacturers dominating the market in the foreseeable future. The industry in Germany is in a good position, especially thanks to strong research efforts into energy applications. In contrast to PV technology, a stationary fuel cell for the efficient power and heat generation at private homes is a complex technology that cannot be copied that easily. On a side note, German manufacturers have already started to collaborate with partners, for example, from Japan, to advance the technology on the German market.

H2-international: Would you be able to tell us something more about the added conditions? There is said to be an investment subsidy, but for how long and how much will be granted?
Herdan: The final IZES report was presented at the BMWi on Nov. 18, 2015, including recommendations on TEP design. The presentation was attended by all in all 20 representatives from federal (BMWi, BMUB, BMVI) and state (NRW, Bavaria, Hesse, BW) departments as well as industry associations (heating systems, fuel cells, CHP plants). All of the participants welcomed the BMWi initiative for such a program. The recommendation was to design a TEP limited to eight years and with investment subsidies decreasing over time. The exact subsidy amounts haven’t been specified yet, for example, because the increased subsidy levels of the CHP Act require a reassessment of the ones suggested by IZES. Our aim is to find the right subsidy levels for enabling a market uptake.

H2-international: Although you cannot say something about the precise subsidy amount, one may reckon that you based your consultations on the strategy paper Advancement of the National Innovation Programme, which was published by the NOW advisory council in summer 2013?
Herdan: Of course, we have a very good understanding of these strategy papers and lists of measures within the department – otherwise, the government would not need to establish and maintain these committees.

H2-international: The then chair of the advisory council, Dr. Werner Tillmetz, explained in October 2013 at exactly this stage in his interview: “After the first analyses, the government would have to allocate EUR 1.6 billion to the task. Spread out over ten years, it really isn’t much for a promising technology and for a booming economy.” What part of his statement still holds true today?
Herdan: As it stands, I cannot agree to it. One should keep in mind that a great deal of financial resources have been devoted to researching and developing the technology. The money put into it has to be earned first as well. Furthermore, I expect that the federal government will base its assistance for the NIP follow-up on the investment pledges by the industry. As far as I know, the industry promised to provide around two billion euro over ten years.

H2-international: So everything will stay as it was, especially considering the task allocation between NOW and project host Jülich as well as during the application process?
Herdan: When it comes to follow-up programs, procedures are examined in detail, but I see no reason to reinvent the wheel.

H2-international: Mr. Herdan, I thank you for our interesting interview.

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