Data provides key to green hydrogen economy
Green hydrogen is considered one of the key ingredients for meeting global climate targets[i]. And it is also a possible alternative to gas, which makes the need to accelerate the hydrogen economy in Germany and Europe all the more urgent. However, establishing a hydrogen economy requires more than just innovative technologies for its production, transmission and utilization. It demands digital solutions to raise efficiency, forecast hydrogen demand and supply, monitor transmission and storage and ensure the safe use of hydrogen in a variety of applications. Yet there has so far been little or insufficient sharing of the data needed to perform these tasks among potential market participants. The primary reasons for this are a lack of trust and a fear of competitive disadvantage. The HyTrust project, funded by the German education and research ministry, now intends to tackle these challenges by creating a data trustee model in the hydrogen economy.
Data plays a vital role in a company’s value creation and is extremely important for the development of competitive advantage. It lays the foundation for sound strategic decision-making and for controlling internal processes but also has enormous potential when it comes to interactions beyond company boundaries. For example, data allows efficiency levels to be raised, collaboration with partners and customers to be coordinated and innovation potential to be exploited.
Sharing data in industry and research is fundamental for developing solutions to societal problems and can be seen as a significant driver of innovation and competition. Despite the increasing availability of data, its use for cross-organizational purposes has so far been rare. This is due principally to a lack of trust by companies, a fear of losing know-how and a fear of competitive disadvantage[ii]. Other obstacles are the lack of an organizational framework for secure data exchange and unclear business models[iii]. Indeed, companies increasingly recognize the value of data but many fail to use this resource effectively[iv].
But what happens if companies neglect digitalization and the exchange of data? We find the answers in the lessons of earlier economic history:
Here we can look to Kodak, Quelle and Nokia – once giants in their fields. Kodak, a pioneer in photography, failed to spot the shift toward digital photography despite previously holding a leading technological position. Quelle, a long-standing mail order company, underestimated the rising importance of online retail and in the end had to file for insolvency. Nokia, onetime leader in the cell phone sector, missed the smartphone trend and lost its dominant market position in the area of smart cellphones to emerging competitors.
These companies not only ignored nascent digital trends but also shied away from making the necessary changes. Their inaction and adherence to outdated business models ultimately led to their existence being put at risk. Experts explain this reticence by the fact that established companies prefer to rely on strategies with which they are familiar and which have served them well in the past. Thus businesspeople expect further growth in return for very few changes – in other words, scant innovation, meager investment and continued profits.
Furthermore, the top decision-makers in established companies are frequently slow to act when it comes to planning and strategy for digitalization. This leads to these companies often not capitalizing on trends promptly enough and a climate of fear prevails in which failure is not tolerated. These factors inhibit the innovation process and result in short-term thinking. In Germany, there is a moderate degree of digitalization. Compared with the rest of Europe, we are in 13th place. The pioneers are the Scandinavian countries and the Netherlands[v].
At the same time, digitalization and the exchange of data have a major role to play in Germany in the restructuring of the energy supply to create an almost fully renewable energy system. They also act as enablers of this transition and are therefore more than just facilitators, particularly with regard to electricity and hydrogen production and usage. Studies on the climate-compatible development of our energy system highlight wind and solar energy as the main pillars of future power generation. Modeling shows that a large number of photovoltaic plants, heat pumps, stationary battery-storage facilities, electrolyzers and other technical plants will be needed to meet climate goals. By 2030, at least 80 percent of gross power consumption (households, companies, public facilities) is set to come from renewable sources[vi]. That means a massive expansion in solar plants and wind farms.
Added to that, production of green hydrogen is expected to grow to a capacity of 10 gigawatts by 2030[vii]. Most of these plants will use fluctuating and uncontrollable renewable energy for power generation which requires a paradigm shift from the previous centralized power plant model to a more flexible system. This complex interaction calls for carefully timed energy use, greater sector coupling and the temporary deployment of flexible production plants and various storage technologies[viii].
Meanwhile, a challenge exists in seasonally balancing supply and demand when integrating electricity generated from photovoltaics and wind. A range of solutions is being discussed, such as the production of hydrogen and its reconversion into electricity as well as the deployment of large-scale storage power plants. The involvement of a multitude of decentralized consumer and generating units as active market participants is crucial for short-term balancing within the energy system[ix]. The (cost) efficiency and eco-friendliness of the entire system and the liquidity of the markets are dependent on this.
The introduction of resilient digitalization concepts with real-time capability that allow for a reactive approach to network management is another step further in developing flexibility potential. Nevertheless, there are currently still digital gaps since the processes for dynamically adapting to power demand and supply are often time-consuming and paper-based. Complete end-to-end digitalization and a data-based exchange of information are needed to make these processes more efficient and more effective.
Insights into digital solutions
Production of green hydrogen: This is where, in particular, the challenges posed by the fluctuating availability of renewables and the cost of production can be addressed. Digital solutions, such as automated energy management systems, are able to support predictive production planning through continuously analyzing parameters like electricity availability, electricity prices and hydrogen load. Predictive maintenance reduces stoppages and maximizes the availability of plants.
Hydrogen transmission: Once hydrogen has been produced, it needs to be conveyed to consumers. However, this requires not only checking and adapting existing infrastructure but also making it more dynamic. Smart grids allow the flow of hydrogen to be adjusted dynamically in real time, which leads to efficient distribution and utilization. Energy management systems can be used to enable the integration of hydrogen-derived energy into existing energy infrastructure by balancing network loads and minimizing energy losses. Digital logistics platforms coordinate hydrogen transmission and improve the efficiency of the supply chain, taking into account regulatory requirements and the traceability of green hydrogen certification.
Hydrogen storage: The storage of hydrogen is critical for security of supply. Intelligent planning of storage capacities using digital technologies (for instance energy management systems) can lower costs by maximizing utilization efficiency through automated charging and discharging processes and minimizing energy losses. Trading platforms provide transparency regarding resources and demand while simulation programs or digital twins can model, test and optimize various storage scenarios.
Hydrogen use: In terms of green hydrogen use, control systems that are supported by artificial intelligence and based on real-time data ensure efficient and demand-responsive utilization of green hydrogen in various applications, for example in industrial processes or in the mobility sector. This is where existing cloud computing applications are used for optimal control. Increasingly there is also potential for new business models, for instance rental models for electrolyzer plants, which are based on data quality and enhance flexibility. Startups have an important contribution to make in addressing the challenges within the value chain by offering innovative solutions.
Development of a hydrogen market: Digital solutions could link up regional and global marketplaces and enable trading to take place across a variety of platforms. Blockchain-based smart contracts can automate and safeguard trading operations, thereby increasing trust and security. Big-data analyses support price setting and the development of market strategies through the assessment of a wide range of market data.
Traceability and certification: The certification and traceability of hydrogen origin must be one of today’s most frequently discussed subjects. Here, digital approaches can provide solutions, such as blockchain technology. This guarantees the traceability of the entire supply chain for green hydrogen, from production through end use. Additionally, digital certificates and supply chain management tools ensure transparency and trust in the provenance and quality of hydrogen. The use of digital technologies makes the whole supply chain more efficient and traceable, which promotes the acceptance and widespread use of green hydrogen.
HyTrust research project[x]
Data trustee models or DTMs are regarded as a highly promising method for encouraging cross-organizational data exchange and commercial data use. A data trustee serves as an intermediary[xi] which acts as a neutral trust authority and data manager and works to achieve a fair balance of interests between data providers and data users[xii]. The aim of a data trustee model is to provide a trustworthy framework with suitable infrastructure for the controlled exchange of data beyond company boundaries. These models are designed to strengthen data sovereignty and individual controls over the exchange of data by allowing data providers to determine what data is made available and for what purpose as well as the form it will take and the intended recipients[xiii].
Data trustee model, Source: Own depiction, Fraunhofer IMW
Data trustee models have a decisive role to play in the ramp-up of green hydrogen since they have the potential to increase the willingness to share data and make it easier for various players in the hydrogen industry to cooperate. Improving data access allows better coordination of value chains in the context of the hydrogen economy and the exploitation of innovation potential, for example.
Furthermore, data trustee models strengthen data sovereignty and security by enabling data providers to precisely define the access to their data. Centralized data management and provision promote trust and make it easier for data to be shared securely between national and international players such as hydrogen producers and off-takers as well as network operators.
Despite the potential, there are concerns and challenges in relation to data trustee models. Improved data availability is not automatically guaranteed, especially if data acquisition and provision remain complex. What is more, the introduction of a data trustee model could be interpreted as an additional bureaucratic hurdle that makes the process of data use more difficult. Companies and organizations could also be hesitant to share their data in a centralized model due to unresolved liability issues.
As it currently stands, the concrete benefits and suitable use cases for data trustee models in the hydrogen market are yet to be fully defined. That is why in this project we are investigating how data trustee systems in the emerging hydrogen economy can be used and structured for various application contexts. As part of this project, the research team is developing viable business and operational models for data trustees and addressing technical aspects relating to the implementation of the data trustee model. In doing so, the researchers will consider the concerns and challenges involved in introducing such a model, taking into account the legal framework conditions and requirements for data trustees.
Possible use cases for data trustee models
Traceability and certification: A data trustee model or DTM would be useful during the establishment of the hydrogen market as it can improve traceability and certification in the hydrogen market. This type of model will create transparency and trust, making the market more accessible from abroad and giving consumers clear information about national and international players, supply, storage and demand. A neutral nonprofit association could act as the data manager without being directly involved in the H2 value chain. This would ensure the neutrality of the certification process.
Planning H2 production and off-take during ramp-up: A data trustee model has a key role in the efficient planning of hydrogen production and off-take. It enables data on production capacities, storage capacities, demand forecasts and import quantities to be gathered and analyzed. This data is essential for optimizing network planning as well as aligning supply and demand. A DTM can help companies optimize processes and shape the hydrogen market in an effective way.
Data trustee model-supported regulations: The development of practical and meaningful regulations in the hydrogen market will be made easier by a data trustee model. A DTM allows the needs and requirements of players to be gathered and evaluated systematically and for this information to be converted into data that is relevant for regulations. This means that regulatory decisions can be based on current, well-founded data which in turn helps foster a stable and dependable market environment.
Network monitoring: A data trustee model is vital for secure and efficient network monitoring within the hydrogen market. It enables inputs and outputs in the network to be monitored second by second and network data to be collected and analyzed. Consequently, network islands can be identified, bottlenecks can be avoided and a continuous supply of hydrogen can be ensured. A DTM supports the disclosure and analysis of network data which is vitally important for the security and stability of the hydrogen network.
Overall, it is apparent that a data trustee model in the hydrogen market has a pivotal part to play in improving transparency, planning certainty, regulatory support and network monitoring. It promotes trust between market participants, facilitates the development of a sustainable hydrogen economy and helps create an efficient and reliable market for green hydrogen.
Digital transformation is not a luxury; it is a necessary condition for the future viability of companies in today’s interlinked world. This is clearly illustrated in the ramp-up of the hydrogen market and in the design of value chains. By effectively using data trustee models and digital technologies along the value chain, companies can successfully shape the transition to a green hydrogen economy and thus play a part in driving lasting change in the economy and society.
[i] BMWK (2020): https://www.bmwk-energiewende.de/EWD/Redaktion/Newsletter/2020/07/Meldung/direkt-erklaert.html
[ii] BDVA Position Paper (2019): Towards a European data sharing space. Enabling data exchange and unlocking AI potential.
[iii] European Commission (2018): Study on data sharing between companies in Europe. https://op.europa.eu/en/publication-detail/-/publication/8b8776ff-4834-11e8-be1d- 01aa75ed71a1/language-en
[iv] Bitkom (2023): https://www.bitkom.org/sites/main/files/2023-05/Bitkom-ChartsDatenoekonomie.pdf
[v] Statista (2022): Digitalisierungsgrad der EU-Länder 2022 | Statista
[vi] Federal Government of Germany (2024): So läuft der Ausbau der Erneuerbaren Energien in Deutschland. So läuft der Ausbau der Erneuerbaren Energien in Deutschland | Bundesregierung
[vii] Federal Government of Germany (2023): Neue Gigafabrik für Wasserstoff-Zukunft. Neue Fabrik für Wasserstoff-Elektrolyseure | Bundesregierung
[viii] Digitalisierung und Energiesystemtransformation – Chancen und Herausforderungen (2018) 7288_Henning.pdf (wupperinst.org)
[ix] Strüker J., Weibelzahl M., Körner M.-F., Kießling A., Franke-Sluijk A., Hermann, M. (2021): Dekarbonisierung durch Digitalisierung – Thesen zur Transformation der Energiewirtschaft. wi-1290.pdf (uni-bayreuth.de)
[x] Fraunhofer IMW; Projekt HyTrust (2023): https://www.imw.fraunhofer.de/de/forschung/data-mining/PlattformbasierteWertsch/forschungsprojekte/hytrust.html
[xi] Blankertz, A.; von Braunmühl, Patrick; Kuzev, Pencho; Richter, Frederick; Richter, Heiko; Schallbruch, Martin (2020): Datentreuhandmodelle. Stiftung Neue Verantwortung. https://www.stiftung-nv.de/de/publikation/datentreuhandmodelle
[xii] Kühling, Jürgen LL.M Prof. Dr. (2021): Der datenschutzrechtliche Rahmen für Datentreuhänder. Zeitschrift für Digitalisierung und Recht (ZfDR). https://rsw.beck.de/zeitschriften/zfdr
[xiii] BDR (2019): Der Datentreuhänder – Centrust Platform der Bundesdruckerei. Bundesdruckerei. https://www.bundesdruckerei.de/de/Newsroom/Aktuelles/Vertrauen-durch-Datentreuhaender