As mentioned previously it becomes available after a certain date (click the "?" in the screen where you can equip your sub in order to see the timeline). Then you need to use the Z key (I think?) to raise the snorkel when at sea.
I've had a play with it and you can force the sub lower than the snorkel depth 'shortcut key' and still make use of it - I think from memory about 14m. This reduces your profile on the surface to a minimum and allows use of the diesel engines. Be aware though that the diesel's are MUCH louder than electric engines and it is foolish to use this configuration in the presence of destroyers hunting for you.
I've used it primarily to run deep enough to allow my sonar to work efficiently but shallow enough to move quickly when (for example) trying to flank a convoy.
Dave
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