Hydrogen projects are being included in the list of important projects of common European interest, which allows them to receive public support. These proposals and initiatives feature hydrogen in several ways, and provide further substance and backing for its development. The enthusiasm for clean hydrogen extends to the national level, where EU members such as Germany, France, Portugal, and the Netherlands have designed their own hydrogen strategies. Germany has even promised to back hydrogen development with a public budget of €9 billion. France has committed €7 billion. In several countries, innovative support schemes are emerging to encourage deployment and to mitigate the most pressing issues. Beyond these, the European Commission has also enlisted the support of industry and set up a European Clean Hydrogen Alliance to develop a pipeline of projects and help achieve the objectives of the hydrogen strategy. The Alliance brings together the industry, public authorities, and civil society to identify a pipeline of hydrogen investments. In November 2021, the Alliance announced a list of over 750 projects across Europe, representing billions in potential investment in the coming years. This underlines how much industry has also recognised the opportunity and importance of hydrogen in today’s context.
hydrogen thesis cannot be overstated – in fact, the falling cost of renewables in the past decade – which the European Investment Bank (EIB) has supported through its financing – is seen as one of the key factors that provide a sound footing for hydrogen today. Because a very large proportion of costs is linked to the electricity used for its production, the development of green hydrogen raises systemic questions about how to align low-cost production (for example, where renewable power is cheap and plentiful) with large and predictable use cases, typically in large industrial basins. Across the board, the value of carbon will be a key component to help mitigate the green premium. Ensuring that avoided carbon emissions can be monetised could make or break initial low-carbon hydrogen projects. Conversely, a higher carbon price on fossil fuel-based approaches could make a comparison more compelling for low-carbon hydrogen. In addition, the regulation governing hydrogen transport and storage may need some adaptation to incentivise investment in the necessary infrastructure. When it comes to financing, EIB’s feedback from recent investor consultations highlights that project risks, whether related to offtake certainty, technology performance, or operational risks, will need to be addressed to make low-cost financing available.
Large investments presenting challenges
In the past decade, EIB has invested €550 million specifically related to hydrogen, which has helped generate over €1.2 billion in external investments in the sector. The company’s support has focused on financing research and development (R&D) in hydrogen transformation and application technologies, as well as public transport schemes deploying hydrogen buses and rolling stock and supply/refuelling infrastructure. Today, the company’s energy lending policy focuses on decarbonisation, and features low-carbon gases such as hydrogen. EIB has approximately €1 billion of hydrogen-related projects in its pipeline, and is beginning to see industrial scale deployment projects come through its doors. EIB is nevertheless looking for more projects to finance. To this end, the company has established advisory collaborations with key industry associations, such as the Hydrogen Council and Hydrogen Europe, and national associations such as France Hydrogène or the Polish Hydrogen Cluster, to identify promising projects and facilitate access to its advisory and financing solutions. In the future, EIB wishes to support projects that expand the supply and use of hydrogen at a larger scale, and the company hopes that it will be able to do that with the right policy and regulatory framework at the EU and member state levels. Given sector challenges, the company’s technical assistance and advisory services can play a key role for these projects. Indeed, EIB can help innovators and governments put together projects in a way that can attract financing.
Getting low-carbon hydrogen usage to serve the needs of the economies and industries will require very large investments – the EU’s Joint Research Centre estimates investments required by 2050 could amount to approximately €2 trillion in a scenario of large scale renewable power capacity and electrolyser deployment. Transport, storage infrastructure, and application-level assets will also need investment. Before such investments can happen, low-carbon hydrogen needs to become more competitive against the technologies it could replace. In some use cases, renewable green hydrogen competes against fossil-based grey hydrogen. In others, hydrogen competes against natural gas. Hydrogen may also compete against completely different technologies altogether, in the case of steel production (traditional blast furnaces or electricity-based models) or transport (thermal engines, batteries). In most cases, low-carbon hydrogen tends to be more expensive. It comes with a green premium that needs to be reduced over time by scaling up the low-carbon hydrogen value chain, which may bring costs down through economies of scale and industrial improvements. While some of the core technologies are mature, innovation is likely to remain important because improvements remain necessary in production, transport and storage, and actual usage applications. In the case of green hydrogen, a critical capacity and cost lever will be the availability of very low-cost renewable power. The importance of renewable power for the clean
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ENERGY GLOBAL SUMMER 2022
Investing as a catalyst
