Clean Hydrogen Project Development - Overcoming Industry Barriers in 2024

Hydrogen is no longer in the back of people’s minds when it comes to energy transition solutions. The clean hydrogen project pipeline grows daily, and interest in the sector is at an all-time high. Still, there is more to be desired as the pace of advancing project development around the world has not been as fast as sector players had hoped for.

This article explores the challenges that the global clean hydrogen sector faces globally and the perspectives of key developers on what needs to change to accelerate the deployment of clean hydrogen. It is based on a new intelligence report developed in collaboration with World Hydrogen Leaders for the upcoming World Electrolysis Congress, returning to Germany from March 4 to March 7 to power electrolysis technology and collaborations in clean hydrogen. Access the free report here.

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Among the reasons for the slow pace is the lack of a stable regulatory framework and a clear definition of what green hydrogen is, as well as slow permitting and financing uncertainty. The good news is that some industry actors believe these obstacles are being dealt with one by one.

According to the report Hydrogen Insights 2023 by the Hydrogen Council, the clean hydrogen project pipeline is indeed maturing, but about 75% of the projects included in it are still at the announced and planning stages, and just 7% have passed the final investment decision (FID) milestone. Europe is the region with the largest number of projects (540), but only about 4% of the announced investments have passed FID.

HYDROGEN OFFTAKE

The two biggest milestones for every project developer, whether in the energy or hydrogen sectors, are the signing of offtake agreements and reaching financial close. Renewable energy companies have had to overcome similar challenges over the past 15 years but clean hydrogen developers will have even less time to sort things out if the world is to achieve its climate goals.

Emma Woodward, European Hydrogen Market Lead at Aurora Energy Research, describes the situation around hydrogen offtake as “a major blocker at present”. In turn, Dimiter Banov, CFO of Bulgarian hydrogen solutions company Hydrogenera, says it is difficult to convince potential clients to invest in hydrogen because it is a big investment and they lack experience dealing with hydrogen, but it becomes a “no-brainer” for them as soon as there is an adequate green bond programme or a direct subsidy scheme for electrolysers.

On this topic, Andy Marsh, the CEO of Plug Power Inc, underscores the current volatility in the market as a factor that affects future hydrogen price visibility. “Because of all the volatility in the market, who knows what the price of hydrogen is going to be in three to four years? That makes the customers buying hydrogen concerned,” he told Renewables Now recently.

STANDARDISATION

Marsh went on to talk about the definition of green hydrogen in the US and Europe.

“On both sides of the ocean, we got to find what green hydrogen is. Nobody knows for certain and you can’t do a green hydrogen project unless you know what green hydrogen is,” he said whilst anticipating the announcement of the rules for the US hydrogen tax credit. Regionality, time matching, and additionality are issues that both the US and Europe have been struggling with, he noted.

FASTER PERMITTING

In addition to the uncertainty of what is going to qualify as “green” in the end, Marsh also spoke about “the huge, huge challenge” of permitting large projects. He said that the current permitting structure is way too problematic because “government rules on both sides of the Atlantic are either Ill-defined or not defined, which creates challenges when you’re trying to raise funds to build a project.”

COP28 MAINTAINS HOPE

The year, though, ended on a high note. The COP28 summit in Dubai became the stage for several hydrogen-related announcements that demonstrate governments’ commitment to supporting the industry. Among those were an intergovernmental declaration of intent on mutual recognition of certification schemes for hydrogen, a new ISO methodology, and a public-private action statement on cross-border trade corridors.

The World Electrolysis Congress promises to be a critical gathering for industry leaders and stakeholders working to turn hydrogen initiatives into concrete, sustainable projects. Its extensive program covers everything renewable hydrogen with topics including policy, finance, electrolyser efficiency, large-scale projects and offshore projects to name a few key themes. To view the full agenda, download the brochure here or register your place here.