July 28, 2022 • Paul Rodden • Season: 2022 • Episode: 134
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Welcome to The Hydrogen Podcast!
In episode 134, One of the most important articles has been written on hydrogen project investment. I’ll go over the article and give my thoughts on it. All of this on today’s hydrogen podcast.
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Paul Rodden
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Transcript:
One of the most important articles has been written on hydrogen project investment. I’ll go over the article and give my thoughts on it. All of this on today’s hydrogen podcast.
So the big questions in the energy industry today are, how is hydrogen the primary driving force behind the evolution of energy? Where is capital being deployed for hydrogen projects globally? And where are the best investment opportunities for early adopters who recognize the importance of hydrogen? I will address the critical issues and give you the information you need to deploy capital. Those are the questions that will unlock the potential of hydrogen, and this podcast will give you the answers. My name is Paul Rodden, and welcome to the Hydrogen Podcast.
In an article from energy post.edu Isabel Huber writes hydrogen, Project pipelines need new ways of matchmaking investors and developers she writes in a world that reaches its climate goals by 2050. International Energy related trade will no longer be dominated by oil and natural gas, but by minerals and hydrogen. With that in mind, an increasing number of countries are devoting public funds to support the development of low carbon hydrogen market. But to establish real markets, public funding will need to catalyze private investments.
In the United States. The hydrogen hubs program, part of the bipartisan infrastructure bill of 2021, is supported by $8 billion, and is expected to unlock 10s of billions and private capital. In the European Union, hundreds of billions in private capital will be needed to reach the goals of the European Union set itself in its 2020 Hydrogen strategy, and even more if hydrogen is to play in the planned role to reduce European Union’s dependence on Russian natural gas investment activity, however, is still relatively low. Out of the 100 and 30 billion euros of investment announced by project promoters in the European Union, only a small part has reached a final investment decision. This raises the question, what are the barriers to private investment in hydrogen and how can they be overcome? The European Investment Bank surveyed hydrogen investors in the European Union to find answers to this question. Its Report provides valuable considerations not only for policymakers in the European Union, but also in the United States and elsewhere. The most obvious challenge for investors is the increased cost of moving to low carbon hydrogen applications for carbon intensive alternatives, or the green premium.
Among the potential public support mechanisms to bridge that gap. The investors surveyed for the report favor the concept of market making platforms that create supportive market conditions for both hydrogen producers and users. For example, Germany’s h2 global mechanism will award long term contracts to international green hydrogen production projects. In short term contracts to hydrogen users. The German government funds the gap between the higher production prices relative to the prices paid by the hydrogen users. This means that the production projects get the full offtake contracts they need to get started, and demand projects do not have to pay the full premium for green hydrogen and have some insurance that supply will be there, that platform could be expanded to a European scale. Several further challenges identified in the report share one underlying theme, a lack of visibility and communication among stakeholders. For example, an end to end business model for hydrogen usually requires proximity to complementing projects, projects need to find the value chain around them. A lack of visibility among project developers hence prevents projects from getting started. Insufficient communication between project promoters and finance experts prevents projects from finding the best combination of available financing options, and sub optimal information exchange between project developers and governments might be one of the reasons why there are investment risks due to lack of regulatory clarity.
So how could communication among the growing number of stakeholders be organized efficiently? Getting digital might prove useful here, governments could develop interactive online platforms or the various groups of hydrogen project promoters or early stage ventures demonstration project developers and big infrastructure project providers can find all the information and context they need for manufacturing, financing solutions and on regulatory frameworks, online forums and common functions could enable information exchange. Both United States and European Union have already developed an online service for matchmaking, the US hydrogen matchmaker and the European Union’s project pipeline database make hydrogen project developers visible to each other to address the challenge of value chain integration. Governments could build on the hydrogen project databases and existing offline platforms, such as the European clean hydrogen alliance to develop online services that further reduce the barriers to communication. For example, an online platform could connect the various groups of project promoters from Innovation Ventures to here huge infrastructure projects to their respective finance counterparts or innovation finance programs and finance project providers. The EIB report highlighted the need for financing projects to create dedicated initiatives to reach out to project developers. With an online tool.
New players do not need to be identified to get information, they would know where to find it. online forums on specific financing topics could lower communication barriers and allow project developers to find answers to questions peers might have already asked. Governments could use the interactive online platform to provide information on the regulatory framework of hydrogen. Investors might then use a comment function to point out where a lack of regulatory clarity prevents projects from getting started. The comments could serve governments as an indicator of which regulations they want to address. First, this could support reducing the regulatory risks for investors found in the report, such as the lack of clarity about what type of low carbon hydrogen, like blue or green is eligible for public support, or the need for a hydrogen certification system linked to the carbon content of its production to help monetize a green premium for low carbon hydrogen. If government’s treat the development of a low carbon hydrogen market as a national or even international project, then they can look to project management research, that efficient communication with stakeholders is key to a project success. One could think of several further online services that connect players and could support private investment in hydrogen, which form or new function would be most useful for stakeholders. Ask them on the hydrogen online platform.
Okay, so a very well written article from Isabel Huber, on the project investment side of the hydrogen industry, and where it’s lacking. And ultimately, what I feel this addresses is the next step in making the hydrogen economy a reality globally. And one of the things that the author reiterates several times in this article is something that I’ve heard people in and around the hydrogen industry question also. And that is transparency and clarity, and things like offtake agreements and feedstock opportunities. And where those opportunities exist geographically, I also really liked the thought that she puts in, in the online platform development, and how basically using social networking, hydrogen operators can connect with each other, but also develop offtake agreements, and set up financing for current and future projects. And I will also say this, if you are in the US and looking to get into hydrogen, either in production, or hydrogen utilization, really do check out the h2 matchmaker. It’s currently in its beta form, but you can access it. Now, conversely, the European clean hydrogen alliances website regarding project pipelines of the European clean hydrogen alliance is up and running. And it’s very easy to use. However, it does seem to be less geographically focused than the h2 matchmaker project. Alright, that’s it for me, everyone.
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