The Urgency for Investments in Hydrogen

The urgency for investments in solid hydrogen projects is now greater than ever. Carbon emissions above pre-COVID levels, the invasion of Ukraine and growing energy security concerns resulting from the war in Europe make it clear that economies around the world urgently need clean hydrogen. And immediate actions are needed to convert proposals into concrete projects.

Hydrogen is one of the biggest drivers of the energy transition. It allows clean energy to be stored in large volumes, transported over long distances through pipelines and ships, promoting a system of greater resilience, cost-efficiency and operational optimization. Hydrogen is a versatile clean molecule that plays multiple roles and is as important as other drivers of decarbonization such as direct electrification, carbon capture and storage, biofuels and energy efficiency measures.
It is a fact that nations around the world are rapidly committing to reducing carbon emissions. 131 countries covering 90% of global GDP have introduced zero emissions targets, and of these, 46 have implemented or announced tariffs and trade policies on carbon emissions. Virtually all stakeholders, whether governments, industry, or consumers themselves, increasingly recognize that hydrogen is vital to achieving zero carbon emissions, ensuring energy security and spurring sustainable economic growth.

However, hydrogen projects are still evolving at a pace that is less than necessary. In 2022, around 680 large-scale hydrogen project proposals were submitted, equivalent to US$ 240 billion in direct investment by 2030. Although this amount represents a 50% increase in investment since November 2021, compared to the same In the previous period, only around 10% (USD 22 billion) reached the final investment decision (FID). Of the 680 announced projects, 45 projects, worth US$29 billion, are in the engineering phase and 120 projects, worth US$80 billion, are in the feasibility study phase, according to the Hydrogen Council.

Europe is home to more than 30% of proposed hydrogen investments worldwide. However, other regions are leading the roll-out: 80% of global low-carbon hydrogen production capacity is in North America, while China is outpacing Europe in electrolysis with 200 megawatts (MW) operational versus 170 MW in Europe , spurred by strong government support.
South Korea and Japan, meanwhile, are leading the way in fuel cells, driven by massive government and corporate incentives, and today, they are home to more than half of the 11 gigawatts (GW) of global fuel cell manufacturing capacity.

The pace of deployment is influenced not only by regulations and commitments by the private sector, but also by factors such as the global economic situation, the global supply chain, geopolitics, commodity prices and inflation. Economic development is uneven across geographic regions and the outlook for growth is uncertain. These factors certainly influence hydrogen deployment, but not necessarily only in a negative way.

Countries are increasingly seeking energy independence and the diversification of energy matrices. In the EU, the war in Ukraine has led to bolder ambitions for clean hydrogen to strengthen energy security and spur decarbonisation. The EU’s REPowerEU, announced three weeks into Ukraine’s war, raised the target from 5.6 million metric tons (MT) of renewable hydrogen deployed by 2030 to 10 million MT of renewable hydrogen produced domestically and elsewhere 10 MT of imported clean hydrogen. Organizations accelerated plans to deploy hydrogen gas pipelines, now to 28,000 km in length by 2030.

For many countries, hydrogen is about monetizing decentralized energy sources like the renewables of Chile, Brazil, Australia and Egypt, or simply ensuring energy security through self-sufficiency, as is the case with China on hydrogen.

The main barrier to project execution today is the lack of demand visibility – many are awaiting decisions on regulatory frameworks and financing to encourage offtakers to enter into long-term hydrogen supply contracts. This long-term offtake is essential to unlock project financing and support from financial investors.

Leveraging hydrogen projects to reach the zero-carbon target by 2050, according to the Hydrogen Council, requires triple the investment in hydrogen by 2030 – that is, additional investments of USD 460 billion. That amount seems large, but when compared to investments in oil and gas over the past decade, hydrogen represents less than 15% of committed investments in these other two fuels. Across the value chain, investments in hydrogen infrastructure that connects supply and demand are virtually at a standstill, with an investment gap of over 80% between proposed projects and what is actually needed to achieve zero emissions. carbon.

Joint action between the public and private sectors to turn projects into actions is urgently needed. Global hydrogen trading makes it possible to bring clean hydrogen from regions with abundant energy resources to key demand centers, accelerating hydrogen uptake and reducing costs. This requires broad international coordination, strong regulation in global trading, a judicious certification system, and cross-border infrastructure. And the industry needs to speed up projects and focus its efforts on establishing cross-border transport infrastructure, terminals, large-scale storage, conversion technologies, distribution networks and refueling stations. As international cooperation between governments advances, industry must actively assist in prioritizing actions to enable effective trade agreements that meet supply and demand across borders.