Hydrogen hubs will remain the favoured pathway for the sector’s development, with most of them concentrated in Europe, Fitch Solutions said.

Projects are largely driven by the private sector, but public support and funding acts as an accelerator, the analysts said in their report ‘Hydrogen Hubs – Industrial Clusters of the Future – part 1’.

The analysts define hydrogen hubs (also called hydrogen clusters or valleys) as projects that create a full value chain of collocated and combined hydrogen production, infrastructure and utilisation.

“There are a number of contributing elements that create a viable hydrogen hub project including readily available renewable electricity, a local carbon intensive industrial process and credible business development pathways,” the report states.

“The development pathways are somewhat more problematic as off taker agreements are limited to those companies and/or markets who have the ability to access capital and take risks in this stage of the industry.”

Fitch Solutions said a “higher concentration” of hydrogen hubs are to be found in Europe, but projects there in general will take on smaller forms before being scaled up.

Hydrogen projects fall into three types:

Small-scale, localised projects focused on mobility

Localised, but medium-scale projects looking at industry

Much larger-scale projects aimed at international export

Source: European public-private partnership Fuel Cells and Hydrogen Joint Undertaking (JCH JU)

Sizes of H2 projects

Fitch Solutions said its data show that markets in Europe are likely to see a wider range of project scales as they can benefit from the closer proximity of industrial clusters and demand centres, while renewable electricity is wider spread and gas infrastructure is already highly developed.

Projects outside Europe in regions such as the Middle East and Asia Pacific, on the other hand, are usually larger as markets seek to benefit from economies of scale in renewables and electrolysers manufacturing.

“These projects are more likely to become exporter hubs with overseas off taker agreements looking to be signed,” the report states.

“Across the pipeline, European projects tend to be smaller in scale with the average of 550MW, while Asia’s project scale average is at 1.4GW.

“The European approach shows what we believe to be lower risk development with an emphasis on proving project viability and market development before looking to larger projects.”

UK hydrogen strategy

The analysts also think the UK – unlike most other European markets - will continue to support both the production of blue hydrogen (made from natural gas and linked to carbon capture and storage) and green hydrogen (made from renewable electricity through electrolyses), due to its offshore wind and gas industries’ expertise to create synergies for both sectors.

The UK government has set a target of 5GW in capacity by 2030 supported by a £240m ($333.95m) hydrogen fund, hoping that will trigger £4bn in private investment.

The UK government’s department for business, energy, & industrial strategy (BEIS) this week told Recharge it will announce its national hydrogen strategy very soon, but declined to give an exact date.