The number of “clean” hydrogen projects being announced around the world is growing fast, but “actual deployment is lagging”, according to a new report from fossil-fuel-led lobby group Hydrogen Council.
More than 680 “clean” hydrogen projects larger than 1MW — requiring $240bn of investment before the end of 2030 — have been announced to date, but only $22bn of those have so far reached financial investment decision (or are under construction or operational), says the study, Hydrogen Insights 2022, which was co-produced by consultant McKinsey.
Announced project capacity has risen by 50%, in terms of investment required, since November 2021, but final investment decisions have only grown by $2bn over the past six months — “significantly slower than growth in project announcements”, the report points out.
These figures include projects that produce, use and/or transport hydrogen — renewable or “low-carbon” — so a particular batch of hydrogen could be used across more than one project. The Hydrogen Council defines “low-carbon” H2 as made from fossil fuels with carbon capture and storage, or electrolysis using non-renewable energy.
Of the 534 projects that are due to be completed or partially completed by 2030, 51 are for gigawatt-scale production, 262 are defined as “large-scale industrial use”, 128 are related to transport, 40 are infrastructure projects, while 53 are defined as “integrated H2 economy”.
Only three gigawatt-scale hydrogen projects have reached financial close, all of which are “linked to low-carbon hydrogen in North America”.
“The key barrier that project developers face today is a lack of demand visibility – many are awaiting decisions on the enabling regulatory frameworks and funding to incentivize offtakers to enter long-term hydrogen supply contracts,” the study explains. “Such long-term offtake is key to unlocking project finance and support from financial investors.”
It adds: “For the world to be on track for net-zero emissions by 2050, investments of some $700bn in hjydrogen are needed through 2030 — only 3% of this capital is committed today.
“In other words, additional investments of $460bn into hydrogen projects through 2030 [are needed]. This sounds enormous, but in fact is equivalent to less than 15% of the investment committed to upstream oil & gas in the past decade.”
The Hydrogen Council report says that 550MW of electrolysers “for renewable hydrogen supply”, and 800,000 tonnes per year of “low-carbon” hydrogen has been deployed to date.
China has about 200MW of electrolysers installed, with Europe close behind on 170MW, yet global manufacturing capacity will add up to about 7GW by the end of this year.
The study does not mention the impact of today’s high natural-gas prices on “low-carbon” (ie, blue) hydrogen projects.
Policy action needed
The Hydrogen Council — which counts oil & gas giants BP, Shell, Saudi Aramco, Equinor, TotalEnergies, Adnoc and Sinopec among its steering members — is calling for three separate policy actions to enable more projects to reach FID:
1) Enabling demand visibility and regulatory certainty by adopting legally binding measures. These include targets and quotas for the consumption of clean hydrogen and derivatives; contracts for difference, and public procurement measures;
2) Fast-track access to public funding for hydrogen projects; and
3) International coordination to enable the trade of hydrogen and its derivatives, including a common global ISOstandard methodology for assessing the carbon footprint of different hydrogen production pathways.
The Hydrogen Council is one of the few trade groups promoting hydrogen for every possible use case, including cars and heating, as well as large-scale deployment of blue H2.
Many observers, particularly green hydrogen advocates, object to the use of the word “clean” with reference to blue H2 projects due to upstream emissions of methane (which is 84 times more powerful a greenhouse gas than CO2 over a 20-year period) and an inability to capture all the carbon dioxide in the production process.