Coming Clean

Everything, it seems, comes a price one way or another. And when it involves the complexities of moving towards a much-needed hydrogen economy in the most sustainable way, there are always going to be hurdles. Last year was in many ways a disappointing one as project developers delayed investments in pilot projects against a backdrop of high energy prices in Europe and Asia.

On a wider level even with proposed subsidies in the €3/kg ballpark, green hydrogen failed on paper to compete with grey or blue alternatives and the impact of higher interest rates increased electrolyser costs meaning fewer key projects got off the ground in 2023. Some experts were predicting from the start of the year that 2024 will be one of reconciliation as the industry faced the same long-term challenges that renewable power did in costing against that of coal or gas-fired plants. Or the slow, often bumpy, path to maturity faced by the solar and wind industry.

The only difference here is the need to accelerate change a lot faster in an era in which such innovation is more crucial. Examples abound. China, for example, may well lead the world in terms of hydrogen refuelling stations, but it is still way behind its 2025 targets having built less than a third of the 1,200-odd H₂ filling stations it had predicted by the end of 2025. And financing issues have been prominent in the thinking of projects from the US to Africa with several commentators questioning the financial viability of Europe reaching 2030 targets, citing everything from supply issues, rising interest rates and problems in securing viable EPC partnerships.

The French consulting firm Capgemini was perhaps the most forthright, in a whitepaper based on its survey of more than 120 hydrogen businesses, describing how the early “widespread hype and enthusiasm... has faded with market and regulatory uncertainties, with very few projects making it to the investment stage”. Economist Gerben Hieminga of ING added a little more sobriety when he predicted that we should expect more activity in the hydrogen market in 2024, adding: “At this early stage of the market, the exact number of projects or capacity added is less relevant. Twenty twenty-four will be about laying the foundations for future growth and realising the first success stories that trigger confidence.” At the root of it lies the high cost of green hydrogen, produced through renewable resources such as solar and wind, and therefore more expensive than grey alternatives.

But in a report on the decarbonisation agenda, authors at PWC observed: “The economics of green hydrogen are challenging today, primarily because the underlying costs and availability of renewable energy sources vary widely.” But they go on to predict: “Production costs will decrease over time, due to continuously falling renewable energy production costs, economies of scale, lessons from projects under way and technological advances. As a result, green hydrogen will become more economical. The challenge is anticipating those trends and acting in time.”