In this list
Agriculture | Chemicals | Electric Power | Energy Transition | Metals

Bright spots for hydrogen project development emerge amid investment delays

Metals | Steel

Platts World Steel Review

Electric Power | Energy Transition | Renewables | Energy

Bridging the gap between conventional energy resources and newer technologies

Energy Transition | Oil & Gas | Upstream

Tokyo Commodity Market Insights Forum

Coal | LNG | Natural Gas | Upstream | Energy Transition | Thermal Coal | Renewables

US power sector gas demand to peak in 2024 on renewables buildout: Commodity Insights

Electric Power | Electricity | Energy | Energy Transition | Renewables

Platts EuGO: European Guarantees of Origin assessments

Energy Transition | Carbon | Emissions | Hydrogen | Renewables

Bright spots for hydrogen project development emerge amid investment delays

For full access to real-time updates, breaking news, analysis, pricing and data visualization subscribe today.

Subscribe Now

Bright spots for hydrogen project development emerge amid investment delays

Highlights

State support, policy certainty give a boost

Incumbents well-placed to capture market share

Export-oriented plants dominate in India, Middle East

  • Author
  • James Burgess    Ruchira Singh    Daniel Weeks
  • Editor
  • Daniel Weeks
  • Commodity
  • Agriculture Chemicals Electric Power Energy Transition Metals
  • Tags
  • Blue Hydrogen United States
  • Topic
  • Energy Transition Hydrogen: Beyond the Hype

Clean hydrogen projects are finding a pathway to final investment decisions despite global headwinds, through careful renewable power procurement, matching hydrogen production with anchor offtake agreements and state support, while incumbent producers also have an advantage.

Not registered?

Receive daily email alerts, subscriber notes & personalize your experience.

Register Now

Low-carbon and renewable hydrogen project delays are well documented around the world, with policy uncertainty, cost inflation and difficulty securing competitive offtake agreements common barriers.

A small minority -- around 7% -- of announced global clean hydrogen projects have taken positive final investment decisions, data from S&P Global Commodity Insights showed.

Meanwhile, electrolyzer costs have risen 20%-45% since 2021, according to Commodity Insights analysts.

Those costs were expected to fall by only 15%-30% by 2030, with "the majority of costs shifting from 'new' technology like electrolysis stacks, to 'standard' balance-of-plant technology such as heat exchangers, pumps, compressors and storage tanks where cost reduction is incremental," the analysts said in a recent report.

But there are bright spots, and concrete progress is being made around the globe, albeit at a slower pace than originally envisaged and than developers would like to see.

Incumbent producers

Incumbent hydrogen producers such as industrial gas companies and fertilizer companies are able to avoid costs associated with developing an entirely new value chain, something many green hydrogen projects are facing.

Some of the largest clean hydrogen projects to have taken positive FIDs are in North America, with two operational carbon capture-enabled plants in Canada and more planned in the US.

Air Products' Louisiana blue hydrogen and ammonia facility is planned to produce over 750 MMcf/day, the company said, capturing 95% of CO2 emissions. The project was expected to come online in 2027.

The company already supplies hydrogen to customers through its Gulf Coast pipeline, where there was "significant demand for blue hydrogen," CEO Seifollah Ghasemi said on an April 30 earnings call.

And in Texas, OCI plans to start up its 1.1 million mt/year blue ammonia project in 2025, capturing and storing up to 1.7 million mt/year of CO2.

However, US project developers are facing similar issues to ones that European peers tackled a few years previously, with uncertainty around policy implementation and details stalling investment decisions.

Proposed tax credits under the Inflation Reduction Act offer subsidies of up to $3/kg but require strict additionality criteria for renewables and hourly power matching, criteria that industry representatives say could choke off the industry in its infancy.

"We are already seeing the first examples of customers either deciding to slow down on their green hydrogen efforts or considering blue hydrogen more seriously," Ambient Fuels CEO Jacob Susman told Commodity Insights, noting the company was re-evaluating several projects in light of the draft legislation.

Hydrogen production costs via grid-based alkaline electrolysis on the US Gulf Coast averaged $2.60/kg in April, the Platts Hydrogen Price Wall shows, with the renewables requirements adding to that. Platts is part of Commodity Insights.

Public equity markets and banks are the main source of funding for low-carbon projects, according to a Commodity Insights analysis. Securing financing for hydrogen projects is complicated by uncertainty, as guaranteed long term offtake agreements are key.

Some developers though are embracing the tough proposed standards. Hy Stor Energy said the rules would provide the industry much-needed credibility for its potential offtakers.

The company said in March that steelmaker SSAB had been selected to enter federal funding negotiations for a prospective steel plant using 100% green hydrogen from Hy Stor's Mississippi Clean Hydrogen Hub project.

First mover advantage

In Europe, the finalization of hydrogen policy and demand mandates has given developers more certainty to underpin economic decisions, while European Commission approval for state support programs is poised to unlock private sector investments.

The EU and national governments such as Denmark and the UK have also awarded first subsidy schemes, and developers are securing offtake agreements from early movers looking to decarbonize operations.

The electrolyzer industry is scaling up, with hydrogen project developers are increasingly focused on medium-sized projects of 100 MW and above that are better placed to weather the cost increases of recent years and take advantage of economies of scale, as well as learnings from smaller pilot and demonstration plants.

Hy24, a joint venture between investment manager FiveT Hydrogen and private equity firm Ardian, is among the backers of Sweden's H2 Green Steel 700-MW hydrogen project, one of the first in Europe to reach FID with agreed loans now in the administrative phase.

Such projects typically do not need third-party funding from either public or private entities and, as a result, can progress more quickly toward FID and construction, executives at electrolyzer supplier Thyssenkrupp Nucera said.

Industry participants said the premium for green hydrogen was a small part of the end steel product cost, with low power costs supporting the business model.

Shell took FID on its 200-MW Holland Hydrogen 1 project in 2022, ahead of securing state support, despite a warning from the Dutch government the move could hamper its subsidy application.

Shell wanted to give certainty to project partners, a company spokesperson told Commodity Insights in April. The project was subsequently approved for receiving government funding under the EU Important Projects of Common European Interest scheme.

The company has also booked 100 MW of electrolyzer manufacturing capacity at ITM Power's factory for its Refhyne II green hydrogen plant at its Rhineland refinery in Germany, though the project is yet to reach FID.

Export-oriented plants

In Saudi Arabia, Air Products is part of the state-backed 2-GW Neom green hydrogen project now in construction, eyeing ammonia exports to global markets.

Elsewhere in the Middle East, the Abu Dhabi National Oil Company has sent a test cargo of blue ammonia from its existing Ruwais plant to Germany, with plans to expand CO2 capture and storage at the site.

Low-cost loans from Indian government companies REC and Power Finance Corp, meanwhile, have helped Indian developers reach financial close on projects.

ACME's 1.2 million mt/year Oman renewable ammonia project is under construction after reaching FID for a first phase with the help of a $487 million loan from REC in July 2023. ACME subsequently secured an offtake agreement with Yara.

ACME, Greenko and Reliance were among winners of India's $2.4 billion hydrogen subsidy plan, and have pledged to accelerate their projects.

ACME also has an offtake agreement with Japan's IHI Corporation relating to its 1.3 million mt/year renewable ammonia project in Odisha, India, with FID expected soon ahead of commissioning by the end of 2026 or early 2027.

Finally, Greenko has deals with Singapore's Keppel and Germany's Uniper, with first shipments foreseen by end-2025, with its Kakinada project in India close to achieving FID, Greenko president Mahesh Kolli told Commodity Insights in February.