Resetting expectations is the key to jumpstarting hydrogen infrastructure

As the hydrogen market shows signs of slowing, experts agree that pausing is necessary to reset expectations and get large-scale projects back on track. In a Gastech 2024 session titled, Financing for hydrogen scale-up: Strategies for de-risking and accelerating hydrogen infrastructure development, panelists discussed how developers can reassure the feasibility and financial requirements of energy projects.

The Hydrogen Council estimates that $1.5tn investment is required to fund the hydrogen infrastructure needed to achieve transition goals by 2050. Governments play a significant role in de-risking and green lighting large-scale national infrastructure rollout through supportive policies and public funding. However, spiraling project costs and the high price of production have threatened the viability of some hydrogen projects and their potential return on investment.

Ganesh Ramaswarmy, EVP, Industrial & Energy Technology, Baker Hughes, said: “Hydrogen is a cornerstone of energy transformation.” He doesn’t believe that hydrogen innovation is slowing, despite there being a perceived lag in the market.

Ana Quelhas, MD, Hydrogen, EDP Renewables, agreed. She said: “My understanding is that most of the targets outlined for 2030 will clearly not be met by 2030 but that doesn’t mean that they will not be met at all.

“Maybe it’s 2035 or 2034 because we need to build from scratch. We need to build an entire industry, an entire value chain, and we need to build and design regulatory framework and policy instruments to align the incentives. And that’s taking much longer - way longer - than initially expected.” Vinay Khurana, VP & MD Claremont Operating Center, Technip Energies, points to the newness of the industry to justify the seemingly sluggish market.

“I think one of the issues with this market so far has been a lot of hopeful new players with lofty goals and very little planning or structure. And I think as we hoped for the learning curve and the early engineering and fees, we are now finding what’s realistic,” he said.

Margaux Moore, Head of the Energy Transition Group and Venture Investments, Trafigura, asserts that many large-scale projects were set in motion based on “creative surveys” and high hopes but the market has experienced a healthy dose of reality over that last 12 months, revealing far more complex realities. She said: “As some of these projects have completely failed, you could no longer hide behind those creative surveys. You actually have to say, well, this is the cost of using my hydrogen. This is my sourcing fee.

Moore continued: “This is my energy price. And I think that is actually something that is really, really good, because we’re finally seeing a maturing market. We’re understanding a lot better. So no, there’s no delay [in the hydrogen market]. “It’s a resetting of expectations and the people who are committed to this industry - those who are building the project’s quality - are 100% on track. I would agree that it’s not a market slow down but there is a common realization that producing green hydrogen is not easy”, said Ahmed El Sherbiny, VP, Energy Transition Funds Investment Team, Copenhagen Infrastructure Partners.

“I think we are having globalization that it requires collaboration between stakeholders across the whole value chain, which requires a little bit of resetting expectations because the price points and CapEx economics numbers that were floated before were a little bit optimistic. “So, I think we need a little bit of recalibration of expectations across the lending communities, up-takers, and governments”, he said.