A recent report on emerging hydrogen economies reveals that, although earlier phases of hydrogen deployment were mostly driven by public authorities or public-private initiatives, more than 50% of such projects are currently being led by the private sector, which views projects as strategic investments in a new business area.
The report, published by public-private partnership Fuel Cells and Hydrogen Joint Undertaking, also finds that locally integrated hydrogen ecosystems, used for climate change mitigation and regional economic development – otherwise known as so-called hydrogen valleys – are rapidly expanding and will significantly mature over the 2020s.
Hydrogen valleys typically comprise a multimillion-euro-denominated investment, spread across a defined geographic scope and covering a substantial part of the value chain, from hydrogen production, storage and transport, to its end-use in various sectors.
The insights into emerging hydrogen economies around the world report finds that hydrogen valleys are growing as a result of an increasing number of projects overall and because announced projects themselves grow in size and complexity, such as by hydrogen production volume and planned investment.
In addition to that, the report points to hydrogen valleys gravitating towards archetypical value chain setups where different foci promise near-term commercial business cases.
As such, the three typical setups observed include local, smaller-scale and mobility-focused projects; local, medium-scale and industry-focused projects; and large-scale and international export-focused projects.
KEY TO SUCCESS
Five factors are particularly key for the successful project development of hydrogen valleys, the report suggests.
Firstly, it finds that a hydrogen valley not only needs a convincing project concept with a hydrogen value chain coverage that leverages local assets and addresses local needs, but it also needs to develop a viable business case that links competitive clean hydrogen production with the off-takers’ willingness to pay.
In this regard, obtaining public support and/or funding (potentially from multiple sources) that closes any remaining funding gaps is still vital, the report reveals.
During project development, it says that effective partnering and stakeholder cooperation that ensures continuous commitment from all parties involved is essential, as is getting political backing from policy makers and support by the general public.
However, the report also finds that there are four prominent barriers to the development of hydrogen valleys, which, it states, are not insurmountable.
The first and most prominent barrier is securing funding.
To overcome this requires creating awareness about the technology at funding entities, initiating proactive dialogues about funding criteria and remaining flexible regarding the potential adaptation of the project concept to tailor it to public funding requirements.
The second barrier involves hydrogen valleys perceiving offtake commitments for clean hydrogen as a key barrier, which can be overcome by investing time in credible investment plans complemented by talks with as many potential offtakers from various sectors as possible.
The third barrier involves the securing of private funding, and can be overcome with hydrogen valleys relying on a structured development approach, the early involvement of offtakers and equity partners to de-risk the project and provision of early feedback from the lending community.
Involving local private investors might additionally be attractive for locally anchored hydrogen valleys, states the report.
Lastly, to mitigate technological readiness issues and technological performance barriers, it proved to be essential for hydrogen valleys to remain flexible regarding the project’s general direction, the report finds.
This could also lead to adding other applications into the project’s portfolio.
A fifth barrier is regulatory provisions in which the report finds that although the policy landscape is growing increasingly favourable for hydrogen valleys, globally, barriers still exist in terms of permitting and regulations affecting hydrogen valleys directly as well as indirectly.
As such, almost 40% of hydrogen valleys still perceive regulatory provisions as a challenge.
Nonetheless, to facilitate their emergence further, the report suggests policy makers should focus on four priorities, the first being having a clear vision of the country’s future hydrogen economy in a national hydrogen strategy that sets the framework for hydrogen valley development.
Also, it suggests the creation of a regulatory environment conducive to the development of hydrogen valleys, the closing of gaps in permitting procedures and acting as local matchmakers to enable the set-up of hydrogen valleys.