This interview by Tom Young was first published in Hydrogen Economist.
More than 350 new large-scale hydrogen project proposals have been announced over the past year, according to the latest Hydrogen Insights report from consultants McKinsey and industry body the Hydrogen Council.
This brings the number of large-scale project proposals as of the end of January 2023 to more than 1,000, 795 of which aim to be fully or partially commissioned by 2030.
Giga-scale projects (more than 1GW of electrolysis for renewable hydrogen supply) account for 112 proposals—double the number in the 2022 report.
But less than 10pc of the $320bn of announced investments in all hydrogen projects through 2030 represent actual committed capital in the form of FIDs. However, this is to be expected at this stage of the transition, according to Daryl Wilson, executive director of the Hydrogen Council.
“We are filling a funnel that has many, many steps. It is completely normal that, at the top end of the funnel, there are a lot of projects, and it takes time for them to move through,” he tells Hydrogen Economist.
This interview by Charlie Currie was first published in H2 View.
The EU has a “very important responsibility” in increasing the amount of projects reaching final investment decision (FID), Daryl Wilson, Executive Director of the Hydrogen Council, told H2 View.
Last Thursday (May 11) saw the unveiling of the Hydrogen Council’s Hydrogen Insights 2023 report, which found that projects reaching FID had grown by 30% between May 2022 and January 2023, totally $29bn.
Speaking to H2 View at the World Hydrogen Summit in Rotterdam, Wilson described the growth as “very gratifying.” Reflecting, he said, “It used to take 10 years to get to a single billion of projects, but now we’re talking about $29bn all ready to go in the next few years.”
“It’s exciting to see that project funnel maturity, which I think is a key point,” he said. “But there are headwinds now. Namely, inflation, but also there’s a much harder pull on supply chains which need to respond to all of this demand.”
Wilson noted that the hydrogen industry had seen monumental gains in the era of the Covid-19 pandemic and of course Russia’s invasion of Ukraine. However now, with economic uncertainty seemingly ahead, he said, “I think there’s some real challenges showing that it’ll be a real fight to work through a lot of this.”
Despite the clear increase in projects crossing the FID threshold, the Hydrogen Council’s report noted that those projects made up just 9% of the 1,040 tracked in the report.
When asked how the industry could navigate the headwinds and continue to increase the number of projects reaching FID, the Hydrogen Council Executive Director told H2 View, “I think the EU has a very important responsibility.”
“It’s the largest single portfolio of projects that has been five years in the making,” he said. “I commented on the FID issue a year ago and we’re still not moving many projects past the pole in Europe, even now.”
Wilson doesn’t believe that result is for lack of trying, “There’s a lot of enthusiasm,” he added.
This interview by Tom Young was first published in Hydrogen Economist.
The EU is close to finalising a regulatory regime designed to stimulate the growth of its hydrogen economy. But industry figures believe some aspects will have to be revised in the next few years if the bloc wants to boost the sector to compete globally.
The EU is home to 201 projects of more than 20MW at the memorandum of understanding stage, according to IEA data, but only 19 projects have taken FID—and none that require offtake from a third party.
“In terms of the raw number of projects proposed and announcements, there are many more projects in the EU versus the US. But there are more projects moving to FID in the US,” says Daryl Wilson, executive director of industry body the Hydrogen Council.
This is partly due to the complexity of EU regulations compared with other jurisdictions. The regime broadly falls into three areas of legislation: certification, supply-side stimulation and demand-side stimulation.
Policy headwinds facing low-carbon and renewable hydrogen projects in Europe will be temporary, with projects poised for swift deployment once there is regulatory certainty, the Hydrogen Council told S&P Global Commodity Insights.
The Hydrogen Council’s report, published with McKinsey, “Global hydrogen flows: hydrogen trade as a key enabler for efficient decarbonization”, found that 65 million mt of hydrogen could be transported long distance by 2030, out of a potential annual market of 140 million mt.
The figures were based on demand growth aligned with a net-zero pathway.
In 2030, trade is dominated by pipeline shipments, with some early green ammonia and methanol shipments also starting by that date.
“By 2030, the first piped imports into Europe will occur as domestic hydrogen supply is constrained and available renewable capacity is built up to decarbonize power,” the Hydrogen Council said. “This facilitates competitive low-carbon supplies from markets such as Norway.”
In markets such as Japan and South Korea, “global clean ammonia demand, in addition to clean methanol demand in Asia, will drive shipped exports from Australia, the Middle East, and North America,” it said.
The Hydrogen Council said production costs in Europe, Japan and South Korea in a range of $1.80-$2.50/kg and above would be significantly higher than in low-cost regions, because of land availability constraints and limited capacity to deploy additional onshore wind and solar.
Platts Hydrogen Price Wall shows the world’s cheapest electrolysis-based hydrogen derives from Western Australia, the US, and the Middle East. The cost of producing hydrogen by alkaline electrolysis in Western Australia averaged $3.15/kg in August, compared with $25.35/kg in the Netherlands, based on month-ahead grid power prices, according to S&P Global Commodity Insights data.
By 2050, international trade in hydrogen and its derivatives could reach 400 million mt/year of a total market of 600 million mt/year. Trade could cut hydrogen supply costs by 25% by 2050, saving $6 trillion, the Hydrogen Council said.
The analysis for the report was produced before the introduction of the Inflation Reduction Act in the US, which has massively boosted investment in low-carbon hydrogen projects there.
The Hydrogen Council said the IRA would likely make a portion of US production more competitive in the coming decade, though the impact on long-term trade balances was unknown.
Wilson said the US act was prompting Europe and other regions to up their game.
“You have very substantial incentives, which are clear with no ambiguity in the US,” he said. “That is a tremendous investment platform.”
However, the US was starting from a less-developed position on its projects compared with Europe, and Wilson noted too that it was not a “zero-sum game”.
“There is plenty of interest to go around the world to activate projects in Europe, the US, Asia and elsewhere,” he said.
“You have to remember, up until the last year, the US was about five years behind, and so there is a degree of catching up in project proposals and project development.”
In Europe, on the other hand, there have been years of project genesis and development, along with building consortiums to deliver these.
“The unfortunate thing is we have policy ambiguity and delays in the EU, which is not a good thing for projects to [take final investment decisions],” Wilson said.
Some companies have postponed FIDs on projects in Europe after the European Parliament in September scrapped the proposed “additionality” criteria and relaxed the accounting rules for matching renewable power with electrolysis projects.
The move created uncertainty about the policy landscape, with the timescale for finalizing the revised Renewable Energy Directive not yet clear.
Wilson said the removal of the additionality rule for renewable hydrogen projects in Europe — whereby the electricity to power electrolyzers had to come from additional renewables capacity for the hydrogen to count as renewable — would help projects get off the ground and did not detract from building a renewable power system.
He said the industry needed to do a better job of explaining the role electrolyzers could play in a holistic energy network, balancing grids, operating as an energy store and market maker for new renewables.
“Maximum system efficiency occurs when you let electrolysis play its role basically following market signals,” he said.
Around $750 billion in investment was needed by 2030 to reach clean hydrogen targets in line with net-zero emissions goals by mid-century, and the industry had reached around a third of this level in project announcements, Wilson said.
Utility-scale projects in the 100s of megawatts could be built in around two years, though subsequent projects would benefit from the development of early projects, speeding up deployment and lowering costs, he noted.
Reductions in electrolyzer cost curves were progressing broadly in line with the Council’s expectations from forecasts over the last five years or so, while the outlook for natural gas-based hydrogen production costs should become clearer in the coming six months, as the market potentially stabilizes, Wilson said.
This interview by Rob Cockerill was first published in H2 View.
The momentum in hydrogen investments and deployment has been building for many years and has rapidly accelerated since 2020, but we’re now seeing the bigger picture in hydrogen unveiled and the direction of the task ahead.
Connecting the dots in infrastructure, renewable energy hubs and demand centres will be the focal point in unlocking hydrogen’s undoubted potential.
That’s according to Daryl Wilson, Executive Director of the Hydrogen Council, speaking to H2 View upon the release of the new Global Hydrogen Flows report.
Released in the last few minutes and co-authored by McKinsey & Company, the report combines the global industry data from the Hydrogen Council with a bespoke advanced-analytics optimisation model, specifically developed for the study, that balances supply and demand across all regions, multiple carriers, end products and scenarios.
It finds that while helping to accelerate the transition to Net Zero, long-distance and international hydrogen trade flows can reduce the total system costs across the hydrogen value chain by as much as $6 trillion.
There will still be a requirement for around $150bn of investment by 2030 to realise hydrogen’s role in the energy transition, rising to up to $1.5 trillion by 2050.
Wilson acknowledges these are still ‘staggering’ figures, noting for perspective that these investments are both in proportion to current energy system spending and an element of them will be a replacement component as spending migrates from old to new infrastructure investment.
It is the point around infrastructure, however, that Wilson believes is the key finding from the report – and the big reveal in terms of the bigger picture in hydrogen going forward.
“I think the contribution of this report is very important in pointing toward the whole notion of infrastructure,” he told H2 View. “We’ve certainly moved over the last few years from demonstration projects to clusters of projects in valleys and ports. There’s been a good scaling-up step that’s happened with the big clusters of projects in these hydrogen hubs. That’s a very strong concept.
“But hubs need to be interconnected into a full infrastructure system to serve the energy needs in any particular region, and that means pipelines and interconnected renewables and electrolyser business. I think we’re beginning to see where those infrastructure investments need to be made, and the approximate pace to make those happen. Naturally, planning corridors for electrical transmission networks and pipelines takes many, many years.”
Out of 1.5 million potential trade routes, the report identifies more than 40 prospective trade routes of hydrogen (or hydrogen equivalent derivatives), with the capacity to transport more than one million tonnes per annum by ship or pipeline.
The study identifies distinct patterns for hydrogen trade. Pure hydrogen is expected to be a ‘regional’ business and will be predominantly sourced domestically or piped from nearby regions, and only shipped via a carrier (ammonia, liquid hydrogen or LOHC) if the prior options are not available.
However, hydrogen derivatives including ammonia for end use, methanol, synthetic kerosene and direct reduced iron will be shipped around the world given relatively low transportation costs, compared to production costs.
The evolution of hydrogen trade flows is expected to take place in four distinct phases, beginning with hydrogen derivative shipping by 2025, followed by the emergence of long-distance hydrogen pipelines by 2030, shipping and pipeline reaching scale by 2040, and a fully mature traded market by 2050.
“It’s important that we start to have a grand vision, that we need to go from point A to point B,” Wilson explained, likening the task ahead to conversations during a recent event he attended in Pittsburgh in the US, where the building of the current highway system across the US was discussed.
“When the vision was cast in the 1950s to generate the interstate highway system, there was a clear plan to go from one city to another and interconnect various corridors. In a similar manner with hydrogen, we need to start thinking, what does the infrastructure vision look like and what points and nodes do we need to connect so that we can realise the longer distance transmission of energy?
“Our current energy system travels over many, many kilometres and that’s going to be true in the new energy system. We need to connect sources of renewable energy with demand centres for hydrogen. And so, long-distance transmission and pipelines is certainly going to be a major factor – and then shipping corridors as well.”
Wilson is pragmatic in terms of the scale and nature of that challenge ahead, adding, “The sector has to grow up to learn how to engage infrastructure money in an intelligent way and offer the risk profile that goes with lower returns. This is the next challenge and there’s a fair bit of work in preparation for that to happen.
“We need to see the success of the hydrogen hubs and valleys. We need to see the technology scaling and operating. All of these things will give confidence to lenders that this is indeed a mature sector that can scale into that infrastructure level of finance.”
‘Charging the funnel’
While the report paints the picture for the future infrastructure landscape in hydrogen, it’s clear that the momentum is behind hydrogen as 2022 draws to a close – and the Hydrogen Council is happy with the brushstrokes that have already been applied to the energy canvas.
Wilson describes activity to date as charging the funnel at the front end, with the task now to overcome any impasse in final investment decisions (FIDs) and permitting of projects.
“We’re now tracking 648 projects and around $240bn in investment,” he enthused. “So the numbers keep going up. And it’s indicative of a rapidly growing sector where there’s lots of announcements, and then the work of getting these projects over the line into final investment decision and into build takes some time.
“We’re charging the funnel in the front end with a lot of announcements, and then the flow through is taking a bit of time. But that’s not a negative situation, it’s a normal situation, with such a rapid growth in the sector.
“It’s an exciting, busy time and there’s lots of work ahead of us to implement all these projects, whether it’s getting the final investment decision through, the funding lined up, the actual procurement, or the build stage and the permitting.
“There are many, many steps to bring the project across the line and it’s going to take some time for all of this to come to fruition. But the front end of the funnel is charging nicely with a lot of activity.”
This interview by David Fogarty, Climate Change Editor, was first published in The Straits Times.
Across the globe, there are ambitious plans to ramp up production of hydrogen fuel, which is increasingly regarded as a key part of the global clean energy economy that will power nations while cutting polluting greenhouse gas emissions.
The global Hydrogen Council says it is tracking 680 projects valued at an estimated US$240 billion (S$330 billion), a dramatic increase from projects worth about US$160 billion six months ago.
Large projects have been announced in Australia, the Middle East, Chile, Europe and elsewhere, many focused on using vast amounts of solar and wind energy to split water into oxygen and hydrogen.
The majority, though, are still at the planning stage and 88 per cent have yet to reach final investment decision, said council CEO Daryl Wilson.
“That’s a big concern,” he told the Ecosperity conference in Singapore during a panel discussion on Tuesday (June 7).
“We need to have an overall sense of urgency about getting the job done on account of climate change.”
There was a need for security of demand, he said. “Without customers, there’s no business and notwithstanding all kinds of supply, there needs to be demand and offtake for these projects.”
Another issue was building a global hydrogen supply chain to ship hydrogen products around the globe, which require policies to build the infrastructure of ships, pipelines and storage.
The council represents more than 130 firms around the world involved in developing the hydrogen industry, which involves not only the production of flammable hydrogen gas but also liquid hydrogen, ammonia as well as flammable methanol and green steel.
Hydrogen can be produced by a variety of means but the two main ones are green hydrogen — splitting water into hydrogen and oxygen using renewable energy — and blue hydrogen, which uses methane, or natural gas, as the feed stock, with the resulting CO2 captured and stored.
Energy-dense hydrogen is much cleaner than fossil fuels, releasing heat and water when burned and is viewed as a key source of transportable energy storage for the renewable energy industry.
“Part of the hydrogen story is about energy storage. So the intermittency of renewable energy from various sources in South-east Asia and Singapore can be mitigated and supported by hydrogen,” Mr Wilson told The Straits Times, adding that Asia is poised to be a major hydrogen importer for use in transport, power generation, industry and heating buildings.
Singapore, which is already investing in hydrogen projects, is also looking at becoming a regional bunking hub. For example, green ammonia, which can be produced in large volumes from green hydrogen from huge solar and wind farms, can be burned in power stations and ship engines.
Jera, Japan’s biggest electricity generator, is trialling the co-firing of ammonia in one of its coal power plants to try to cut carbon emissions.
“So there’s a hydrogen story, wherever you are in the world, and Singapore is very much front and centre and active in the hydrogen story today,” Mr Wilson said.
But he said investors and governments need closer coordination to ensure there were the right policies on building supply chain infrastructure and ensuring long-term demand.
“That’s where we still have some challenges because of the uncertainty in demand signals, especially from the policy side.”
“Kudos to China and South Korea, which are getting the most done most quickly,” he added, referring to policies and funding that are helping bring projects to market. These are mainly centred around fuel cell-powered passenger vehicles, he said.
“The bad news is we have a huge amount of projects in Europe, where we’re not getting stuff across the line as fast as we should,” he said, pointing to long delays in approval processes.
Big projects, though, are moving ahead.
In January this year, Singapore’s sovereign wealth fund GIC announced a strategic investment in green fuels firm InterContinental Energy (ICE), which has plans to develop huge green hydrogen hubs in Western Australia, Oman and Saudi Arabia totalling 200 gigawatts (GW).
Ms Alicia Eastman, president of ICE, told the panel discussion on Tuesday the firm chooses coastal desert locations to ensure maximum sunshine and wind to power its future hydrogen and green ammonia production, meaning cheaper costs.
All the projects under development are 25GW capacity or more, with the proposed Western Energy Hub in Western Australia to have a final capacity 50GW and about 20 million tonnes annual production of green ammonia, much of it for export.
“One of the benefits green hydrogen has for the long term is that the projects can predict what the price will be for the whole 20 to 25 year offtake agreement,” Ms Eastman told the conference, referring to energy securing concerns about volatile fossil fuel prices.
Mr Wilson said the war in Ukraine will “drive more investment in new choices of low-carbon hydrogen and renewable hydrogen”.
He added the council forecasts hydrogen will provide 22 per cent of the global energy use by 2050 and cover many applications, from steelmaking and ammonia fertiliser, to fuel for vehicles and decarbonisation of industry, such as using hydrogen as an energy raw material for making steel instead of coking coal.
The need for a global energy transition has accelerated in recent months – and so has the push for a clean recovery with hydrogen. Where is the hydrogen market now, and where is it headed? What does the hydrogen industry still need to do to encourage further hydrogen development and deployment? For any governments still on the fence about hydrogen, why should they put it at the heart of COVID-19 recovery plans?
Hydrogen Council Co-secretary Pierre-Etienne Franc (Air Liquide) and Hydrogen Council Executive Director Daryl Wilson address these topics and more in an exclusive webinar hosted by H2 View/gasworld TV.
In a webinar jointly organised by the Atlantic Council and the Hydrogen Council on Monday 20 July 2020, our members Tom Linebarger, Chairman & Chief Executive Officer of Cummins and Christian Bruch, President & Chief Executive Officer of Siemens Energy entered into discussions with Michael Berube from the US Department of Energy and Paula Abreu Marques from the European Commission. The expert panel shared their views on the need for cross-border trade of hydrogen, infrastructure, R&D, investments, incentives for deployment, and much more.