Conditions for securing financing for large-scale hydrogen projects are improving, according to panellists speaking at Gulf Energy Information’s First Element conference.

There are a number of key factors in securing offtake, according to Simon Collier, partner with professional services firm EY Law.

“As with any other large projects, what you are looking for is long-term guarantee of demand, a long-term guarantee of price, a creditworthy offtaker and a political environment that gives you stability,” he says.

National hydrogen strategies are starting to fulfil the last condition in the list, and there are plenty of creditworthy offtakers looking to secure supply. But more government intervention is still needed to ensure the other two criteria are met, according to Rod Davies, hydrogen lead at consultancy Marakon.

“The prospect of [CfDs] and production tax credits are encouraging” Davies, Marakon

“Many projects have announced [offtake] but few have confirmed [it]. We know there are many enablers that need to come together, and many gaps remain,” he says.

“But good progress in terms of capital incentives. The prospect of contracts for difference (CfDs) and production tax credits are encouraging.”

Production tax credits are the mechanism selected by the Biden administration to incentivise hydrogen project deployment in the US. The EU and the UK are planning to use forms of CfDs for the same purpose.

Davies adds that the deployment ambitions of EU countries need to be met by stronger policies if they are to be fulfilled. While hydrogen valley and industrial cluster policies are advancing well, uptake for more distributed applications is less certain, he notes.

“Power generation in combination with large-scale storage is one example,” he says.

Extending collaboration

Extending current collaborative relationships to include investors and the financial sector will also help improve the bankability of projects, according to Helena Anderson, COO at consultancy Ikigai Capital.

“We realise that there is a need to have greater collaboration across key stakeholders,” she says. “From our perspective this includes the investors themselves.”

A recent report from the European Investment Bank made a similar recommendation, saying support from finance experts could help lenders understand the evolving opportunities for investment in the hydrogen sector.

“Advisory support could also extend to hands-on project development assistance, particularly in the case of large, complex projects involving multiple players and value-chain segments,” the report says.

---

Author: Tom Young