A lack of visible demand for hydrogen is the key barrier faced by developers seeking investments to advance projects to FID, according to Hydrogen Insights 2022, a report published by industry group the Hydrogen Council and consultancy McKinsey.

Of more than 680 projects announced, 45 worth $29bn are in the Feed phase and 120 worth $80bn are undergoing feasibility studies, according to the report.

However, only $22bn worth—or about 10pc of proposals—have reached FID or are under construction or in operation. This number has risen by only $2bn in the last half of the year, which is significantly slower than growth in project announcements.

“On-the-ground deployment is not moving fast enough and needs to accelerate to realise the benefits of hydrogen” Kanehana, Kawasaki

“With the growing concerns around energy security, it is clear our economies need hydrogen. But on-the-ground deployment is not moving fast enough and needs to accelerate to realise the benefits of hydrogen,” says Yoshinori Kanehana, chair of Japan's Kawasaki Heavy Industries and co-chair of the Hydrogen Council.

The report identifies demand visibility as the main bottleneck in bringing projects to FID. “Many are awaiting decisions on the enabling regulatory frameworks and funding to incentivise offtakers to enter long-term hydrogen supply contracts. Such long-term offtake is key to unlocking project finance and support from financial investors,” it says.

The report identifies several “priority actions” for policymakers and for the industry in 2022-23.

Policymakers should create demand visibility through measures such as targets or quotas for hydrogen consumption across end-use sectors, alongside public procurement measures or competitive bidding for carbon contracts for difference, it says.

Vision to action

 Government should also fast track access to state support schemes by launching competitive bidding processes. “Policymakers across geographies have put forward plans to roll out the relevant instruments designed to stimulate hydrogen uptake. Right now, it is crucial to move from vision to action, and proceed with the implementation of these instruments,”

Another priority for governments is to ensure international coordination of credible common standards and robust tradeable certification systems for hydrogen. “A common standard methodology for assessing all hydrogen production pathways is essential to allow the hydrogen with the lowest carbon footprint to reveal its climate benefits,” the report says.

Industry should focus its efforts on establishing infrastructure to enable cross-border trade by building terminals, large-scale storage, and hydrogen conversion technologies, the report says. “As international cooperation between governments advances, the industry should actively help to prioritise actions to enable international trade flows to match supply and demand in an efficient manner,” the report says.

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Author: Stuart Penson