The US clean hydrogen sector will struggle to scale up significantly until the country’s oil majors are fully behind it, according to a senior US Department of Energy (DoE) official.

No US refineries have so far signed clean hydrogen offtake deals, highlighting the majors’ reluctance to back the sector, Jigar Shah, director of the Loan Programs Office at the DoE, told the Hydrogen Americas Summit.

“I do not see any major traditional players involved in hydrogen, none whatsoever, none of the big oil majors,” he says. “Until you see the really large incumbents say: ‘We are actually going to bet the company on this conversion’, [then] you are not going to see the level of growth to be able to see it as a gigaton-scale climate reduction.”

“I do not see any major traditional players involved in hydrogen, none whatsoever, none of the big oil majors” Shah, DoE

Shah says US hydrogen projects appear to be signing more offtake deals with European consumers than with domestic users.

“I also think that some of what we are seeing seems slightly fanciful. There are a lot of people getting European offtake agreements with almost nothing happening in the US,” he says.

Too many models

Turning to the financing of the clean hydrogen sector, Shah says the sheer number of different business models and potential applications of the fuel put forward by developers are limiting progress.

“We keep creating new business models for hydrogen. It confuses the crap out of the finance sector because they are all different,” he says. “All 14 or 18 use cases are completely different. They are not actually related to each other. And finance people think in terms of risk.”

The hydrogen sector needs a new financing model based on far longer time horizons than those currently offered to the energy industry, Nicole Faucher, CEO of investment company Beam Capital told the conference.

“The current financing models just do not work. These are 20- and 40-year [clean hydrogen] themes. The current market is really strong in terms of venture capital and hedge funds for a much shorter timeframe. We need long-term patient strategic capital to really move the needle on a clean hydrogen economy,” she says.

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Author: Stuart Penson