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.

“We are filling a funnel that has many, many steps” Wilson, Hydrogen Council

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.

Permitting hurdles

One key factor slowing progress is permitting. Renewable infrastructure, storage, transportation and electrolysers all require permits, and many governments are being swamped with applications.

“It is fine for senior level governments to make targets and aspirations for hydrogen projects, but then all the other layers of government have to get engaged,” says Wilson.

“This is very new for those other layers of government. And at this scale, they have never seen it before. That key part of the system is not designed to deal with a shock load of projects.”

Different countries and regions have different processes, but many face the same issues. In the renewables sector, some permits can be speculative, with companies essentially reserving a place on the permit roster. These applications are in the same line as more serious project applications, which can be delayed as a result.

“What is needed is a holistic approach. Somebody has to have the competency to integrate all these different modalities of energy into one picture, and then actually create the plans for the future architecture of that particular energy system in that particular area,” says Wilson.

Demand

On the demand side, there are similar issues in coordinating the ecosystem for hydrogen projects, but the issues lie in fostering effective collaboration rather than government permitting.

“On the supply side, it is possible for single large entities to generate a significant supply, but on the demand side, it takes many parties cooperating together,” says Wilson.

“In the example of transport, you have to have fuelling stations, fuel-cell production, truck manufacture, system operators and the fleets that will take those trucks.”

The Hydrogen Council is working with companies and authorities in regions where this is a problem to attempt to coordinate demand creation.

Eyes on the prize

The speed with which firm capital commitments are reached varies by geography. Regions with high energy demand and early focus on hydrogen as a decarbonisation sector—such as Europe, China, and North America—have advanced more projects to FID. However, Europe is lagging slightly behind other regions, partly due to the complexity of its legislation.

“Despite Europe’s clear position as leading on announced volumes, this is not reflected in the maturity of the project funnel, of which only 5pc are committed volumes,” says the report.

In regions that are expected to export hydrogen and its derivatives but have limited local demand—such as Latin America, Australia, the Middle East and Africa—projects tend to be larger and in earlier stages of development, such as feasibility or Feed studies.

Accelerating progress is important if net-zero goals are to be achieved. The Hydrogen Insights report estimates that committed capital must increase more than twentyfold by 2030 to be consistent with a net-zero scenario.

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Author: Tom Young