Green ammonia, e-fuels, gaseous hydrogen, liquid hydrogen, sustainable aviation fuel (SAF) or other derivatives. That is the choice facing many upstream project developers and their financiers in the rapidly growing clean hydrogen space as they try to bet on which products will win out over the coming decades.

In terms of capacity, the current project pipeline is weighted towards production of green ammonia, capacities for which tend to be larger. Ammonia can be shipped globally via an established seaborne market for grey ammonia and has some existing direct applications, though cracking it back to hydrogen for other uses at scale presents challenges.

“If you want to transport hydrogen over long distances then it is probably the simplest solution to turn into ammonia” Tveit, Equinor

“If you want to transport hydrogen over long distances, then it is probably the simplest solution to turn into ammonia and ship it to where you want to utilise the hydrogen,” Grete Tveit, senior vice-president for low-carbon solutions at Norwegian state-owned energy company Equinor, told the World Hydrogen Congress in Copenhagen. Ammonia is to hydrogen what LNG is to natural gas, she added.

However, Tveit acknowledged that ammonia is only one piece of a complex suite of derivatives jostling for position in the emerging clean hydrogen market.

“Of course, there are all kinds of derivatives, like SAF, e-methanol and others,” said Tveit. “Which of them will come first and in large volumes—we are trying to observe and analyse the markets, and we are not sure.”

Equinor’s hydrogen strategy came under scrutiny in Copenhagen, following its recent decision to halt a major blue project in Norway and withdraw from a related plan to develop a pipeline to Germany.

“With the existing market, which is more or less non-existent, we could not continue with those projects,” Tveit said. However, she stressed Equinor’s commitment to low-carbon hydrogen and its derivatives, pointing to other projects the company is developing in both Europe and the US.

“We are not slowing down, but we are waiting for the market to materialise,” she told the conference. In terms of government policy, Tveit said there was a “global lack of definition” for blue hydrogen. She was critical of recently published EU proposals for the definition of low-carbon hydrogen.

Investment cycle

Equinor is not alone in its struggles with the direction of clean hydrogen markets. Deciding which molecule to focus on over a 20 -year investment cycle is challenging, with all upstream producers faced with far-reaching implications related to technology, regulation and the buildout of infrastructure.

For some projects, location and access to feedstock—including renewable power, gas, water and CO₂—will naturally narrow down their options or offer them alternative routes to market. London-listed Atome Energy started developing its project in Paraguay as a green ammonia producer but switched its focus to green calcium ammonium nitrate (CAN), a fertiliser product, after talking with offtakers. As it expands capacity, it could start supplying hydrogen buses in its local market, Olivier Mussat, the firm’s CEO, said in Copenhagen.

For others, the market outlook is deeply uncertain. “We do not know which molecule fundamentally is going to be the molecule of choice in international trade,” said Dan Feldman, global head of energy at law firm King & Spalding. “We do not know if it will be ammonia, e-methanol, liquid hydrogen or one of the other options.”

Feldman also pointed to a lack of consensus over how the market will treat the various levels of carbon intensity of various hydrogen production routes.

“Is it likely that early investment in the wrong molecule turns out be a mistake, or is there room for multiple molecules to find markets both at this stage and across the 20-year investment cycle?” he added.

Buyer’s market

The answer to this ultimately lies with hydrogen’s future consumers, which are treading carefully when it comes to committing to long-term offtake of hydrogen and its derivatives at the prices currently on offer, despite a growing number of policies mandating the use of low-carbon products.

Multiple speakers in Copenhagen identified problems securing offtake deals as the largest barrier to progressing upstream projects to FID. Subsidies are not yet bridging the gap between the green premium for low-carbon products and buyers’ willingness to pay, several delegates said.

70% – Increase in planned capacity

The IEA and others are calling on governments to further strengthen incentives to drive the demand side.

“The growth in new projects suggests strong investor interest in developing low-emissions hydrogen production, which could play a critical role in reducing emissions from industrial sectors such as steel, refining and chemicals,” said IEA Executive Director Fatih Birol, as the agency launched its Global Hydrogen Review 2024, which coincided with the Copenhagen event.

“But for these projects to be a success, low-emission hydrogen producers need buyers. Policymakers and developers must look carefully at the tools for supporting demand creation while also reducing costs and ensuring clear regulations are in place that will support further investment in the sector.”

In Copenhagen, Luca Volta, venture executive for hydrogen and low-carbon solutions at US oil major ExxonMobil, urged governments to move from “project enabling policies” to “market forming policies”.

Momentum

Despite the demand uncertainty—as well as huge policy and infrastructure risks—momentum on the supply side is building. The potential for demand to surge to about six time the current hydrogen demand by 2050 remains a big draw for investors.

The volume of production capacity (green and blue) at an advanced stage of planning has risen by 70% since the start of this year, said Catherine Robinson, executive director, hydrogen and low-carbon gas at information provider S&P Global Commodity Insights. The project pipeline is split roughly 50/50 between green and blue projects, she told the conference. Continued uncertainty over the rules governing the 45V tax credit in the US had "chilled" sentiment in the US clean hydrogen market, Robinson noted. 

The IEA said the number of projects reaching FID has doubled in the past 12 months. If all announced projects are realised worldwide, total production could reach almost 50mt/yr by the end of this decade, it said.  However, this would require the hydrogen sector to grow at an unprecedented compound annual growth rate of more than 90% between now and 2030, well above the growth experienced by solar PV during its fastest expansion phases, the IEA said.

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Author: Stuart Penson