The net-zero carbon hydrogen industry is moving forward from pilot-scale projects of 10-20 MW of electrolysis capacity to large-scale projects of 100-200 MW and larger.
While the discrepancy between the number of announced projects and those reaching financial close remains large, some of the more credible projects are getting financed and starting construction.
Now investors and financiers are searching worldwide for optimal arrangements, locations offering the possibility of large-scale clean power production with high load factors, combined with strong public support to offset cost.
Their most advanced projects are currently in Europe, where large-scale schemes are moving forward under clear EU directives and regulatory regimes.
Meanwhile they are looking elsewhere, closely watching where the right combination of advantages will appear as they anticipate Europe’s inevitable need to import carbon-free hydrogen to meet its ambitious clean energy objectives. Australia, the Americas, and the Middle East and Africa (MEA) are all in their sights.
Europe leads the way
“We tend to put money where we see a case to work,” says Amir Sharifi, Chief Investment Officer of Hy24.
“It’s not just about geography, it’s a matrix between the geography and a certain vertical within the hydrogen value chain.
“In practice we’ve started with Europe, it’s the most advanced geography in terms of supporting regulations,” he adds.
Hy24, a joint venture of the Paris-based private equity company Ardian and investment fund FiveT Hydrogen, manages the Clean Hydrogen Infrastructure Fund with €2 bn from more than 50 investors including major industrial companies. Related: Hedge Funds Dump U.S. Energy Stocks to Buy Crude Options
The fund life is 12 years from its start in 2022 with expectation of asset sale. Its investments have gone into countries with strong state support programs, where ample wind and sunshine offer large amounts of low-cost power production in Europe’s northern and southern peripheries.
It has invested in Everfuel, the Danish developer whose founder, a former Senior Vice President at Nel Hydrogen, is well known in the industry. Everfuel is working in the Nordic countries, the Netherlands and Germany, with a 20MW electrolyser to begin operation this year.
It has also invested in start-up company H2 Green Steel, which is developing a fully integrated plant in Boden, Sweden, now under construction with 700MW electrolysis capacity. The project offers numerous advantages, with low cost hydropower, proximity of iron ore mines and ports, available land, and support from the Swedish government.
“All of these factors made us comfortable investing in a new steel plant, the first new plant in Europe in 50 years,” says Sharifi.
“We already have long-term offtakes, with €3.5bn debt to finance the construction, and €1.5bn equity, of which we have been the lead investor.”
In Spain, Hy24 has taken an ownership position in Enagas Renovable, in partnership with gas transmission operator Enagas, with a large portfolio of renewable fuels projects. They have invested in a joint venture for green hydrogen production with offtake by Spanish oil and gas companies including Repsol and CEPSA.
Sharifi emphasizes the importance of European regulations to make these investments feasible by creating industrial demand. These include the revised Renewable Energy Directive (RED III) with its binding targets for renewable fuels of non-biological origin in the transport and industry sectors, and the introduction of the carbon border adjustment mechanism (CBAM), which ensures that steel produced with green hydrogen will compete against imported steel produced by carbon-intensive methods.
Large but limited
Noé van Hulst, who is Special Advisor for Hydrogen to the International Energy Agency, points to another key piece of the European hydrogen landscape now coming into place. It is the Hydrogen Backbone, the repurposing of gas pipelines and development of new pipeline infrastructure to connect the Netherlands’ ports and main industrial clusters, now financed and under construction.
The project, led by Dutch natural gas company Gasunie, was launched last year at Port of Rotterdam, where a dedicated 32-km hydrogen pipeline – HyTransPort – is being built. The Hydrogen Backbone will eventually link to Germany and to Belgium.
The pipeline system under development is a key support for projects now planned and under construction on the Maasvlakte, the man-made westward extension of the Port of Rotterdam.
Shell’s Hydrogen Holland I project on the Maasvlakte is now under construction. A 200MW electrolysis plant, powered by electricity generated by the Hollandse Kust (Noord) offshore wind farm, will produce hydrogen for the Shell Energy and Chemicals Park through the HyTransPort pipeline. Thyssenkrupp Uhde will fabricate the alkaline water electrolysis plant.
The German state-owned energy company Uniper is pursuing its H2Maasvlakte project, with 100MW of electrolysis capacity to produce green hydrogen by 2026, and planned expansion to 500MW by 2030. US company Plug Power Inc. will provide PEM electrolyzer technology.
Meanwhile in France, Air Liquide’s Normand’Hy project has received public funding for development of a 200 MW electrolysis plant to supply renewable and low-carbon hydrogen to a TotalEnergies refinery and other industrial users in the Normandy industrial basin, starting from the second half of 2026 according to news reports.
While these large projects are impressive, van Hulst thinks the base of active projects in Europe is far too low.
“Europe is advancing more slowly than expected,” he says. “There’s still too much uncertainty about the support schemes, too much uncertainty about national implementation of the European directives that have finally been concluded.”
“We really need to accelerate to get closer to the EU targets.”
Looking afield
Despite his concerns, van Hulst does see hydrogen imports to Europe as inevitable before 2030. He refers to Germany’s H2Global auctioning system now underway for offtake agreements for green ammonia, methanol and e-fuels. The results of the first round of auctioning, with €900m in subsidies, are expected soon. The outcome will inform subsequent rounds of auctioning with the addition of €3.5bn to the program announced by the German government earlier this year.
"The import volumes before 2030 will be relatively small, then hopefully ramp up by 2030 and after with higher volumes,” says van Hulst.
An additional window will open with participation of The Netherlands in a €600m auction, the first Dutch/German joint auction through the H2Global mechanism that will take place before end of year.
“We’re going to see who is really willing to sign contracts, which companies and export countries,” he says.
Apart from the auctioning mechanisms, he expects the Netherlands, Germany, and Belgium to develop bilateral export-import corridors and projects with individual countries.
Load factor
Hy24 is looking beyond Europe, with approximately 50% of the fund devoted to projects in Europe, the Middle East and Africa (EMEA), and the other half to be split equally among the Americas and Asia-Pacific region.
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It has invested in Intercontinental Energy, with projects in Oman and Australia currently in pre-FID study phase. They are located in coastal desert regions with combined wind and solar production yielding a very competitive load factor of close to 70%.
“The load factor is very important,” says Amir Sharifi. “There are not many locations in the world with the combination of a lot of available space and a high load factor.”
“To be able to produce hydrogen at most competitive cost, it requires access to power that will be both very cheap on capex, which requires large scale, because balance of plant is usually a big element,” he says.
“If you have more volumes of assets then you have less balance of plant as a percentage, so you have big economies of scale.”
The fund also has a team in the US seeking investment opportunities in anticipation of new regulations and tax incentives for green hydrogen under the Inflation Reduction Act (IRA).
Leading regs
Hy24 has entered a strategic framework agreement with the Abu Dhabi-based clean energy company Masdar to pursue co-investment in large scale green hydrogen production projects worldwide.
As they look to where production can occur at most competitive cost, they must remain quite flexible because of the changing regulatory environment in different regions.
“Looking back 18 months ago, we thought the IRA in the US would be a trigger,” says Florian Merz, who is Masdar’s Associate Director of Business Development for Europe.
“Now the US is working on its regs, apparently trying to get them close to European standards, and projects are delayed waiting for this.
“Also, Japan-Northeast Asia is now deciding on regulation and relevant support schemes.
“So, after initial delay, Europe is in the lead in terms of regulatory clarity,” he says.
By Alan Mammoser for Oilprice.com
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