The hydrogen sector is at a critical juncture, with experts stressing the need to reassess expectations and standardize technologies to foster its development.
The transition to a decarbonized economy without hydrogen is deemed “inconceivable” by speakers on panels at the Gastech conference.
However, building the entire hydrogen value chain is taking longer than expected, resulting in a pause in the US market.
Ana Quelhas, General Manager of Hydrogen at EDP Renewables, says the industry is clearly underestimating the time needed to achieve hydrogen commodification.
The regulatory and policy frameworks essential to market development are taking longer to put in place than anticipated.
Quelhas points out that the targets set for 2030 are unlikely to be met on schedule, but that doesn’t mean they won’t eventually be achieved.
The complexity of the market is exacerbated by the arrival of new players with over-optimistic capital expenditure and operating forecasts, without adequate planning.
Vinay Khurana, Managing Director of the Claremont Operating Center at Technip Energies, notes that the industry is gradually discovering which projects are really viable.
The challenges of demand and standardization
Demand is identified as the “weak link” in the development of hydrogen projects.
Quelhas calls hydrogen buyers, such as industrial refineries and fertilizer producers, the “most valuable partners” in this dynamic.
She points out that the market will begin in a decentralized form, which doesn’t necessarily mean small-scale, but rather avoids complex transport and distribution logistics that aren’t yet in place.
This approach makes it possible to take advantage of the many existing sites around the world for the development of hydrogen projects.
Marguax Moore, Head of the Energy Transition Group at Trafigura, expresses her frustration at unrealistic market expectations.
She insists on the need to readjust these expectations by focusing on what is achievable in the next few years.
Standardization of projects and technologies is seen as a key factor in reducing costs and improving the transparency of hydrogen projects.
Khurana emphasizes that this standardization could facilitate positive investment decisions.
Incentives and market dynamics
In the USA, the Inflation Reduction Act offers incentives for hydrogen supply, but demand incentives are lacking, positioning the country as a strict exporter.
Ahmed El Sherbiny, Vice President of Energy Transition Funds at Copenhagen Infrastructure Partners, notes that only 7% of announced global clean hydrogen projects have made positive final investment decisions.
A project deemed “good” must have a strong development team, including a full understanding of the value chain, including infrastructure and energy sources.
Hydrogen investors and buyers are currently reluctant to make long-term commitments to hydrogen projects, due to the premiums associated with low-carbon products.
Quelhas stresses that transparency of hydrogen project costs is essential to achieve positive investment decisions.
Standardization of projects and technologies could play a crucial role in this transparency.
Towards a mature hydrogen market
Projects should aim for “low-hanging fruit” to get off the ground, using cheap natural gas in the USA for example.
Moore expresses his fears about building one-off projects rather than pioneering ones, which could stifle innovation and replication in the sector.
The maturity of the hydrogen market will depend on the ability of players to establish standards and practices that promote the economic viability of projects.
The outlook for hydrogen is promising, but requires a pragmatic and structured approach.
Market players need to work together to set realistic expectations and develop projects that meet market needs while respecting economic constraints.
Standardization and cost transparency will be decisive factors in hydrogen’s success in the global energy transition.
