Hydrogen’s headline moment requires demand growth and regulatory certainty to scale
Hydrogen’s golden age could be just around the corner but requires further evolution of a robust economy for the commodity to scale demand and infrastructure.
While there are challenges and strong opportunities for the hydrogen market, there is a need for pragmatism after the initial “hype”.
That was the essence of a Executive Leadership panel titled ‘Unlocking hydrogen at scale: Infrastructure as the catalyst for systemic adoption’, which also highlighted the need for more regulation, investment, and cross-border cooperation.
The session also explored the use of trading certificates and financial instruments to enable a physical hydrogen value chain.
Ahmed El-Hoshy, CEO, Fertiglobe, suggested leveraging existing infrastructure, such as in the ammonia industry, to reduce costs and accelerate development of a hydrogen economy.
“It’s a question of cost, especially in this environment where the biggest under appreciation is just how much Capex has gone up, and we don’t really see it coming back down,” he said.
“So we need to leverage what’s in place to start getting some molecules to flow to ultimately reduce the price for the customer. You reduce the amount of subsidies needed, you make it a bit easier of a gamble for someone to go buy that low carbon product.”
“We need to leverage what’s in place to start getting some molecules to flow to ultimately reduce the price for the customer.”
- Ahmed El-Hoshy, CEO, Fertiglobe
The panel also touched on working towards greater interconnectivity between regions, governments, and regulators to standardise regulations and certifications, reducing barriers to infrastructure investment.
Jillian Evanko, CEO & President, Chart Industries said: “If I’m going to build something in one region and I want to do the exact same thing in another the standardisation concept, which is a cost reduction reducer, I have to get two different certifications.”
“So this idea of an interconnectivity point between regulators and certifiers could be very helpful to the industry itself,” she said.
El-Hoshy also commented on the regulatory aspect. “The really big problem we have is this uncertainty we’ve always lived with in the commodity sector is now compounded by policy uncertainty.”
“There was a huge rush on the infrastructure side, for example, to invest in Europe, but we’re really not seeing many dedicated builds for infrastructure because people don’t know…what if gas price drops by 50% in Europe, then people end up not using the lower carbon alternative?” he added.
“It’s so open, there’s so many vast outcomes that an infrastructure investor who usually takes a low return, low risk (attitude) is just stuck sitting on their hands, and that’s going on as long as there’s policy uncertainty.”
Evanko said that made it counterintuitive to the fact that costs have to come down for the hydrogen industry to be successful.
“You’re in this situation where it’s challenged by all the things you just heard. During the exuberance period we had potential customers that would say, ‘I'm going to do LNG today, but can you make equipment prepared for if in the future I want to change to hydrogen’.
“This is a very thoughtful approach, because in terms of incremental cost, that’s much less than if you were going to just go and rip out all existing infrastructure and replace it with hydrogen. Now you’re not having that conversation because people are saying ‘I just got to keep cost as low as possible, and LNG is going to be here for a long period of time’.
“So there’s a lot of dynamics that are headwinds for us to face, in particular as infrastructure providers.”
The panel called for continuing to build strategic partnerships across the hydrogen value chain to de-risk projects, share costs, and bring together different expertise and off-takers.
Michèle Azalber, Chief Hydrogen Officer of Gentari, highlighted the Hydrogen Council’s Global Hydrogen Compass report indicated global low-carbon hydrogen project capacity reaching the FID stage had surpassed six million tonnes per year (mtpa).
“It’s a significant volume,” she said. “The question is, what do we need to really deliver on the ambition? The key challenge is how to connect supply and demand supply.”
Azalber added: “There are two key dimensions we have to track. First is a physical one, the supply chain. The second one, financial; how to meet the price expectation of the customers, which is a key dimension for off-take to materialise.”
“The good news is we foresee demand…around four to eight million tonnes in the short term by 2030 mainly driven from Europe. What’s missing is you need translation of policies into local regulation to unlock the demand.”
Gautam Reddy, CEO, AM Green Group, noted there had been some “irrational exuberance” around hydrogen, but he now saw positive change every quarter.
He said: “We have seen LNG develop from scratch…it takes time, right?
Oliver Pfann, CEO - EMEA, Linde, also noted optimism in the hydrogen industry, but cited governmental support as crucial to enable demand.”
He concluded: “We’ve got more realism, and that’s healthy, it leads to consolidation in the industry, and we still see momentum, so there is still a good future for hydrogen.”
Evanko echoed the sentiment saying she was looking forward to “a year from now and showing the progress” the industry has made.
And Azalber added: “We want to have everything all aligned at the same time. Before we had hype and realism. Now it’s time for pragmatism.”
