Green hydrogen took a step up in 2024. The scale of the proposed private investments grew and, location-wise, these bigger projects tended to be in locations with strong solar resources. They’ve also tended not to rely much on subsidies and to include larger managers.
One case in point was Actis, now part of General Atlantic, teaming up with Fortescue in May on a 200,000 tonnes-a-year project in Oman, which will involve the $4.7 billion Actis Energy 5 as well as further sources of funding. Another was a similarly sized 200,000-tonne project in Morocco, led by TotalEnergies and involving Copenhagen Infrastructure Partners’ Energy Transition Fund and AP Møller Capital’s Emerging Markets Infrastructure Fund.
Furthermore, KKR announced an up to €400 million investment in a green hydrogen JV in June from their $7 billion-target Global Climate Fund. This will be for projects in Spain and Portugal. Brookfield announced an up to $1.1 billion investment from its $15 billion Global Transition Fund in global e-fuel producer Infinium in September.
As for subsidies, they perhaps matter less than expected. In the first auction by the European Hydrogen Bank, the seven winning bids asked for grants of between €0.37/kg and €0.48/kg, against a €4.50/kg ceiling. Two of these projects, both 500MW – one in Spain, one in Portugal, are led by CIP.
Amid this flurry of excitement stands the lack of physical progress, such as spades in the ground and established electrolysers.
Across Europe, only 2GW of green hydrogen projects (corresponding to 0.44 million tonnes of hydrogen) reached FID in the past 12 months, and few of these were privately sponsored. This, despite the steady public support and the EU’s third renewable energy directive (RED III) demanding that, by 2030, 42 percent of the hydrogen used by the EU’s industry must be green along with 1.2 percent of aviation fuel.
Squaring the green hydrogen circle
“Globally, in the past three years about 100 million tonnes of green hydrogen projects have been announced, but less than 3 percent of these have reached FID,” Minh Khoi Le, head of hydrogen research at analyst Rystad Energy told Infrastructure Investor in October. “What is missing is the push to bridge the gap between the buyer’s willingness to pay and the producer’s ability to decrease the cost.”
Indeed, 2024 saw plenty of deliberation about green hydrogen, as most projects on hold (and that would be most of them) stayed on hold, regardless of the sponsor.
For example, Copenhagen Infrastructure Partners have a dedicated green fuel fund – the €3.1 billion CI Energy Transition Fund I – which reached a final close in August 2022. It made its first investment, an acquisition, this December and the first FID on the handful of large green molecule projects in the pipeline is not expected for another 12 months.
Even German KGAL isn’t quite ready to press ‘go’ on a 1GW project in Lubmin, although it is in a prime spot with plenty of renewable resources, grid connection and access to the coming 9,040 km of hydrogen-ready German pipeline. This was one significant project that bucked the trend and moved ahead in 2024.
A recent academic study (‘Risk on steroids’: Investing in the hydrogen economy by OB Hunt & JP Tilsted) points to uncertainties around profitability, the demand for a high-risk premium and a lack of bankability as barriers preventing projects from reaching FID.
According to the study, the interlinking of the renewable energy generation build-out and the establishment of a green hydrogen market does not help: “The investability of power-to-x is predicated on low enough electricity prices, while the investability of renewables depends on high enough energy prices.”
Green hydrogen is not an easy circle to square. And yet, managers keep trying.
Indeed, Cordiant Capital just announced a deal for the team managing the only dedicated hydrogen fund listed in London, trusting it will deliver the competencies needed for the future. And, three of the top 10 largest global managers must be considered significant investors in green hydrogen, up from one a year ago.
As the year has demonstrated, this sector is still evolving.