New EIB report on investors’ views on how the public sector can help to address the risks and challenges of the move towards a more hydrogen-fuelled economy

Robin Whitlock writes on the Renewable Energy Magazine website about a new report from the European Investment Bank that provides key insights into the main drivers behind the European hydrogen market and how the EIB should address them.

 

New report finds that the international investment community recognises both the opportunity for hydrogen deployment and the challenges

The European Investment Bank (EIB) has published a report on investors’ views on how the public sector can help to address the risks and challenges of the move towards a more hydrogen-fuelled economy.

The report’s findings are based on consultations by the EIB’s Advisory Services with nearly 50 market participants, at the request of the European Commission under the InnovFin Advisory programme.

Besides providing key insights into the main drivers behind the European hydrogen market, the report provides results and recommendations to inform the European Commission’s investment agenda for hydrogen under the EU Green Deal and the Horizon Europe programme.

The findings confirm that the international investment community recognises both the large market opportunity hydrogen represents as a zero-carbon-emission fuel and the current challenges to its large-scale deployment. Improvements in the economic and regulatory conditions of hydrogen-based projects will be required – to reduce the risks they face and their cost of capital – to mobilise the financing needed to meet the European Union’s ambitious targets. The interconnected nature of the hydrogen sector also calls for a more coherent value chain-based approach to ensure that the various components of such projects develop in an optimal way and to support the broader development of the hydrogen-based ecosystem.

To address these challenges, the report highlights some of the solutions to emerge from the market consultation: the introduction of new credit enhancement and risk-sharing mechanisms to facilitate bank financing of hydrogen projects; initiatives focused on ecosystem development and the coordination of market participants; and advisory services to prepare hydrogen projects for investment.

“Hydrogen is among the technologies with the greatest potential to reduce global carbon emissions, especially in hard-to-abate industrial sectors” said Jean-Christophe Laloux, Director General, Head of Operations at the EIB. “As the EU climate bank, we acknowledge both the potential of hydrogen and the many challenges in front of us. This new report provides important findings and recommendations for investors and policymakers to help them overcome some of the challenges and scale up financing for hydrogen projects. At the EIB, including through our Advisory Services, we will continue to work with our partners at the European Commission and project promoters to make hydrogen happen.”

Jean-Eric Paquet, Director General for Research and Innovation at the European Commission, added that the report carried out by the European Investment Bank in partnership with the European Commission represents an important step to take forward the European Union’s hydrogen agenda and that it will better equip policymakers in their efforts to strengthen and expand a sector of such strategic importance for Europe’s decarbonisation, technological sovereignty and energy autonomy in the years to come.

The European Investment Bank (EIB) is the long-term lending institution of the European Union owned by its Member States. It makes long-term finance available for sound investment in order to contribute towards EU policy goals.

Since 2014, the EU bank has provided over 550 million euros in direct financial support to hydrogen-based technologies, which has helped mobilise total investment of over 1.2 billion euros. Through these financing operations, the Bank has supported key technologies (such as electrolysers and fuel cells) and financed hydrogen production and applications (including mobility and energy storage).

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2 thoughts on “New EIB report on investors’ views on how the public sector can help to address the risks and challenges of the move towards a more hydrogen-fuelled economy

  1. I will not comment on the panegyric above & move to the heart of the matter: a report which fails to grasp the essentials and contains unsupported statements. Page 12 kicks it off with this: “The production of renewable and low-carbon hydrogen remains more expensive than existing grey hydrogen production approaches. In the case of renewable hydrogen, this cost differential is mainly attributable to the cost of clean electricity and the cost of electrolyser equipment”

    Spot market gas is circa €80 -90/MWh, add in ETS and you arrive at a grey H2 price of around €170/MWh. Note that ACER predicts that nat gas prices will remain high. Thus the claim is that green-H2 is more expensive than this price. Using elec from PV (Spain) give a green-H2 price of around €49/MWh (assuming direct connection PV – electrolysers – typical or projects in Spain). The price rises to €70/MWh for on-shore wind – Germany. In the case of blue H2 it has a cost range of €107 – 123/MWh.

    Nowhere in the report does the EIB support its statement on page 12. Sadly you will find hardly a number in the entire report, which comes across as one long whine by bankers – leading to, one suspects a request for “support” aka public funds/subsidies/bribes/bungs.: Quoting from the report: “Investors called for clearer public support mechanisms that create long-term visibility and positive returns,”

    The nonsense on high cost H2 is repeated here: “The economics of hydrogen, where scale alone may not be sufficient to bridge the economic gap,require innovation that would facilitate larger-scale deployment at a lower cost.” (page 15).

    Shortly before the pandemic I met with DG Competition – the section that dealt with IPCEI. Our pitch was that H2 projects of any sort (green or blue) should receive zero subsidy & no gov support of any sort. We proposed, instead, price discovery/mandatory targets – what could green or blue H2 be made for without gov support. Clearly I need to pay a return visit. For any bankers reading this: trust me on this one, I have VERY good contacts with DG Comp, they listen & I’ve forgotten more about H2 than you know.

    Top of my wish list: the network operators need to be neutered, their charging regimes are based on the mafia’s playbook which means that locating electrolysers next to demand and taking elec from RES somewhere else on the network destroys the green-H2 business case. (this is vaguely referenced on Page 13 of the EIBs “report”).

    The LCOH for green-H2 has a CAPEX/OPEX balance of 20/80 – which means that the focus has to be on minimising electricity costs, which could include electrolyser efficiency (improve efficiency -get more H2).

    CAPEX impacts (on LCOH) tail off once electrolyser capacity factors exceed 40% – thus the focus should be on the CF perhaps using hybrid RES (PV+wind) – which is what the Spanish are doing. CAPEX improvements are fine – but one key area is debt costs – and this is where the ECB/EIB combo could come into play – low cost debt.

    In summary, the report makes a wrong (& unsupported) assumption at the start (green H2 is costly) and builds much of its reasoning on this wrong assumption. EIB and the banksters it spoke to should hold their heads in shame. The report is disgraceful & if I were a professor and a student submitted such a report to me I would make him re-take an entire year at uni. As for the writer of the opinion piece – I will pass over in silence what he said.

    1. Thanks so much for this, Mike. I’m going to try to get your comment to officials at the EIB because they need to read this.

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