Europe’s search for alternatives to Russian energy in the wake of the war in Ukraine could “supercharge” investment in low-carbon hydrogen and drive forward more than $1tn of projects globally by 2030, according to the IEA.

The EU has ramped up its target for green hydrogen consumption to 20mn t/yr as part of its RepowerEU policy response to the war in Ukraine.

Meeting this demand will require capital investment of c.$600bn globally, with 60pc of this for infrastructure outside the EU. The cost rises to $1.3tn when including the cost of capital to fund the investments, the IEA estimates.

“The momentum behind the global low-carbon hydrogen sector has been given a major boost by Russia’s invasion of Ukraine,” says the IEA in its World Energy Investment 2022 report.

“The hydrogen project pipeline continues to grow, and projects are increasingly likely to achieve FID.”

670MW – Electrolyser capacity due to start up this year

More than $500mn has already been spent on supply projects coming online in 2022, with 670MW of electrolyser capacity scheduled for commissioning this year. Just under 270MW of electrolyser capacity started up in 2021, more than in any previous year.

“We estimate this new capacity to be equivalent to investment of around $200mn, a near-fourfold rise from 2020,” the IEA says.

Unprecedented levels of investment have been mobilised as near-term expectations for hydrogen projects have risen, but there has been a downward correction in the value of pure-play hydrogen firms since the start of 2021, the IEA says.

It tracks the performance of the sector via an index based on a portfolio of 33 publicly traded firms active across the hydrogen value chain. At $40bn, the portfolio is worth around 20 times more than it was five years ago in nominal terms and four times more than at the end of 2019. However, the index has “significantly faltered” since the start of 2021.

This reflects a market correction as well as a reallocation of capital away from long-term growth stocks in search of more short-term value, according to the report.

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Author: Stuart Penson