FIDs on European green hydrogen projects remain elusive as developers and their backers monitor shifting policy frameworks, while sites and grid connections for electrolysers can be difficult to secure, according to speakers at the FT Hydrogen Summit.

Developers have tabled multiple project proposals, but the industry needs first-movers to commit to FIDs to give the sector momentum and ensure a smooth ramp-up of production. Smaller projects can lead the way, and the industry should not wait for mega-projects under development by players such as the oil majors, which work to longer investment horizons, speakers say.

“We need FIDs in this space,” says Jane Toogood, sector CEO at technology company Johnson Matthey. “There is a big demand for sustainable energy. It is quite important to get these early projects over the line. We have got blinded a bit by the big projects—sometimes big is not the answer.” Less than 10pc of announced projects currently have firm startup dates, she adds.

“The big question is, when is the money going to show up, when are the big FIDs going to show up?” Jones, JP Morgan

Speakers welcomed the hydrogen element of the EU’s recent RepowerEU strategy, which sets a 2030 goal to produce 10mn t/yr within the EU and to import a further 10mn t/yr. RepowerEU also includes proposals to roll out carbon contracts for difference for hydrogen projects via the EU’s Innovation Fund.

But uncertainty persists around hydrogen taxonomy and proposals on additionality, speakers at the summit said. Last month, the European Commission launched consultations on two delegated acts clarifying EU rules on renewable hydrogen. The proposals set the criteria for what can be defined as “renewable hydrogen”, as well as methodologies to calculate the lifecycle emissions of green hydrogen. There is also uncertainty over whether national hydrogen strategies align with EU policy, summit delegates said.

Delays to the approval of projects put forward by member states to receive state aid under a derogation of the EU’s Important Projects of Common European Interest (IPCEI) scheme are another concern. The EU has pledged to make the approvals this summer. Graham Cooley, CEO of UK-based electrolyser manufacturer ITM Power, played down the significance of IPCEI approval delays, saying he thinks the EU will move forward in August once there are more details on its proposed CfD mechanism.

Ahead of the curve

Norwegian electrolyser maker Nel called on project developers to take FIDs to get the sector moving. Nel is ready to supply the sector with the technology it wants, having scaled up its production capacity, according to CEO Jon Andre Lokke.

“We have invested ahead of the curve,” he says. “We are ready. We cannot be more ready.”

Lokke adds that his firm’s facilities are running at below capacity. “I am not running 24/7 because we are still waiting for FIDs,” he says.

Patrick Jones, European mining, steel and hydrogen research analyst at JP Morgan, also highlighted the sluggish progress towards FIDs saying: “The big question is: when is the money going to show up, when are the big FIDs going to show up?”

Even if policy risks can be overcome, project developers face additional challenges in sourcing sites and grid connections, delegates say. Securing grid connections for electrolysers is “very difficult in Europe”, according to Julien Rolland, head of power and renewables at commodities trading group Trafigura, which is part of a consortium with German developer Hy2gen and investment firm Copenhagen Infrastructure Partners to produce green ammonia for the shipping sector. Rolland says the industry at this early stage needs first-movers ready to take decisions despite projects having “a slightly imperfect model”.

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Author: Stuart Penson