The hydrogen project pipeline may be booming, but FIDs are relatively few and far between. Three main challenges are holding projects back, says Hans Dieter Hermes, vice-president for hydrogen at engineering firm Worley, which has advised on more than 250 hydrogen developments.

The first major challenge is building up and de-risking the supply chain. “A green hydrogen project will need its own pipelines, its own port access and its own transmission lines—not to mention all the wind and solar capacity. A 1GW [green hydrogen] project requires a significant amount of raw material, so there is a logistic challenge,” Hermes tells Hydrogen Economist, noting that a project of that size would need 60,000t of steel, 3,000km of cables, 40km of internal road networks and no less than 1.2mn solar panels. “All this material needs to come from somewhere, and it needs to be produced, supplied, assembled and put into operation—a huge task,” he adds.

“There is no tradeable price because we do not have a tradeable product yet that is commonly certified” Hermes, Worley

“We have always had the ambition to look into what can be done locally, but this was more from a socioeconomic point of view—developing the labour force or the GDP,” says Hermes. “Nowadays, this is additionally very important to de-risk projects. It is not only about getting the cheapest electrolyser, or the cheapest pipeline or solar panels. It is also about getting the material at all in the right volume and time.”

Worley is “deeply involved” in helping large project developers plan out where and how they will source different parts of the value chain, as well as opportunities to develop a local skilled workforce throughout a project’s 3–10-year construction phase, according to Hermes. “We are not only helping realise projects, we are also helping to raise the infrastructure environment.”

A second challenge is the development of common infrastructure between projects in the same region. “It does not make sense to have ten pipelines in parallel going to a port for the same products—or ten storage tanks or transmission lines in parallel. It is not only a cost issue; it is also an infrastructure and supply chain issue,” Hermes says, adding that common infrastructure can also limit the environmental impact of a project.

“It is a question that needs quite a bit of attention, because it is about who owns this infrastructure, who operates it, [and] who takes liability,” he notes.

Through its consulting business, Advisian, Worley has recently completed a study for the Namibian government on hydrogen sectoral development, drawing on models from the renewables sector and industrial parks, with the aim of progressing project discussions. “The regulatory frameworks need to be developed, but they cannot be developed without a broad basis,” Hermes says.

Global hydrogen trade

Another key hurdle for FID on projects is price—or a lack thereof. “There is no tradeable price because we do not have a tradeable product yet that is commonly certified,” Hermes says. Currently, this requires government intervention in the form of buying platforms, guaranteed prices and contracts for difference in order to de-risk the projects and unlock financing.

60,000t – Steel needed for a 1GW green hydrogen project

While ammonia may present “low-hanging fruit” for low-carbon hydrogen offtake and allows access to existing markets, Hermes notes the chemical has its limitations as a hydrogen carrier. “Every time we produce it, ship it and then reconvert it… it means we lose on the energy balance,” he says, adding that this process is “more expensive… and not so efficient”.

“The technology development is that rapid, right now, that in a few years we will see other shipping solutions or other products, plus pipelines,” he adds.

Integrating expertise

While the nascent hydrogen industry can leverage decades of experience in project development from the renewables and chemicals sectors, integrating this expertise is difficult, Hermes says.

In February, Worley announced a partnership with technology companies IBM and ABB to develop an optimisation centre for hydrogen project development and operations. “We built a platform with the aim and objective to help investors, developers and everyone involved in these projects to better understand the decisions being taken early on and what implications they may have,” Hermes says. For example, modelling can help developers determine whether slashing capex will raise operational expenses over a 20-year period.

Knowledge-sharing initiatives such as this are key for scaling up the sector, according to Hermes. “All projects worldwide cover only part of the potential demand. This is not about competition—this is about collaboration.”

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Author: Polly Martin