The green hydrogen sector is gaining momentum but the absence of internationally agreed definitions and the reluctance of many banks to lend to projects are constraining growth, according to London-headquartered bank Barclays.

Last year was a “tipping point for the industry” and the sector has moved from talk to practicable action, Daniel Hanna, global head of sustainable finance for corporate and investment banking at Barclays, told a capital markets day hosted this week by investment fund HydrogenOne Capital Growth.

“Yet there is still a lot to do before we turn hydrogen hope into reality. While the number of announced large-scale hydrogen projects grows, only about 10pc have actually made it to FID,” Hanna says. “The absence of an international agreement on what constitutes green hydrogen is a brake on rapid growth.”

“The absence of an international agreement on what constitutes green hydrogen is a brake on rapid growth” Hanna, Barclays

The recent progress made by the EU in publishing its delegated act to define green hydrogen is important for the industry, he says. “We are having this debate now in order to give developers, consumers and investors confidence to plan the future.”

German electrolyser manufacturer Sunfire welcomed the EU’s move to clarify its definitions of renewable hydrogen. “The first definition of green hydrogen was tremendously helpful. It is a big, big plus for us and we are confident that it will help our customers to reach FID because this is something that was missing,” says Sunfire’s chief of staff, Benedict Minkner.

Lenders

However, “most” banks are unwilling to lend to hydrogen projects because of risks around policy, technology and other concerns, says Hanna, citing new research by consultancy Boston Consulting Group.

The need for projects to have robust offtake agreements for their production is also critical to secure financing, Hanna says. “Developing long-term offtake contracts with reputable counterparties will be key and require large investments from both producers and consumers with each depending on the success of the other,” he says.

Germany-based green hydrogen project developer HH2E is in talks with major offtakers ahead of the startup of its projects, according to Mark Page, the company’s CFO. “We are negotiating contracts today for delivery in 2025 with major customers, in the millions and tens of millions of euros per annum in terms of spend,” Page says. “A lot of this is in the transportation sector, which has a huge policy push—a financial push—to get trucks in particular migrating to hydrogen, and refineries.”

HH2E is discussing potential contracts of five to ten years’ duration at “factory gates prices” north of €10/kg ($10.55/kg), Page says. He describes claims by some in the industry that prices should be as low as €2/kg as “nonsense”.

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Author: Stuart Penson