Securing finance for green hydrogen projects has arguably become more difficult over the last couple of years. The risks for investors have increased against a backdrop of deepening policy and regulatory uncertainty, geopolitical tensions and stubbornly high production costs.

Add to this list a creeping loss of enthusiasm for the net-zero project, and the chances of winning over lenders and investors start to look slim, especially for independent projects that are not tied into existing infrastructure such as refineries.

Bankability for green hydrogen is a complex business in need of greater visibility

So far, about $38b of investment has been firmly committed to low-emission hydrogen by investors and banks, representing only about 7% of the total announced investment volume.

For developers, the aim is to somehow navigate a way through to the point where projects are truly bankable in the eyes of the lenders and investors.  

But what does “bankable” really mean for clean hydrogen projects? Industry association Hydrogen Europe and German risk management firm Dekra have attempted to answer this question in a recent whitepaper titled ‘Unravelling the myth of bankability for green hydrogen project financing’.

Box office

The term ‘bankable’ can be traced back to the early 19th century, when it referred to something that was acceptable for processing by a bank, such as cheques or money orders.

The rise of Hollywood saw the term expand to the movie business, where bankable stars could ensure box office success, the whitepaper noted.

Back in the real world of financially challenged green hydrogen projects, bankability extends beyond financial assessments—it is a multidimensional concept involving proactive risk management, project structuring, regulatory alignment, and stakeholder engagement, Hydrogen Europe and Dekra said.

From a financial institution’s perspective, a bankable project must have predictable cash flows, strong risk management strategies and a stable regulatory environment. “Managing bankability is an ongoing, multidimensional process akin to quality management. It requires proactive strategies to align stakeholder interests and adapt to evolving market conditions,” the whitepaper said.

When seeking the recipe for success, the green hydrogen sector likes to point to the success of the solar PV industry, although it tends to forget the length of time taken for solar to get to where it is today.

“Lessons from the PV solar industry provide insights into actively managing bankability,” the whitepaper said. “During the 2007–08 financial crisis, credit markets tightened, yet PV projects with strong financial models, risk mitigation measures, and regulatory support continued to secure funding, proving bankability as a practical financing tool.”

However, while hydrogen and PV solar projects both rely on renewable energy, their risk profiles and bankability considerations differ significantly. “Unlike PV solar, where quality assurance is relatively straightforward, green hydrogen production involves complex electrolysis systems that require rigorous assessments for performance, safety and integration reliability,” the whitepaper said.

Seal of approval

Dekra and Hydrogen Europe reckon one way to boost investor confidence would be to introduce a “bankability seal”. This would provide a “standardised certification framework that aligns project risks, financial viability and regulatory compliance.” The seal would be governed by a regulatory body or industry consortium

“By defining clear investment benchmarks, the Bankability Seal would enhance investor confidence, streamline financing, and lower risk perception, making it easier for developers to secure funding,” said Dekra and Hydrogen Europe.

They may be right. Bankability for green hydrogen is a complex business in need of greater visibility. However, standardisation is hard to achieve in a sector full of bespoke projects. Of course, the key criteria for green hydrogen bankability are easy to spot - sharply lower production costs and a much larger pool of willing offtakers.

---

Author: Stuart Penson