Global hydrogen project announcements fall as policy delays, supply chains bite

Global hydrogen project announcements fell in 2022, as policy delays in Europe and supply chain issues hindered new developments after an initial boom in plans over the previous couple of years, panelists at the S&P Global Commodity Insights London Energy Forum said Feb. 27.

S&P Global hydrogen analyst Matthew Hodgkinson said there had been around 23 million mt/year of global new production capacity announcements in 2022, some 12 million mt/year lower than 2021.

Total projects at the announcement phase totaled 67 million mt/year of capacity by the end of 2022, Hodgkinson said.

However, the global picture was more nuanced, with a steeper decline in blue hydrogen project announcements in Europe, utilizing steam methane reforming coupled with carbon capture and storage.

Policy incentives in the EU have focused on renewable hydrogen, produced via renewables-powered electrolysis.

The European decline in blue hydrogen project announcements amounted to around 60%-65% in 2022, compared to a 20%-25% fall in green hydrogen project announcements.

The disparity also reflects a wave of blue hydrogen projects published the year before, particularly in the UK, which has taken a twin-track policy approach, supporting blue as well as green hydrogen.

However, S&P Global Head of Energy Transition Pricing Alan Hayes said the market had not hit a wall, but was negotiating the first significant bumps in the nascent market development.

LNG comparison

Senior Director for Global Hydrogen and Renewable Gases Consulting at S&P Global Simon Wood said three factors were driving project development: finding demand and the certainty of demand, power prices and regulation.

"There is a lot of uncertainty about the cost of the power and the availability of the renewables," Wood said.

Observing the analogue with the LNG industry, which many in the hydrogen market see as a model for how the hydrogen economy could develop, Wood noted a lot of investor and lender confidence in LNG "that just is not there in the hydrogen market."

S&P Global head of global hydrogen pricing Mario Perez said high prompt prices for renewable power purchase agreements had disincentivized project developers from locking in prices.

This, however, was being offset to some extent by an exemption from EU rules requiring electrolyzers to be powered by additional renewables capacity. Green hydrogen projects coming online before 2028 are exempt from the rule until 2038.

Carbon intensity

The low-carbon hydrogen market will increasingly be looking at carbon intensity, the panelists said.

"Carbon intensity is going to be a watchword across commodities for the next 10 years or so," Wood said, reflecting a need to capture the full emissions profile of incumbent fuels.

Hayes noted that such a methodology for measuring carbon intensity was already used in crude oil markets, adding that the EU Carbon Border Adjustment Mechanism would kick-start the focus on carbon intensity across a range of markets.

"CBAM effectively instigates and starts that process, not only in Europe" he said. "It effectively pushes that requirement out to the rest of the world."

"It could become a requirement of international trade," he added.

Platts, part of S&P Global, is investigating assessments for low-carbon hydrogen and derivative ammonia on an energy substitution basis, enabling consumers to compare prices against their existing energy and feedstock costs, to address this need, Perez said.

Europe has among the highest low-carbon production costs globally, the Platts Hydrogen Price Wall shows.