Hydrogen Economy

In today's rapidly evolving energy landscape, the hydrogen economy emerges as a pivotal player in the transition towards sustainable and clean energy solutions. As businesses and consumers alike seek more environmentally friendly alternatives, hydrogen presents a promising pathway towards decarbonization and reduced reliance on fossil fuels.

With its potential to serve as a versatile energy carrier and storage medium, hydrogen offers a wide array of applications across various sectors, from transportation; low/no emission solutions are needed in the transportation sector because electrification may not be the complete solution, in particular for marine, aviation, and heavy trucks, to industry; oil and chemical refining, heating and gas turbine power generation.

Embracing the hydrogen economy not only aligns with environmental objectives but also presents lucrative opportunities for businesses to innovate and lead in this attracting attention to your brand's participation in the hydrogen economy through strategic marketing initiatives can position your company as a forward-thinking gas oil industry leader committed to sustainability and driving positive change.

Green Hydrogen Future

Why is hydrogen considered apotential future energy source?

1. Net zero targets: Hydrogen combustion produces zero carbon emissions, aligning with global efforts to achieve net zero carbon goals.

2. Demand for decarbonization: Growing pressure from consumers and investors prompts companies to reduce greenhouse gas emissions, driving interest in hydrogen as a clean energy alternative.

3. Filling gaps in decarbonization: Unlike electrification, which faces challenges in sectors like transportation, agriculture, and industry, hydrogen offers a viable solution for reducing emissions in these areas.

4. Complementary energy storage: Hydrogen serves as a valuable energy store, addressing intermittency issues associated with renewable energy sources like wind and solar, despite advancements in storage technologies.

5. Cost-effective renewables: With renewable electricity costs increasingly competitive with fossil fuels, the production of zero-emission green hydrogen becomes more economically viable.

6. Alignment with industry transition: Oil and gas companies and utilities seek to transition to cleaner technologies, making hydrogen a natural fit for these players in their efforts to embrace sustainability.hydrogen is a natural fit for these players

Hydrogen Production Methods

4 pathways of producing clean hydrogen are:

• Green hydrogen; produced thru Electrolysis of water : more energy intensive but, when powered by renewable energy, creates no emissions

• Blue hydrogen, produced through steam-methane reforming, involves the combination of high-temperature steam with natural gas to extract hydrogen, achieving carbon capture efficiency of up to 95%. This process stands as the most prevalent existing method. When no carbon capture is employed, it is referred to as grey hydrogen

• Turquoise hydrogen; produced through Thermal pyrolysis decomposition of fossil fuel-methane or bio-methane

• Pink hydrogen: produced by Electrolysis of water and using nuclear power

There are two primary types of electrolyzer available on the market: alkaline and proton-exchange membrane (PEM). Additionally, other technologies are currently under development. While alkaline electrolyzer are more established and cost effective, PEM electrolyzer offer several advantages, including being perceived as the safer option and providing a more rapid response. This rapid response capability can be particularly beneficial for meeting grid transmission needs.

Green Hydrogen Market

Differential pricing is becoming apparent across various types of hydrogen, with greener variants commanding premium prices. For projects focused on producing green hydrogen, it becomes imperative to clearly define the criteria necessary to qualify for this designation within off-take contracts and target markets.

However, this task is complicated by the absence of a universal international standard, compounded by ongoing policy discussions surrounding renewable energy requirements, the global hydrogen market will likely require significant additional government support to that already announced in order to develop meaningfully.

Consequently, developers of green hydrogen must ascertain the standards that their projects are intended to meet and consider adjustments to bolster their environmental credentials. Attracting attention to your brand's involvement in the hydrogen economy through strategic marketing initiatives can position your company as a forward-thinking industry leader committed to sustainability and driving positive change.

Furthermore, addressing financing requirements by advocating for a supportive and transparent regulatory framework, along with incentives such as government subsidies and tax credits, will be essential to bolster the hydrogen economy, particularly in mitigating risks associated with electrolyzer technology scaling including cost, performance and reliability which requires appropriate risk allocation sharing with the financial institutions.

Government Contribution on Green Hydrogen

Governments can provide support and subsidies through various means:

• Government-funded Research & Development initiatives aimed at enhancing efficiencies and demonstrating reliability.

• Public-Private-Partnerships (PPPs) and other government interventions to mitigate investment risks. These initiatives are crucial for fostering the development of essential infrastructure necessary for the viability of Fuel Cell Electric Vehicles (FCEVs). Additionally, financial support mechanisms may encompass tax incentives, government guarantees, preferential long-term loans, equity-loan hybrids, or refinancing schemes targeted at early adopters.

• Public procurement strategies and fleet regulations. Governments can bolster hydrogen demand by procuring hydrogen-powered vehicles for public transportation, such as hydrogen buses or government fleets. They can also encourage the adoption of green or blue hydrogen for electricity generation or heating. Regulatory measures, such as offering preferred licenses for hydrogen-powered taxis, can further stimulate demand.

• Generally applicable climate change measures, such as carbon taxes or cap-and-trade systems, which can create a conducive environment for the development and adoption of green hydrogen technologies.

Green Hydrogen Financing Structure

Developing bankable hydrogen project will require innovation on development of new technology and financing structures, such as Project-on-project risk and bundling multiple elements within the management and control of a single project vehicle will offer significant advantages, for instance by bundling the renewable energy plant, electrolyzer, water processing facilities, ships, receiving terminals, downstream facilities into the same project. The project vehicle gains greater control over development and timing.

Moreover, consolidating multiple project elements under a lumpsum Engineering, Procurement, and Construction (EPC) contract simplifies risk allocation, which is viewed favorably by financial institutions. However, remaining project-on-project risks must undergo thorough finance due diligence and may require additional structural protections. These protections could include completion guarantees from financially robust developers, government support, or financially strong end users assuming risks under supply and/or off-take agreements.

Oil majors are already observed to be retraining marketing, shipping, and other specialists for the hydrogen sector, bringing with them an oil & gas mindset. By aligning with the costs associated with the growing proportion of renewables in the energy generation mix and engaging in social media campaigns targeting regulatory hurdles, your brand can successfully convey its commitment to forging a cleaner, greener future driven by hydrogen.

Green Hydrogen Investment Perspective

As investments continue to rise, diverse sources of debt will be essential for financing the substantial capital costs associated with green hydrogen projects. International financial institutions such as Export Credit Agencies (ECAs), Multilateral Development Banks (MLAs), and Development Finance Institutions (DFIs)), commercial banks, bond investors, and institutional investors are all potential providers of debt. Structures must be designed to accommodate the varying requirements of these stakeholders.

In the medium term, green financiers are expected to be enthusiastic supporters of hydrogen projects, especially those that align with their Environmental, Social, and Governance (ESG) criteria and contribute to the shift away from fossil fuels.

While investment options like the bond and private placement market may not be readily available for initial greenfield projects, they could offer significant liquidity for refinancing individual projects and, eventually, portfolios.

As with other emerging technologies and markets, such as renewables and LNG, we anticipate that initial investments in green hydrogen projects will primarily come from the balance sheets of major industry players, often in the form of joint ventures or through concessional loans.

The necessity for public intervention to bridge economic gaps and facilitate the feasibility of hydrogen projects is very crucial, project financing is expected to be phased, initially targeting projects that can effectively demonstrate robustness across key factors, particularly regarding off-take and market risks.

Additionally, projects with limited project-on-project risk, particularly those involving infrastructure such as transportation networks or the conversion of existing projects (e.g., from grey to blue hydrogen), may be prioritized for financing under PublicPrivate Partnership (PPP) structures.

Our Consultancy Service

Collaborate with Gas oil energy prosper e.K. to unlock the full potential of the hydrogen economy. Together, we can forge a path towards a more sustainable future by bridging the clean energy gap and advancing towards a net-zero emission world beyond electrification and carbon capture for benefiting both businesses and the planet.

Join us in our endeavor to transform non-fossil, abundant natural resources such as water, sunlight, wind, and organic waste into opportunities, while embracing a more sustainable approach to resource management.