The financing gap
To date, financing green hydrogen projects proves to be a challenge. There is a strong call from stakeholders to increase government funding and subsidies to close financing gaps and help kickstart the green hydrogen market. Green hydrogen is considered a crucial element in the energy transition. While hydrogen technologies are promising, the demand for green hydrogen remains unpredictable. This is mainly due to the high costs compared to other less green energy sources. Green hydrogen is simply unable to compete with lower prices offered by less sustainable alternatives currently. An example: rising electricity prices and high interest rates caused the production price of green hydrogen in the Netherlands to reach up to €13 per kilogram, compared to up to €3 for a kilogram of grey hydrogen.
The role of the Netherlands
The Dutch government organized a Finance Forum at the World Hydrogen Summit focused on practical actions to make hydrogen projects more financially attractive for investors. Banks can play an essential role by supporting the hydrogen sector and clearly express what is needed to make hydrogen projects bankable, i.e. banks confidence in the project’s potential to generate returns, manage risks and ultimately repay loans.
Governments can support the market to help kickstart it. To ensure and derisk the demand for green hydrogen, the Netherlands and Germany are therefore launching the H2Global Foundation. H2Global is designed to accelerate the clean hydrogen market with ‘contracts for difference’. This means that an intermediary enters contracts with sellers and buyers that often struggle to connect on price independently at an early stage of market development. The intermediary buys green hydrogen that is more expensive than their carbon-intensive grey hydrogen counterparts and sells the green hydrogen through an auction at a lower price to end consumers. The price difference is covered by public funding. This proven system supports demand build up and at the same time derisks the market, making it more attractive for private investors to step in. Dutch Minister Sophie Hermans explained at the Summit how the Netherlands gives direction in the hydrogen market by ensuring sufficient demand as a top priority.
The port of Rotterdam plays a central role in the Dutch ambition to lead the green hydrogen market. Europe simply does not have the capacity to produce enough green hydrogen to supply both the heavy industries and potentially broader society. Therefore, the infrastructure and capacity to import, store and transport the energy intense molecule will be important to realize the hydrogen economy and support the energy transition.
The hydrogen train has started its journey and is picking up speed. The big question is now who will be the true leaders in the green hydrogen economy and what will be the main hub for import, transportation and distribution? The Netherlands clearly expressed its ambition to be a frontrunner during the World Hydrogen Summit in Rotterdam this year, which was attended by more than 15.000 people, and continues to position itself as a promising candidate to become Europe’s most important player in the green hydrogen economy.
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