IUnlockingthehydrogeneconomy—stimulatinginvestmentacrossthehydrogenvaluechainInvestorperspectivesonrisks,challengesandtheroleofthepublicsectorUnlockingthehydrogeneconomy—stimulatinginvestmentacrossthehydrogenvaluechainInvestorperspectivesonrisks,challengesandtheroleofthepublicsectorUnlockingthehydrogeneconomy—stimulatinginvestmentacrossthehydrogenvaluechainInvestorperspectivesonrisks,challengesandtheroleofthepublicsector©EuropeanInvestmentBank,2022.AllrightsreservedAllquestionsonrightsandlicensingshouldbeaddressedtopublications@eib.org.EuropeanInvestmentBank98-100,boulevardKonradAdenauerL-2950Luxembourg+3524379-1info@eib.orgwww.eib.orgtwitter.com/eibfacebook.com/europeaninvestmentbankyoutube.com/eibtheeubankPreparedfor:EuropeanCommission(DGRTD)By:InnovationFinanceAdvisory,EuropeanInvestmentBankAuthors:F.Gilles,P.BrzezickaAcknowledgements—EuropeanCommission:JochenBrodersen,DermotButtle,MartynChamberlain,FabioDomanico,MartinGieb,KatarzynaGryc,GwennaelJoliff-Botrel,RuudKempener,EirikLonning,FrancescoMatteucci,PatriceMillet,AndersMorris,AntonioPantaleo,EdwardRicketts,GabrieleSalvo,WolfgangSchneider,LorenzoTamaSupervisor:S.DustdarAnalyticalsupportprovidedby:McKinsey&Company,GlobalCorporateVenturingThisreportwasproducedwithfundingfromtheEuropeanUnion,undertheInnovFinmandate.Contact:innovfinadvisory@eib.orgDisclaimerThisReportshouldnotbereferredtoasrepresentingtheviewsoftheEuropeanInvestmentBank(EIB),oftheInnovationFinanceAdvisory(IFA),oftheEuropeanCommission(EC),orofotherEuropeanUnion(EU)institutionsandbodies.Anyviewsexpressedherein,includinginterpretation(s)ofregulations,reflectthecurrentviewsoftheauthor(s),whichdonotnecessarilycorrespondtotheviewsoftheEIB,oftheIFA,oftheEC,orofotherEUinstitutionsandbodies.Viewsexpressedhereinmaydifferfromviewssetoutinotherdocuments,includingsimilarresearchpaperspublishedbytheEIB,theIFA,theEC,orotherEUinstitutionsandbodies.ContentsofthisReport,includingviewsexpressed,arecurrentatthedateofpublicationsetoutabove,andmaychangewithoutnotice.Norepresentationorwarranty,expressorimplied,isorwillbemade,andnoliabilityorresponsibilityisorwillbeacceptedbytheEIB,theIFA,theEC,orotherEUinstitutionsandbodiesinrespectoftheaccuracyorcompletenessoftheinformationcontainedherein,andanysuchliabilityisexpresslydisclaimed.NothinginthisReportconstitutesinvestment,legal,ortaxadvice,norshallberelieduponassuchadvice.SpecificprofessionaladviceshouldalwaysbesoughtseparatelybeforetakinganyactionbasedonthisReport.Reproduction,publication,andreprintaresubjecttotheauthors’priorwrittenauthorisation.Photocredits:EIB,Gettyimages,Shutterstock.AllrightsreservedAuthorisationtoreproduceorusethesephotosmustberequesteddirectlyfromthecopyrightholder.ForfurtherinformationontheEIB’sactivities,pleaseconsultourwebsite,www.eib.org.Youcanalsocontactinfo@eib.org.Getoure-newsletteratwww.eib.org/sign-upPublishedbytheEuropeanInvestmentBank.PrintedonFSC®Paper.TheEIBusespapercertifiedbytheForestStewardshipCouncil(FSC).Becauseit’smadebypeoplewholiketrees.FSCpromotesenvironmentallysound,sociallybeneficial,andeconomicallyviablemanagementoftheworld’sforests.Weallknowreadingisgoodforyou.It’sgoodfortheplanet,too—aslongasyoureadontherightpaper.eBook:QH-08-21-276-EN-EISBN978-92-861-5073-9doi:10.2867/480240pdf:QH-08-21-276-EN-NISBN978-92-861-5074-6doi:10.2867/8476771ContentsCONTENTSForeword2EuropeanCommissionendorsement3Introduction5Hydrogen—stateofplay7Keyinterviewfindings11Challengingeconomicconditions12Needforsupportiveregulation14Importanceofinnovationfinance15Challengingprojectfinanceconditions16Importanceofvaluechainandecosystem19Recommendations23Improvingmarketandregulatoryconditions24Improvingaccess-to-financeconditionsforhydrogenpromoters26Supportingvaluechainintegrationandecosystemdevelopmentwithin-kindsupport31Conclusionandnextsteps342Unlockingthehydrogeneconomy—stimulatinginvestmentacrossthehydrogenvaluechainFOREWORDGivenbothrapidandincreasinglydamagingclimatechange,theracetodeveloptheclean,carbon-neutralenergycarrierofthe21stcenturyison.Hydrogenisamongthetechnologieswiththegreatestpotentialtoreduceglobalcarbonemissions,especiallyinhard-to-abateindustrialsectors,andtherebyaddressourdamagingimpactontheplanet’sclimateandultimatelyourlivingconditions.Todayhydrogenispredominantlyproducedfromfossilfuels,yetthereisagreatopportunitytoswitchtolower-carbonmethodsbasedon“greenhydrogen”producedwithrenewableenergy.Theworldhaswokenuptohydrogen’spotentialtomakeasubstantialimpacttowardsthe“netzero”objective.In2020theEuropeanUnionlauncheditsEuropeanHydrogenStrategyandsimilarplanswereannouncedatnationallevel—outliningambitiousgoalstoestablishtheinfrastructurenecessaryforthewidespreadadoptionofhydrogenasacleanenergycarrier.ManyprojectsarenowinvariousphasesofdevelopmentacrossEurope.AstheEUclimatebank,weapplaudthesedevelopmentsandstandreadytoact.However,likemanytechnologiesatasimilarlyearlystageofdevelopment,deployinglow-carbonhydrogenatscalebringssignificantchallenges—economic,industrialandoperational.Themagnitudeofinvestmentthatwillberequiredoverthecomingdecadesisexpectedtorunintothehundredsofbillionsofeuros—whichwillrequirenotonlypublicsupport,butthefullforceofthefinancialsectorandtherelevantecosystemofindustrialplayers.IamextremelypleasedthattheEIB’sAdvisoryServiceshaveactivelyengagedwithkeyindustrialandfinancialplayersacrossEuropetoassesstheirappetiteforinvestinginhydrogen-basedtechnologiesandtheconstraintstheyface.Armedwiththisunderstanding,wehopetoidentifywaystobringdownthesebarriersandprovidesolutions.Thisreportoutlinesaviewofwhatitwilltaketorallyinvestorsinsupportofhydrogen-basedtechnologiesandtheirenablinginfrastructure.Supportschemessuchasmarket-makingmechanismsthatwouldprovideclaritytobothsuppliersandusersofhydrogenhavegreatpotentialandIamgreatlyencouragedbytheblueprintforsuchschemesthathavealreadybeenlaunched.Solutionswillalsoincludefinancialinstruments,suchascreditenhancementorrisk-sharingschemes,toimproveaccesstolow-costfinancing.In-kindadvisorysupportwillalsoplayakeyroleinpreparinglarge-scaledemonstrationprojects,forexamplekeyImportantProjectsofCommonEuropeanInterest(IPCEI)or“lighthouse”projects.Iamconfidentthatacombinationofthesemeasurescanmeaningfullyacceleratethetransitiontolow-carbonhydrogenatscale.ItishardtoimagineasuccessfultransitiontotheimpendingIndustrialRevolution4.0withoutaddressingthecarbonemissionsproblemofearlierphasesinoureconomicdevelopment.Lastly,IwouldliketothankourcolleaguesattheEuropeanCommissionforworkingwithusonthisinitiativeandfortheirsponsorship.WeattheEIBstandreadytosupporthydrogen-basedprojectswithadviceandmoneyinpursuitoftheobjectivesoftheEuropeanGreenDeal.Jean-ChristopheLaloux,DirectorGeneral,HeadofOperations,EuropeanInvestmentBank3EuropeancommissionendorsementEUROPEANCOMMISSIONENDORSEMENTHydrogenhasthepotentialtostoreanddistributerenewableenergyanddecarbonisehard-to-abatesectorsinindustryandtransport.Asaresult,itisakeyelementtohelpachievetheEuropeanGreenDealandacleanenergytransitioninEurope.TheEuropeanUnionisdeterminedtobeafrontrunnerindevelopingagreenhydrogeneconomy,inlinewithourclimateneutralityandzeropollutionlong-termgoals.Tothatend,wearecommittedtousingthefullrangeofEUfundingandregulatoryinstruments.BuildingonthehydrogenandenergysystemintegrationstrategieslaunchedundertheEuropeanGreenDealin2020,alongwiththecreationoftheEuropeanCleanHydrogenAllianceandlaunchofanewCleanHydrogenJointUndertaking,theEuropeanUnioniscreatingarobustframeworkaimedatspurringinnovationandinvestmentsalongthewholehydrogenvaluechain.HydrogenisanimportantcomponentoftheEuropeanUnion’sresearchandinnovationagenda,withEUframeworkprogrammeshavingsupportedresearchandinnovationactivitiesonhydrogenforoveradecade,inparticularthoughtheFuelCellsandHydrogenJointUndertaking.Toenablethewidespreaduseofcleanhydrogen,publicfundingandprivateinvestmentinresearchandinnovationneedfurthersupporttoimproveandtesthydrogentechnologies,beforetheycanreachmassproductionandbesuccessfullyintegratedintoindustrialvaluechains.Agoodexampleisthegreenhydrogenpilotinitiativelaunchedin2021undertheEuropeanResearchArea,whichaimstodevelopandimplementastrategicresearchandinnovationagendaforgreenhydrogenbetweentheEuropeanCommissionandEUMemberStates.TogalvaniseinvestmentsincleanhydrogeninEurope,itisvitaltomaphydrogen’sinvestmentlandscapeintheregionandidentifyregulatorybarriersthatinvestorsmayperceiveasconstrainingtheirfinancialdecisions.Thisiswhywehavecommissionedthestudyunderlyingthisimportantreport.Byconsultingkeycompaniesandinvestorsoperatingacrossthehydrogenvaluechain(fromproductionandtransporttostorageandkeyapplications)andassetclasses(venturecapital,privateequity,commercialbanks),thereportexaminesthecurrentstateofinvestmentactivityonhydrogenintheEuropeanUnion.Importantly,thereportshedslightonrisksandchallengesperceivedbyinvestors,suchasuncertaintiesrelatedtothetechnicalperformanceofhydrogen-basedequipment.Italsoidentifiespotentialleversthatcouldbeactivatedfromapublicfinancingandregulatorystandpoint,inparticularatEUlevel,tomitigatesuchrisksandfurtherdriveinvestmentsinhydrogen.ThisreportcarriedoutbytheEuropeanInvestmentBankinpartnershipwiththeEuropeanCommissionrepresentsanimportantsteptotakeforwardtheEuropeanUnion’shydrogenagenda.ItwillbetterequippolicymakersintheireffortstostrengthenandexpandasectorofsuchstrategicimportanceforEurope’sdecarbonisation,technologicalsovereigntyandenergyautonomyintheyearstocome.IwouldliketothanktheBankforthisjointworkandlookforwardtofuturecollaborationopportunities.Jean-EricPaquet,Director-General,EuropeanCommission,Directorate-GeneralforResearchandInnovation4Unlockingthehydrogeneconomy—stimulatinginvestmentacrossthehydrogenvaluechain5IntroductionINTRODUCTIONThisreporthighlightsthekeytakeawaysfromaninvestorconsultationwith46marketparticipantsconductedbytheEuropeanInvestmentBank’sAdvisoryServicesattherequestoftheEuropeanCommission,undertheInnovFinAdvisoryinitiative.Thisstudyisbasedonaconsultationwithfinancialinvestors,industrialcompaniesandexpertsactiveacrossthehydrogensector.Itaimstoprovideinsightandunderstandingregardingthekeyprioritiesdrivingthemarket.TheresultsserveasabasistosupporttheEuropeanCommission’sdevelopmentofaninvestmentagendaforhydrogeninthecontextoftheEuropeanGreenDealandHorizonEurope.Followingamarketmappingexercise,arepresentativesampleof46playerswereconsultedthroughsemi-structuredinterviewsaimedatunderstandingtheirinvestmentstrategiesforhydrogen,theirperceivedchallengesandconstraints,andtheirviewsonhowtounlockthedevelopmentofhydrogenasamass-scalesolutiontoreducinggreenhousegasemissions.Adigitalquestionnairewassharedwithrespondentstofacilitatethequantitativeevaluationofresponses.Thesampleincluded20industrialcompaniesacrossthehydrogenvaluechainand26financialinvestorsacrossmultipleassetclassesspanningearly-stageinnovationfinancingandlater-stageinfrastructurefinancing.Figure1providesanoverviewofthesamplecomposition.Thisreporttranslatesthekeyfeedbackcollectedthroughthisprocess,articulatedinkeyfindingsandrecommendations.Forward-lookingviewsandrecommendationsexpressedbyparticipantsaresupplemented,whereappropriate,withtheperspectiveoftheEuropeanInvestmentBank’sAdvisoryServices.Figure1a:SampleDescription–TypeandGeographyofInvestorsInterviewedBreakdownofparticipantsbyspecialisation1Transport,storageanddistribution.57%43%20strategicinvestors26financialinvestorsOfftake/usePublicinstitutionCapitalwealthfundSovereignwealthfundBankPrivateequity/infrastructureCorporateventurecapitalVenturecapitalMidstream1Renewableenergy/hydrogendevelopmentTechandequipment6Unlockingthehydrogeneconomy—stimulatinginvestmentacrossthehydrogenvaluechainFigure1b:SampleDescription–TypeandGeographyofInvestorsInterviewedBreakdownofcompaniesacrossgeographiesWesternEurope(37%)NorthernEurope(17%);SouthernEurope(17%)EasternEurope(3%)EuropeanUnion(6%)+International:NorthAmericaandAsia(20%)+7Hydrogen—stateofplayHYDROGEN—STATEOFPLAYEuropeaninvestorsexpecthydrogentoplayakeyroleindecarbonisingEUeconomies,especiallyinenergy-intensivesectorswheredecarbonisationhasbeenparticularlychallenging.Hydrogen’suniquepropertiescanenablesustainableenergyinnovation.Hydrogenisthemostabundantchemicalsubstanceintheuniverse.Whenisolatedinitspureform(dihydrogen,orH2),ithasanumberofphysicalpropertiesthatmakeitusefulincontextswhereenergyneedstobeused,storedortransferred.HydrogencombustiondoesnotproduceCO2oranyothergreenhousegas.Hydrogenisalreadyinuseinsectorssuchaspetrochemicalrefiningandfertiliserproduction.Inthefuture,hydrogencouldalsoplayausefulroleindecarbonisingenergy-intensiveindustrialsectorssuchassteelproductionandactasabufferforintermittentrenewablepowersources.Hydrogencanalsoprovideenergyforfuelcellelectricvehiclesanddecarboniseheatingapplications.ProductionMethodsToday,thevastmajorityofhydrogenisproducedviamethodsthatreleasecarbonemissions(“grey”hydrogen)fromcoalornaturalgas-basedprocesses—asFigure2illustrates.Importantly,alternativemethodsexisttoproducethemoleculewithlimitedornear-zeroemissions.Forexample,theprocessofelectrolysiscanseparatehydrogenfromwaterand,ifbasedonrenewableelectricity,canproducerenewablehydrogenwithoutemittingcarbon(i.e.“green”or“renewable”hydrogen).Todate,renewablehydrogenproductionremainsexpensiveinmostcasesanddependentontheavailabilityandcostofrenewableelectricity.Figure2:Overviewofglobalhydrogenproductionsourcesin2020;source:IEA(InternationalEnergyAgency)190MTH2Naturalgasw/ocarboncapture,utilisationandstorage59%Byproduct21%Coal19%Oil0.6%Naturalgasw/carboncapture,utilisationandstorage0.7%Source:IEA.Allrightsreserved1https://iea.blob.core.windows.net/assets/e57fd1ee-aac7-494d-a351-f2a4024909b4/GlobalHydrogenReview2021.pdf8Unlockingthehydrogeneconomy—stimulatinginvestmentacrossthehydrogenvaluechainAnothermethodoflow-carbonhydrogenproduction(i.e.“blue”hydrogen)utilisesexistingfossil-basedproductionprocesses,whilecapturingmostoftheemissions.Nevertheless,thereareconcernsaboutthesustainabilityofthistypeofhydrogen,sinceinvestinginthistechnologycould“lockin”carbon-intensiveinfrastructureandcrowdouttherapidscale-upofgreenhydrogen2.TerminologyFollowingtheterminologyusedbythemarketrepresentativesconsultedthroughoutthisreport,theterm“low-carbonhydrogen”encompassesgreenhydrogen(alsoreferredtoas“renewable”or“clean”)andlow-carbonbluehydrogen(i.e.fossil-basedhydrogenwithcarboncapture).GreenDealObjectivesGivenitsphysicalpropertiesasanenergycarrier,hydrogenisexpectedtoplayakeyrole,alongsiderenewables,inEurope’senergytransition.Forinstance,hydrogenisemergingasasolutiontodecarbonisecertainhard-to-abateindustrialprocessessuchastheproductionofchemicalsorsteel,andalsolong-distanceorheavytransportapplicationswhererangeandrefuellingtimesmatter.Hydrogencouldalsoplayaroleinthepowersectorandsupportcertainheatingapplications.Thekeyusesofhydrogenaresummarisedinthefigurebelow.Figure3:Overviewofhydrogenapplications;source:HydrogenCouncilSource:HydrogenCouncilInordertorealisethispotentialandcontributetotheobjectivesoftheEuropeanGreenDealforcarbonneutralityby2050,substantialinvestmentwillberequiredtoscaleuphydrogeninfrastructureandpromotefurtherinnovation.Thisshouldhelptolowercostsandfacilitatetheadoptionofhydrogenacrosstheenergysystem.2See:https://climateanalytics.org/publications/2021/why-gas-is-the-new-coal/9Hydrogen—stateofplayToachievetheEuropeanUnion’shydrogenstrategy,€24-42billionofinvestmentwillbeneededby2030inEuropeanelectrolysercapacityalone.EUHydrogenStrategyTargetsTheEUhydrogenstrategyrecognisestheimportanceofdevelopingacleanhydrogeneconomyandaimstoinstallsixgigawattsofelectrolysercapacityby2024,scalinguptoatotalof40gigawattsby2030.Toachievethesegoals,Europewillneedtoinvestacumulativeamountof€24-42billioninelectrolysersaloneby2030.Togetherwiththeadditionalinvestmentthatwillberequiredinrenewableenergycapacity,transportationandstorageinfrastructureandhydrogenapplications,thetotalfundingrequiredby2030isintherangeofhundredsofbillionsofeuros.Futureregulationcouldalsofurtherstimulatedemandandincreasefundingneedsinthehydrogensector.Bymid-century,thecumulativeinvestmentneededinhydrogenproductioncapacityintheEuropeanUnioncouldbeashighas€470billion.Thefundingcommittedtohydrogenprojectstoday,however,remainsrelativelylowduetoanumberofhurdlesanduncertainties,intermsofeconomiccompetitiveness,regulatoryclarity,financingavailabilityandlackofsupplychainmaturityamongothers.ProjectDevelopmentandInvestmentStateofPlayParticulareffortsatEUleveltowardsthedevelopmentofhydrogenprojectshavebeenongoingsincethelaunchoftheEUhydrogenstrategy.TheEuropeanCleanHydrogenAlliancewaslaunchedtomobiliseplayersacrossthehydrogenvaluechainforthedevelopmentofapipelineofprojects.InNovember2021,alistof750projectswasreleasedasaresultoftheworkofAlliancemembers,comprisingproduction,midstreamandapplication-levelprojectsacrossEurope.Inparallel,aprocesstoidentifyImportantProjectsofCommonEuropeanInterest(IPCEI)waslaunchedinDecember2020toidentifymajorprojectsandprovideabasisforpublicsupportthatgoesbeyondnormalstateaidlimitations.Workisstillongoingtoselectprojectsandallocatefunds.Someoftheprojectsemergingfromtheseinitiativesarelarge-scale,cross-valuechainprojectsinvolvingseveralregionsorcountries.Suchambitiousdevelopmentsareimportantbecausetheypresentanopportunitytocreatemoreviableend-to-endhydrogenecosystems.Someofthesehavebeenlabelled“lighthouse”projects.Whilethechallengesdescribedinthisreportapplyjustaswelltotheselargeandcomplexdevelopments,attentiontotheirsuccessiscriticalforthemainstreamdevelopmentofhydrogenatscale.Overall,projectpromotershaveannouncedmorethan€130billionofinvestmentinhydrogenintheEuropeanUniontodate.However,outofthe23gigawattsofelectrolysercapacitytobeinstalledby2030,only350megawatts(lessthan2%)arelinkedtoprojectsthatarecurrentlyunderwayorforwhichafinalinvestmentdecisionhasbeenmade.Theenvironmentforfinancinginvestmentinhydrogenremainschallengingduetoanumberofissues.GiventhesechallengesandthemagnitudeoftheinvestmentrequiredtodevelopahydrogeneconomyintheEuropeanUnion,itiscrucialtounderstandtheperspectiveofinvestorsandthefactorsthatwillhelpallocatemarketfinancingtohydrogenprojectsandincreasetheimpactofpublicresourcesdedicatedtohydrogen’sdevelopment.Thefollowingchaptersdetailthemarket’sfeedbackontheseissuesandviewsonpotentialsolutions.11KeyinterviewfindingsKEYINTERVIEWFINDINGSInvestorinterestinhydrogenhasrisensubstantiallyinrecentyearsbutinvestmentactivityinrenewableandlow-carbonhydrogenprojectshasbeenconstrainedbyacombinationofrisksandchallenges.Ifunaddressed,thesecouldhindertheinvestmentandprojectdevelopmentneededtoachievethetargetsoftheEuropeanGreenDealandtheEuropeanUnion’shydrogenstrategy.All46investorsconsultedinthisstudyacknowledgedthepotentialofhydrogenanditsimportanceasaninvestmentopportunity.Themajorityofinvestorsconsultedhavealreadyannouncedspecificinternalinitiativesordevelopedstrategiestoapproachthisopportunity.Atthesametime,investorfeedbackalsoclearlyunderlinesthatsignificantrisksandchallengesexistandneedtobeaddressedinordertomakeinvestmentpossible.Basedontheconsultation,thisreportfocusesonthekeyforcesthatareatworkacrosssixkeyfindings:Figure4:OverviewoffindingsacrosskeydimensionsMarketandregulatoryconditionsFinding1(economics)Thecurrenteconomicdisadvantageofcleanhydrogenanditsapplicationscomparedtootheralternativeslimitsdemand.Finding2(regulation)Thelackofregulatoryclarityonkeyhydrogendevelopmentaspectscreatesrisksforinvestors.Acces-to-financeconditionsFinding3(innovation)Innovationinhydrogenremainscrucial,butaccesstofinanceforearly-stageinnovatorsisconstrained,inparticularforthedemonstrationofnewtechnologies.Finding4(projectfinance)Themobilisationoflarge-scaleproject-basedfinancingforthedeploymentofhydrogeninfrastructureisconstrained.Valuechainintegration&ecosystemdevelopmentFinding5(valuechain)Hydrogenprojectsareinterdependentandlinkedacrossthevaluechain.Avaluechainapproach,includingtheplanningofcoherentandcoordinatedprojectsaroundoptimallocations,isakeyfactorforprojectdevelopment.Finding6(ecosystem)Investorsperceivethatthereisalackofanintegratedandmaturehydrogenfinancingecosystem.Projectpromotersrelyonpublicsupportbuthaveinsufficientknowledgeofpossiblefundingoptions.Thefollowingsectionsprovidedetailsoneachofthesixfindings.12Unlockingthehydrogeneconomy—stimulatinginvestmentacrossthehydrogenvaluechainCHALLENGINGECONOMICCONDITIONSFinding1Thecurrenteconomicdisadvantageoflow-carbonhydrogenanditsapplicationscomparedtootheralternativeslimitslow-carbonhydrogendemand.Themainbarriertothehydrogenmarket’sdevelopmentisthefactthatlow-carbonhydrogenanditsapplicationsarecurrentlyrelativelyexpensivecomparedtoexistingalternatives.Withoutcompensatingmechanisms,thecurrentcostgap(or“greenpremium”)oflow-carbonhydrogenlimitsinvestors’abilityandwillingnesstoinvestinprojects.OptimisingresourcesacrossthevaluechaintobridgethecostgapTheeconomicsofhydrogenwereequallycitedbythemajorityofinvestors,includingearly-stageplayersconsideringinvestmentinhydrogentechnologies,asthemainbarriertoinvestment.Thiseconomicdisadvantagecanbeattributedtothelackofeconomiesofscale;higherproduction,transport,storageandapplicationcosts;andtheinsufficientmonetisationofavoidedcarbonemissions.Thecurrentcostgapfortheproduction,transportanduseoflow-carbonhydrogenisthustheprimaryconstrainttomakinghydrogenbusinessmodelswork.Indeed,investorfeedbackindicatesthattheeconomicgap,whichreducesreturnsoninvestment,ispresentacrosspracticallyallareasofthelow-carbonhydrogenvaluechain:•Theproductionofrenewableandlow-carbonhydrogenremainsmoreexpensivethanexistinggreyhydrogenproductionapproaches.Inthecaseofrenewablehydrogen,thiscostdifferentialismainlyattributabletothecostofcleanelectricityandthecostofelectrolyserequipment.•Limitedaccesstolow-costmeansfortransportingandstoringhydrogenthroughpipelines,liquefaction,orhydrogencarriersaddssubstantiallytothefinalcostofhydrogen.•Acrossapplications,thelackofscaleandmaturityoftechnologiesalsokeepscostshigh.Forexample,theuseofhydrogeninsteelmakingisfoundtoaddsignificantcoststotheprocessandthecostoffuelcellvehiclesalsoremainshigherthanexistingalternatives.Therelativelyhighcostsassociatedwithhydrogenarepromptingsomeinvestorstoseekpartnershipsfortheirfirstprojects.Thehighcostsalsoencouragepromoterstolocateprojectsclosetoabundant,low-costsourcesofrenewableenergyandinproximitytocustomersinordertoloweroravoidtransportcosts.Thesemeasures,however,areoftenstillinsufficienttoovercometheeconomicgapforinitialdeploymentinitiatives.InvestorsdemandasupportiveecosystemTheviewoftheinvestorsconsultedisthatarobustsupportecosystemisindispensabletobridgethehydrogencostgap.Thisisseenascriticaltosupportingtheadoptionofhydrogentechnologies,especiallyintheearlystagesofgrowth.Investorscalledforclearerpublicsupportmechanismsthatcreatelong-termvisibilityandpositivereturns,enablingthemtoapproveprojectsbasedontheirfinancialandeconomicmerits.13KeyinterviewfindingsWhilebridgingtheeconomicgapisakeyconsideration,manyplayersalsopointedtotheneedformeasuresthatleveltheplayingfieldinawaythatisconsistentwiththeEuropeanUnion’saimofreducingcarbonemissions,forinstancethroughsomeformofcarbonlevythatwouldhelpputavalueonthepositiveexternalitiesoflower-carbonhydrogeninitiatives.Investorsalsocommentedontheincompleteandfragmentedofferingofpublicsupportmechanismsforhydrogenprojects.Schemesdiffergreatlybetweensectorsandregions,orareinsomecasesnon-existent.Thiscallsformoreintegrationofpublicsupport,includingfromavaluechainmanagementperspective.Lastly,investorspointedoutthelackoffinancialsupportforoperatingcostsamongavailableinstruments.Inthecaseofhydrogen,alackoffinancialsupportforoperatingcostscanbeparticularlychallengingbecauseproductionofthemoleculeisincertaincasesreliantonoperatingexpenditure(forinstance,purchasinggridelectricitytopowerelectrolysers)versuscapitalexpenditure(forinstance,buildingdedicatedrenewableinfrastructureforthesamepurpose).ScalingmustbeacceleratedtodecreasecostsWhiletheeconomicgapisasignificantshort-termobstacle,investorsrecognisethepotentialimpactforeconomiesofscaletodrivedowncostsovertime,aswellastheneedtocollaboratecloselywithotherplayersacrossthevaluechaininthedevelopmentoflarge-scaleprojects.Thistypeofmulti-partycollaborationisprimarilyaimedatensuringmoreefficientinfrastructuredeploymentthanwouldotherwisebeachievable.Furthermore,significantcostreductionscanonlybeachievedthroughindustrialisationandthroughtheexpansionofproductioncapacity.However,investorsagreedthatthecurrentlevelsofindustrialisationandproductioncapacitiesareinsufficienttoachievethedeploymenttargetssetoutintheEUhydrogenstrategy.Thereisaneedfordemand-creationmechanismsCompoundingthechallenge,hydrogenbusinessmodelsoftenneedtobeintegratedintocomplexvaluechains.Asaresult,investorsfearthatprojectsmaynotbeviableintheneartermwithoutbroadadoptionanddemandforhydrogenacrossthefullvaluechain.Forinvestors,thiscallsformeasurestoboostdemandforhydrogenandmarketuptakeofproductsproducedwithhydrogenversusmorecarbon-intensiveproductionmethods.HighvaluationscreatebarrierstoentryBeyondprojecteconomics,highcapitalmarketvaluationsinthehydrogenspaceindicatestrongmarketdemandforinnovation.Highvaluationshavebeenmentionedasabarriertoentryforsmallerventurecapitalinvestors,whofinditdifficulttocomeupwithsuchfunding.Investorsalsoexpressedconcernsaboutthepotentialformarketvaluationcorrectionsinthesector,whichcoulddisruptthecurrentmomentumanddiscouragefurtherinvestmentactivity.ERR能研微讯微信公众号：Energy-report欢迎申请加入ERR能研微讯开发的能源研究微信群，请提供单位姓名（或学校姓名），申请添加智库掌门人（下面二维码）微信，智库掌门人会进行进群审核，已在能源研究群的人员请勿申请；群组禁止不通过智库掌门人拉人进群。ERR能研微讯聚焦世界能源行业热点资讯，发布最新能源研究报告，提供能源行业咨询。本订阅号原创内容包含能源行业最新动态、趋势、深度调查、科技发现等内容，同时为读者带来国内外高端能源报告主要内容的提炼、摘要、翻译、编辑和综述，内容版权遵循CreativeCommons协议。知识星球提供能源行业最新资讯、政策、前沿分析、报告（日均更新15条+，十年plus能源行业分析师主理）提供能源投资研究报告（日均更新8~12篇，覆盖数十家券商研究所）二维码矩阵资报告号：ERR能研微讯订阅号二维码（左）丨行业咨询、情报、专家合作：ERR能研君（右)视频、图表号、研究成果：能研智库订阅号二维码（左）丨ERR能研微讯头条号、西瓜视频（右)能研智库视频号（左）丨能研智库抖音号（右)14Unlockingthehydrogeneconomy—stimulatinginvestmentacrossthehydrogenvaluechainNEEDFORSUPPORTIVEREGULATIONFinding2Alackofregulatoryclarityonkeyhydrogendevelopmentaspectscreatesrisksforinvestors.ThehydrogensectordependsonmultipleregulatoryframeworksacrossthevaluechainandthroughoutEuropeanregions,onwhichinvestorslackclarity.Asupportiveandstreamlinedregulatoryframeworkcouldincreaseinvestorconfidence.Morethanhalfoftheinvestorsinterviewed,includingalltheparticipatingventurecapitalinvestors,mentionedtheimportanceofasupportiveandstreamlinedregulatoryframeworkandregulatorytransparency.Becauseofthecomplexityofthehydrogenvaluechain,itisimportanttohaveclarityonthefutureregulatorytreatmentofhydrogen.Regulatoryissueshaveadirecteconomicimpactonhydrogenprojects,makingtheplanningoflarge-scalehydrogenprojectsdifficultforinvestors.Keypointsraisedbymarketplayersinclude:EUtaxonomyEUtaxonomydevelopmentsarestillongoing.Inthecaseofhydrogen,sometechnicalandmethodologicaluncertaintiesremain.Inaddition,thequestionoftaxonomycompliancevs.publicsupporteligibilitystillremainsopenforinvestors.GuaranteesoforiginAlegalframeworkisneededforguaranteesoforiginlinkedtothecarboncontentofhydrogenproductionmethods.Thiswouldhelptomonetiseagreenpremiumforcleanhydrogen.TechnicalandsafetystandardsThereisalackofclarityrelatedtotechnicalandsafetystandards,particularlyforthetransportandstorageofhydrogen(e.g.standardisationofstorageanddispensingpressures).StateaidStateaidrulesconstraintheabilityofthepublicsectortoeffectivelybridgetheeconomicgapbetweenhydrogenandexistingalternatives.AdditionalityrequirementsThereareuncertaintiesrelatedtoadditionalityrequirementsforrenewableenergy(howmuchdedicatedrenewableenergyinfrastructureshouldbeaddedalongsidehydrogenproductionprojects).Thegeneralrequirementforadditionalrenewableenergyappearstobewellunderstoodbyinvestorsbutuncertaintiesremainnevertheless—intermsofbothemissioncalculationapproachesandspecificcriteriausedtodefinewhatistobeconsideredasadditionalrenewableenergy.Investorsalsopointedtoalackofanintegratedstrategyonsectorcouplingbetweenhydrogenandelectricity.15KeyinterviewfindingsInvestorslookforaharmonisedapproachattheEuropeanlevelInlinewiththeabovecomments,investorsalsoexpressedconcernsaboutthelackofharmonisationofsupportmechanismsandpoliciesacrosstheEuropeanUnionpotentiallytriggeringuneveneconomicconditionsforinvestorsindifferentlocations.Suchdifferencescouldcreatecomplexityforplayersoperatingacrossmultiplecountriesandlimittheproperfunctioningofcross-borderhydrogenmarkets.Early-stageinvestorspointedtorelevantcasestudiesfromabroad,inparticularCalifornia’sLowCarbonFuelStandard(LCFS),whichincludesgrants,matchingpublicfunds,acreditsystem,auctionsandhydrogenprojectdevelopmenttargets.Thequestionofrenewableversuslow-carbonhydrogenThequestionofcarboncontentandeligibilityforsupportmeasuresstandsoutascriticalformanyinvestors.Theinvestorsconsultedincludedcompaniesinterestedininvestinginrenewablehydrogenonly,aswellastechnology-agnosticcompanies(i.e.thoseinterestedininvestinginrenewableandlow-carbonhydrogen).Tenoutofthe11early-stageinvestorswereopentoinvestinginbothrenewableandnon-renewablehydrogen,dependingonmarketdevelopmentsandeconomics.Ofthe35late-stageinvestors,57%weretechnology-agnostic,while43%indicatedtheywouldinvestingreenhydrogenonly.Thevastmajorityofinvestorslookingintogreenhydrogenonlyweredevelopersofrenewableenergyorofrenewablehydrogentechnologies.Inallcases,interestininvestinginvariousformsofhydrogenwascloselylinkedtoquestionsofregulatoryclarity.IMPORTANCEOFINNOVATIONFINANCEFinding3Innovationinhydrogenremainscrucial,butaccesstofinanceforearly-stageinnovatorsisconstrained,particularlyfornewtechnologydemonstrationprojects.ThereisaneconomicneedforR&DinvestmentTheeconomicsofhydrogen,wherescalealonemaynotbesufficienttobridgetheeconomicgap,requireinnovationthatwouldfacilitatelarger-scaledeploymentatalowercost.InvestorsagreedthatinnovationinhydrogenremainscriticalforthesuccessoftheEUhydrogenstrategyandtheEuropeanGreenDeal.TheinvestorsconsultedhighlightedtheneedforinnovationandR&Datthehydrogenproductionstage,wheredisruptivetechnologiesthatcouldoptimisetheeconomicaspectsofhydrogenproductionaresought.Thisneedforinnovationcallsforactionattheearlieststagesofthedevelopmentcycle,wheregrant-typeandresearchsupportfundingcanbedeployed.Significantopportunityexistshereandthereisaperceptionthathydrogenisfallingbehindincomparisontogroundbreakingdevelopmentsinotherfields.16Unlockingthehydrogeneconomy—stimulatinginvestmentacrossthehydrogenvaluechainAconcentratedventurecapitalmarketTheventurecapitalsceneforhydrogenisconcentrated,withalimitednumberofEuropeanfundsfocusedonhydrogenandcorporateventurecapitalplayersdominatingthespace.Manyventurecapitalinvestorsremaincautiouswithrespecttoinnovativebusinessmodelsrequiringsignificantcapitalexpenditureandrealworldprojectdeploymenttomeetdevelopmentandvaluationmilestones(asopposedtooftenmorescalablevaluationmilestonesthatcanbeachievedininformationandcommunicationtechnologiesorlifesciences).Theventurecapitalistandcorporateventurecapitalistinvestorsconsultedmentionedanumberofinvestmentconstraints.Theseincludethehighcapitalexpenditurerequirementsofhydrogendemonstrationprojects;thehighvaluationofstart-ups,whichlimitstheirabilitytoinvest;thegeographicallimitationsofEuropeanpublicmandates,whichcaninhibitcross-borderprojectswithcountriesoutsidetheEuropeanUnion;andtheneedforresearchanddevelopmentthatcouldbringnewplayersandinnovationsthatwouldlowerthecostofhydrogentomarket.DemonstrationprojectsneedfundingInthiscontext,obtainingfinancingforcommercial-scaledemonstrationprojectswithticketsizesofteninthetensofmillionsofeuroscanbeevenmorechallenging.Indeed,theseprojectsconsolidatemostoftherisksgenerallyassociatedwithhydrogendevelopment(economicgap,regulatoryuncertainty,etc.)andaddalayerofinnovativetechnologydeploymenttobringprojectriskslargelybeyondthethresholdsofmanyinvestors.Thesedifficultiesforhydrogeninnovatorsarecompoundedbytheeconomicandregulatorychallengesdescribedpreviously,whichaddsignificantuncertaintytothebusinessandcommercialoutlookofearly-stageinvestments.Toovercomesuchconstraints,moreneedstobedonetoensuretheavailabilityofarobustofferingofriskcapitaltoEuropeanhydrogeninnovators,whilealsomakingsurethatfinancialinstrumentsfordemonstrationprojectsmeettheneedsofinnovativehydrogenprojectdevelopers.CHALLENGINGPROJECTFINANCECONDITIONSFinding4Themobilisationoflarge-scaleproject-basedfinancingforthedeploymentofhydrogeninfrastructureisconstrained.Financingconditionsforhydrogeninfrastructureprojectsremainchallengingbecauseofthemanyrisksassociatedwithsuchprojects,includingapaucityofdemonstrationsfromwhichlenderscandrawexperience.Fordemonstrationprojects,largecapitalexpenditurerequirementsrelativetotheriskprofileareafurtherconstraint.Similartothewindandsolarenergysectorsafewyearsago,thehydrogensectorrequiresasignificantramp-upinthedeploymentofprojectsacrossallareasofthevaluechain.Greaterscalewouldgenerateindustrialimprovementprocessesandbringaboutcostreductionsinavirtuousdevelopmentcycle.Investors’abilitytofinancehydrogenprojectsonasenior,non-recoursebasis,whichisessentialforthescale-upofthesector,isconstrainedbytheperceptionofsignificantresidualrisks.Inthecaseofprojectfinancefordemonstrationprojects,early-stageinvestorsareparticularlyconstrainedbythe17Keyinterviewfindingslargecapitalexpenditurerequirementsandtheirperceptionofbetterinvestmentopportunitiesinotherpartsofthedecarbonisationagenda,suchasthebioeconomy,renewables,orelectrification,whereinvestmentrequirementsmaybemoremodest.Forpotentialprojectfinanciers,thekeyresidualriskscitedincludetheofftakeprice,durationandvolumerisk,aswellastechnology,operationalandcounterpartycreditrisks.Offtakeprice:•Fluctuatingnaturalgaspricesaffectthepriceofhydrogendirectly(asaninputfactorforbluehydrogen)andindirectlyasacompetitorinsomeapplications.•Regulatoryuncertaintyoverthevaluationofavoidedcarbonemissionsmakesitchallengingtorelyontheportionofrevenueattributabletosuchschemes.•EveninthecaseoftheexistingEUEmissionsTradingSystem(ETS),investorsvoiceconcernsoverthelackoflong-termvisibility.Insomecases,entirelynewcertificateschemescouldberequiredtocrystalliserevenuestreamsforhydrogenprojectdevelopers.Offtakeduration:•Hydrogenbuyersareconstrainedbyindustrialinvestmentcycles.Buyerofftakecommitmentsaretypicallylimitedtofivetotenyears,whiletheeconomiclifeofhydrogenproductionorindustrialassets,whichinfluencesthedesiredmaturityoffinancingforprojectdevelopers,liesinthe20to30-yearrange.Offtakevolume:•Commercialcommitmentsbybuyersofhydrogenorbuyersofendproductsbasedonhydrogentendtobelimitedintermsofvolume.Hydrogenprojectdevelopersstruggletopresentpredictablerevenueandcashflowoutlooksfortheirprojects.Asaresult,thedebtcapacityofprojectsisconstrainedbytheiramountofpredictablecashflow.Technologymaturityandscale-uprisk:•Whilecertaintechnologiesaremature(e.g.alkalineelectrolysis),thereislittleexperienceoftheirindustrialdeploymentonacommercialscalewithincomplexintegratedbusinessmodels(e.g.combiningintermittentrenewableenergytodeliverfirmvolumecommitmenttoofftakers).Thiscreatessignificantuncertaintyforsomepotentialfinanciers,althoughothersstatedthatsuchriskswerenotsignificantandcouldbemanagedthroughcontractualarrangements.Operationalrisk:•Investorsciteanumberofoperationalrisks,suchasuncertaintiesrelatedtothetechnicalperformanceandefficiencyofhydrogenequipment(e.g.loadfactors,conversionefficiency,leakage)butalsointheusefullifeandreliabilitythatcanbeexpectedfromsuchassetsgiventheirlimitedtrackrecord(e.g.electrolyserstacklifetimes).Thequestionofmaintenancebeyondaninitialperiodofactivityhasalsocomeupasaparticularuncertainty.Suchfactorscouldimpactmaintenanceandoperationalexpenditureandworsenthecreditprofileofprojects.18Unlockingthehydrogeneconomy—stimulatinginvestmentacrossthehydrogenvaluechain19KeyinterviewfindingsCounterpartycreditrisk:•Hydrogenprojectsnecessarilyinvolvemultiplefirmswithexpertiseindifferentareassuchasequipmentmanufacturing,renewableenergy,engineeringandothertechnicalservices.Feedbackfromdevelopersandfinanciersindicatesthattherelativelysmallsizeofsomehydrogenequipmentsuppliersisaconcernbecausesuchcompaniesarelessabletoprovidecreditworthywarrantiestotheirprojectcontribution.•Offtakersforhydrogenmayalsobelessthanrobustintermsofcreditworthiness,whichcouldexacerbatethechallengeforfinancierstorenderprojectsbankable.RiskmitigationapproachestomobilisethebalancesheetsofprivatefundingprovidersSomeoftheaforementionedriskscouldbemitigatedandallocatedtothevariouspartieswithinprojectstructures.Forexample,operationalrisks,costoverrunsandmaintenanceissuescouldbestructuredunderengineering,procurementandconstructionwrapcontracts,whichdefinetheresponsibilitiesofcontractorsandtheriskstheywouldbear.Suchcontractscould,forexample,alsoallowforaportionofcoretechnologyandperformancerisksrelatedtothestill-to-be-testedperformanceoflarge-scaleelectrolyserstobeallocated.Performanceguaranteesfromprojectpartnerscouldbeanotherwaytomitigateprojectrisks.Thesecouldcoveraspectssuchasefficiency,capacity,outputpressure,purity,noise,loadfollowing,oxygenproduction,outputavailability,orwater-relatedaspects.Riskallocationtotheprivatepartnersaroundthetableislikelytohaveitslimits,however,assomeprivatepartnersmaynothavethecreditworthinesstoprovideguarantees,ortheriskappetite.Thiscallsfornewriskmitigationmechanismstoenableprivateinvestorstoparticipateintherolloutofhydrogenprojects(e.g.offtakeguarantees,auctions).Suchmeasureswouldlikelybeneededuntilmarketconditionsareachievedforhydrogenanduntilthereisasufficienttrackrecordofprojectstogivecomforttoseniorfinanciersundernormalprojectconditions.Themagnitudeoftheinvestmentrequiredforsuchascale-up(severalhundredbillioneurosby2050)cannotrestonpublicsupportalone.Todevelophydrogenprojectsontherightscale,itisvitaltomobilisethebalancesheetsoflargebanksandprovidersofprojectfinance.Suchfinancing,whenavailable,isgenerallycheaperandhelpsimprovethereturnprospectsforprojectdevelopersandencouragefurtherprojectdevelopment.IMPORTANCEOFVALUECHAINANDECOSYSTEMFinding5Hydrogenprojectsareinterdependentandlinkedacrossthevaluechain.Avaluechainapproach,includingtheplanningofcoherentandcoordinatedprojectsaroundoptimallocations,isakeyfactorforprojectdevelopment.ValuechaincoordinationisrequiredtoachievethetimelydevelopmentofthemarketKeysegmentswithinthehydrogenvaluechainspanningproduction,transport,storageandendapplicationsarehighlydependentoneachother.Investorslackclarityonhydrogenclusterlocationsandexpressaclearneedforplanningvisibilityandintra-valuechaincoordination.20Unlockingthehydrogeneconomy—stimulatinginvestmentacrossthehydrogenvaluechainValuechaincomplexitystandsoutinconversationsasacriticalconstraintforprojectdevelopment.Investorsoftencomparehydrogenwithrenewableenergyprojectsinthisrespect,contrastinghowmuchmorecomplexityneedstobemanagedinthecaseofhydrogentoarrangetheend-to-endbusinessmodels.Inthiscontext,investorsrealisethatlocationcanbeasignificantsuccessfactorforhydrogenprojectsasproximitytocheap,adequaterenewableenergyortohydrogenuserscanmakeasignificantdifferencetotheeconomicsofprojects.Theimportanceofcoordinationacrossmultipleareasandsegmentsofthevaluechainisthusperceivedascritical.SupportingprojectswithselectiveendusesandlocationsIntervieweessuggestedtheneedforacoherentvaluechainapproach,withplanningandidentificationofthewinningusecasesforhydrogen(e.g.steel,chemicals),whichcouldbetheinvestmentfocusforpublicspending.Theyexpressedtheneedforsuchmarketcoordinationwhileurgingcautiontoavoidoverregulationintermsofsectorselectivity.Someofthemostpromisinginvestmentareas/usecasesmentionedbytheinvestorsinterviewedalsoincludednewproductionmethods(e.g.methanepyrolysis,waste-basedhydrogenproduction),transportandstorage,mobilityforlargevehicles(e.g.truck,aircraftandbusfleets)andinfrastructureupgrades(e.g.pipelinecoatings).InternationalvaluechaincoordinationGiventhelocationrequirementsforthecost-efficientproductionoflow-carbonhydrogen,therewillinevitablybeaneedtotransportitacrossborders.Thismakesinternationalcollaborationavitalissue.Intervieweesexpressedtheneedforcooperationacrossthevaluechain(e.g.gascompaniestransportinghydrogenintheirgaspipes).Oneindustrialplayerconsultedsummarisedthesituationbysaying:“FromaEuropeanperspectiveI’dreallywishforacollaborativeandharmonisedapproach.[…]…..across-bordertypeofapproach.”IPCEIexemplifiesEuropeanprojectsupportcoordinatedacrossthevaluechainInvestorsinterviewedspecificallymentionedpositivecaseexamplesfromtheEuropeanCleanHydrogenAllianceorImportantProjectsofCommonEuropeanInterest(IPCEI).Theyhighlightedthecomprehensiveapproachoftheseinstrumentsthatfundprojectsfromsupplytodemand.Inadditiontosuchexisting,well-functioningmechanisms,investorsraisedtheneedforacoordinationecosystem/entityconnectingplayersfromacrossthevaluechaintostrategicallyplaninvestmentinkeyhydrogeninfrastructure.Thisfindingwasparticularlystrongamongsmallerearly-stageinvestorswhich,giventheirsize,usuallylackglobalindustryvisibilitycomparedtolargeindustrialplayers.Finding6Investorsbelievethereisalackofanintegratedandmaturehydrogenfinancingecosystem.Projectpromotersrelyonpublicsupportbuthaveinsufficientknowledgeofpossiblefundingoptions.Theofferoffinancingsolutionsandpublicsupportforhydrogeniscomplexandconstantlyevolving.Thismarketconsultationfoundthatmostpromotersdonothaveafullunderstandingofhowtooptimallycombinemultiplesourcesofpublicandprivatefinancingtoassembleworkablefinancingstructuresfortheirprojects.21KeyinterviewfindingsPromotersoftenfallbackonpublicsupportrequestswithoutnecessarilyconsideringthefullrangeofblendedfinancingoptionsthatmaybeavailabletothemandcouldpotentiallyresultinfinancestructuresthatdeliverreturnsandprojectswithalowertotaluseofscarcegrantresources.Thisisespeciallytrueforcaseswhereresidualprojectriskslimitfinancingpossibilitiesfromtraditionalprivatefinancingproviders,andpromoterslacktheknowledgeandaccesstoinnovativefuelblendingschemes.Beyondthis,thefinancingindustryhaspickedupsignificantinterestinhydrogenasabusinessopportunity,evenifthehydrogenfinancingecosystemtodayremainsimmature.Mostinteractionswithfinancingplayersindicatethattheactualinvestmenttrackrecord,andthereforetheriskmanagementlessonslearnt,remainlimited.Inresponse,anumberofproactiveinvestorshavejoinedopencollaborationinitiativesamongprojectdevelopersandotherfinancingplayersinordertoenhanceknowledgesharing,developexanteassessmentsanddiscussriskswithinprojectarchetypes.22Unlockingthehydrogeneconomy—stimulatinginvestmentacrossthehydrogenvaluechain23RecommendationsRECOMMENDATIONSUnlockingthehydrogenmarketrequiresactiontoimprovethemarketandregulation,accesstofinance,andvaluechainintegrationwithecosystemsupport.Thekeyfindingsoftheconsultationof46investorscanbesummarisedintermsoffourmainforcesthatcouldimprovetheconditionsforaccessingfinancefortheinnovationanddeploymentofhydrogentechnologies:economiccompetitiveness,clearandstreamlinedregulation,avaluechainapproach,andecosystemsupport—assummarisedinFigure5below.Figure5:KeyforcesrequiredtoincreaseinvestorfundingforhydrogeninnovationandprojectsClearandstreamlinedregulationImprovedacces-to-financeconditionsforinnovationanddeployementValuechainthinkingEcosystemsupportEconomiccompetitivenessAharmonisedandsupportiveregulatoryframeworkwouldreduceriskforinvestorsIntegratedplanningacrossthevaluechainwouldaddressthesystemicnatureofhydrogenandthedependencyofitscostonlocationandothervaluechainsegmentsAcoordinatedapproachwouldhelptacklethelackofmaturityofthehydrogenfinancingecosystem,wherepromoterslackinformationonoptimalfinancingsources,andprovidersoffinancerelyonblendingofmultiplefinancingsolutionsLowercostsofcleanhydrogenanditsapplicationscomparedtoconventionalalternativeswouldincreasedemandFeedbackfromtheparticipatinginvestorsincludedanumberofrecommendationsforimprovingaccess-to-financeconditionsforthehydrogeneconomy,whichhavebeenstructuredalongthelinesofthekeythemesinFigure6below.24Unlockingthehydrogeneconomy—stimulatinginvestmentacrossthehydrogenvaluechainFigure6:Summaryofrecommendationsacrosstheregulatory,access-to-financeandadvisorysupportdimensionsImprovingmarketandregulatoryconditionsRecommendation1Introducevolumeandprice-basedincentivemechanismstobridgetheeconomicgapandcreateanenablingenvironmentforinvestmentduringatransitionphase.Improvingacces-to-financeconditionsValuechainintegration&ecosystemdevelopmentwithin-kindsupportRecommendation2AdaptandharmoniseexistingregulationstopromotetheroleofhydrogenandencouragethedevelopmentofaEuropeanenergysystemfeaturinghydrogen.Recommendation4SupportEuropeanprojectfinancingproviderswithcredit-enhancingmechanismsthatreduceseniorlenderriskonhydrgendeploymentprojectsuntilmarketconditionsbecomemature.Recommendation3Enhanceacces-to-financeconditionsforhydrogeninnovatorsbylaunchinghydrogen-tailoredfinancingenvelopeswithinkeydirectandindirectinnovationfinanceprogrammes.Recommendation5Coordinatecoherentvaluechaindevelopmentbyfacilitatingregionalandcross-borderprojectdevelopment,buildingonbestpracticesandusecases.Recommendation6Supporttheemergenceofafinancingmarketforhydrogenthroughtheintroductionandcoordinationoftargetedoutreachactivities,connectingkeyfinancial,industrialandinnovationplayersacrosstheecosystem.Recommendation7Developtailoredadvisorysolutionsforhydrogenpromoterstoaccessdedicatedfinancinginstruments,particularlyforlarge,complexhydrogenprojectsrequiringlong-termplanningandacoordinatedapproach.Note:Themarketfeedbackaroundrecommendations1and2oneconomicandregulatoryaspectshasbeensharedwiththeEuropeanCommission.Giventheextensivescopeandcomplexityoftheseaspects,andtherapidlyevolvingpolicylandscape,theseparticularproposalshavenotbeenfullyfleshedoutinthecontextofthisreport.Rather,thisdocumentfocusesinmoredepthonrecommendations3-7whichapplydirectlytothefinancingcommunity,andthereforealsotheEuropeanInvestmentBank,aswellasthosehydrogenprojectsseekingfinance.IMPROVINGMARKETANDREGULATORYCONDITIONSECONOMICSRecommendation1Introducevolume-andprice-basedincentivemechanismstobridgetheeconomicgapandcreateanenablingenvironmentforinvestmentduringatransitionphase.Giventheeconomicpressureonhydrogenprojects,thehydrogenindustryneedstargetedprogrammestoensureareasonablereturnoninvestmentforinitialcommercialprojects,especiallyduringtheearlystagesofthehydrogenmarket’sdevelopment.Ideally,mechanismsshouldevolveasthemarketdevelopsandultimatelybephasedoutasmarketconditionsimprove.25RecommendationsEarlyprojectswillprovidethemarketwithexperienceandhelpacceleratelearningcurvesandcostreductions,whichovertimewouldreducetheneedformarketsupportmechanisms.Inthemediumterm,atransparent,pan-Europeanmarketwouldrequiremoreambitioustoolsthattargetnewsectorsandinnovations.Potentialsupportmechanismsdiscussedwithinvestorsincludethefollowing:•Carboncontractsfordifference•Guaranteedofftake(potentiallycombinedwithapricefloorattheendofcommercialcontracts)•Feed-intariffs•AEuropeanclearinghouseormarket-makingmechanism•Auctions•Greenpublicprocurement.Amongthevariousinitiativesorsupportmeasuresproposed,theconceptofmarket-makingplatformsstandsoutinparticularforitspotentialtocreatesupportivemarketconditionsforbothproducersandusersofhydrogen.Forexample,theH2GlobalfundinginstrumentlaunchedinGermanyreceivedpositivefeedbackfrommanyparticipants.Throughit,producersofhydrogenmaybeabletoobtainmorevisibilityonofftakeovertimeandintermsofvolumeandprice.Usersrequiringpricevisibilityandstabilityinsupplywouldalsobenefitfromtheplatform.Suchmarket-makingor“switchboard”mechanismscouldalsobeconsideredonaEuropeanscaletoprovidesupportfortheemergenceofproducersandusersofgreenhydrogenacrossthecontinent.REGULATIONRecommendation2AdaptandharmoniseexistingregulationstopromotetheroleofhydrogenandencouragethedevelopmentofaEuropeanenergysystemfeaturinghydrogen.Improvingtheregulationofhydrogenisacomplexyetcriticalissuetofacilitateinvestmentandthedevelopmentofthesector.Whilethefullextentofpotentialregulatoryimprovementscouldnotbederivedfromthisconsultation,thefollowingtopicswereraisedininvestorinterviews:•Needtofinaliseeffortsofdefiningahydrogentaxonomythatremovestheuncertaintiessurroundingwhattypeofhydrogenmaybeconsideredcompliantand/oreligibleforpublicsupport•Opportunityformarketregulationstopromotetheuseofexcessrenewableenergyforelectrolysers•Potentialforaguaranteeoforiginorvirtualpan-Europeancertificatemarket•Potentialhydrogenblendingquotasformidstreaminfrastructure•Needforenablingstandardsandlegalframeworksformidstreamandstorage(e.g.safetyandpressurestandards)•OpportunitytopromotethedeploymentofhydrogenandCO2pipelinesthroughconsistentthird-partyaccesstoregulatedinfrastructurewithstandardisedcontractingacrossEurope•Potentialforregulatedassetbasemodelformidstreaminfrastructure,andfacilitatingmarkettradingmechanisms(equivalenttogasclearinghouses)•Potentialsectoralconsumptionquotasforlargehydrogenconsumers(e.g.ammonia,petrochemicals)intheshorttermandfornewsectorsinthemediumtolongterm•ExplorationofhowfutureEUETSallowancescouldenableinvestment•Potentialforcarbonbordertax•Potentialrelaxationofstateaidrulesduringmarketlaunchphaseandeligibilityforstateaidrules26Unlockingthehydrogeneconomy—stimulatinginvestmentacrossthehydrogenvaluechainIMPROVINGACCESS-TO-FINANCECONDITIONSFORHYDROGENPROMOTERSINNOVATIONRecommendation3:Enhanceaccess-to-financeconditionsforhydrogeninnovatorsbylaunchinghydrogen-tailoredfinancingenvelopeswithinkeydirectandindirectinnovationfinanceprogrammes.Innovationiscriticaltomarketdevelopment.Therefore,itisimportantforinnovatorstoobtainfundingsothatanestablishedmarketcanformandthetechnologytoscaleupcanbedeveloped.Somerecommendationsforfinancingframeworksforhydrogeninnovators,informedbymarketfeedbackandtheEIB’sownexperience,aredescribedbelow.EuropeanInnovationCouncilThefirststeptoimprovingaccesstofinanceforinnovatorswouldbetoincreasetheavailabilityoffundingforearly-stageventuresinvolvedinhydrogen.Thiscouldbeachieved,forexample,bylaunchinghydrogen-relatedcallsundertheEuropeanInnovationCouncil(EIC)programme,whichwouldprovideacombinationofgrantsandequitytoeligiblecandidates.EICblendedfundingwouldalsohelpprotectEurope’sstrategicinterestsinthisinnovativesector.InnovationFundSimilarly,leveragingtheInnovationFundwillbekeytopromotetherolloutoffurtherinnovationinthehydrogensector.TheInnovationFundisalreadyseenbyplayersasoneofthekeytoolstopromotenewtechnologydeployment.Maintainingsufficientfocusonhydrogentechnologiesinthescopeofeligibilitycriteriawillbeimportant.Aligningpotentialgrants,intermsofquantityandstructure,totheneedsofindividualpromotersmaybeanotherfactortoconsider.Finally,maintainingsufficientprojectdevelopmentassistanceforprojectsrequiringsupporttoobtainthegrantswillalsocontributetooverallpotentialimpact.Fund-of-fundsAnotherwaytoprovideearly-stagesupportwouldbetoallocatededicatedequityresourcesforventurecapitalintermediariestoencourageindirectfinancingofhydrogenventuresandthesetting-upofdedicatedhydrogenventurecapitalfundsorstrategieswithinestablishedgeneralistfunds.ThelattersolutioncoulddrawonlessonslearntfromtheartificialintelligenceandblockchaininvestmentplatformsetupwiththeEuropeanInvestmentFundtoprovidetargetedfinancing.Financeforhigher-riskdemonstrationprojectsSupportinginnovatorsintheirgrowthstageandforthedeploymentofdemonstrationprojectsisequallyimportant.Forhydrogendemonstrationprojects,ablendedfinanceresourcedrawingonlessonslearntfromtheInnovFinEnergyDemonstrationProjectsfacilityshouldbemadeavailable,ideallywithadjustmentscateringtothespecificneedsofhydrogenprojects.Suchadjustmentscouldinclude:•Implementingrisk-sharingmechanismstoallowfortheabsorptionofofftakerisks(volume,price,duration),technologyscale-uprisksandoperationalrisks,whicharestillexpectedtobehighininitialinnovativedemonstrationprojects.•Ensuringflexibilityintermsofloantenortohelpmatchthelongeconomiclifeofhydrogenassets.27RecommendationsThematicgrowthfinanceForhydrogeninnovatorsseekinggrowthfunding,dedicatedsupportcouldalsobeintroducedbyenhancingquasi-equityinvestmentresourcestoprovidelong-term,lessdilutiveriskcapitaltoeligiblecompaniestohelpfurthertheirdevelopment(potentiallybackedbyEuropeanCommissionrisk-sharingmechanisms).Exhibit1:PotentialfinancingsupportforhydrogeninnovatorsPROJECTFINANCERecommendation4:SupportEuropeanprojectfinancingproviderswithcredit-enhancingmechanismsthatreduceseniorlenderriskonhydrogendeploymentprojectsuntilmarketconditionsbecomemature.Oneormorespecifictoolsshouldbecreatedtoabsorbthepreviouslydescribedrisks,whicharecurrentlyhinderingprojectfinanceprovidersfromprovidinglow-costseniorfinancingtohydrogenprojectsandtherebypreventingprojectdevelopersfromstructuringandlaunchingattractiveinvestmentprojects.BasedonmarketfeedbackandtheEIB’sownexperience,suchcredit-enhancingmechanismscouldtakemultipleforms.Thefollowingproposalswerementionedintheconsultation:•Afirst-lossguaranteeprovidingariskcushiontolenders,facilitatedbytheEuropeanCommission,exportcreditagenciesornationalpublicsources.•Aliquidityfacilityoracontingentloanschemetriggeredundercertainevents,withrisk-sharingfromappropriatepublicsources(e.g.EuropeanCommissionorEuropeanInvestmentBank).•Aconditionalgrantenhancingtheprojectcapitalstructurebasedonloanapproval.28Unlockingthehydrogeneconomy—stimulatinginvestmentacrossthehydrogenvaluechain•Asubordinatedloanresourcestructuredtoabsorbfirstlossesafterequityholdersandbeforeseniorlenders,withrisk-sharingfromappropriatepublicsources(e.g.EuropeanCommission).First-lossguaranteeAfirst-lossguaranteewouldactasadirectfinancingenabler,wherebyaguaranteefromanappropriatepublicfundingsource(e.g.EuropeanCommission,anationalprogrammeorexportcreditagency)wouldbemadeavailableinsupportofseniorprojectlenderstoeligibleprojects,subjecttopre-definedparameters.Thiscouldbeanattractiveoptionforseniorlendersasitwouldreducetheirriskexposurewhereitishighest.Whenprojectsaresuccessful,thepublicguaranteewouldnotbecalledandthereforewouldnotresultinanactualdrawonpublicresources.Suchaninstrumentcouldstimulatetheearlyrolloutofnewtechnologies,subjecttophasingoutastheneedforpublicsupportdiminishes.ConditionalgrantsAconditionalgrantschemecouldalsomakelendingeasierifitweremadeavailabletoeligiblehydrogenprojectsontheconditionthattheyobtainaloanfromagreedimplementingpartners.Aconditionalgrantcouldbedesignedtocovercertainagreedcosts(capitaloroperatingexpenditure)specifictohydrogenprojects.Thiswouldhelptoreducetheoverallamountstobefinancedbydebtandimprovethedebtservicecoverageratiooftheproject,allotherthingsbeingequal.ThiscouldfollowthemodeloftheConnectingEuropeFacilityprogramme’sBlendingFacility,whereeligiblemobilityprojectscanapplyforaportionofthecostsofmobilityassetstobefinancedifapprovedforaloanbytheEuropeanInvestmentBankoranotherimplementingpartner.LiquidityfacilityAliquidityfacilitycouldprovideabuffertoseniorlendersforthephasingofprojectcashflows,helpingreducerisksrelatedtotemporarydeviationsfrompredictedcashflows.Itcouldbetriggeredundercertaindebtserviceoroperationalperformancescenarios,e.g.projectcashflowshortfallsorareducedseniordebtservicecapacity.Thefacilitywouldbringadditionalcashintotheprojectwhentriggered,whichcouldthenbeusedtocovertheproject’sexpenses,includingseniordebtservice.Sucharesourcecouldberelevantincaseswhereliquidityrisks,ratherthandebtservicecapacity,needtobeaddressed.Giventhehighrisk,thisfinancingresourcewouldrequirerisk-sharingsupportfrompublicsources.ContingentloansContingentloansareloansstructuredinsuchawaythatcertaintermsandconditions(interest,graceperiod,repayment,amortisationschedule,etc.)aredependent/contingentoncertaintriggereventsormilestones.Contingentloansarenormallystructuredupfront,e.g.bylinkingrepaymentconditionstocertainmilestones.Suchloanscouldbebeneficialtohydrogenprojectstohelpmitigatesomeoftheunderlyingrisks.Forexample,repaymentflexibilitycouldbeintroducedtodealwithprojectexecutionrisk,ortechnologyperformancerisk.Suchfinancingresourceswouldrequirerisk-sharingsupportfrompublicresources.SubordinatedloansAsubordinatedloancouldhelpfacilitateseniorfinancingbyprovidingabufferinthecapitalstructureandreducingtheprobabilityofdefaultforseniorlendersintheeventofcashflowshortfalls.IfimplementedbytheEuropeanInvestmentBank,suchsubordinatedloanscouldbringsignalling29Recommendationsbenefitsthatwouldfurtherencourageseniorlenderintervention.Giventhehighriskexposure,thisactionmayrequiresignificantrisk-sharingcoveragefrompublicsourcestobeeffective.Itshouldalsobedesignedwithsufficientstructuringflexibilitysoastoenabletheimplementingpartnertoalsofinancetheprojectatseniorlevelsinparalleltothesubordinatedtranche,subjectofcoursetonormalmeasurestomanagepotentialconflictsofinterest.Toconclude,credit-enhancingmechanismssimilartothoseoutlinedabovecouldprovideabuffertoinvestors,facilitatingtheentryofseniorlendingintoprojectstructuresaswellasenticinginstitutionalinvestorsintothisnascentmarket.Suchsupportcouldstimulatefurtherinvestment,whichwouldthenspurinnovationandtheformationofastrongermarketbase.Exhibit2:Potentialcredit-enhancingmechanismsforhydrogenprojects30Unlockingthehydrogeneconomy—stimulatinginvestmentacrossthehydrogenvaluechain31RecommendationsSUPPORTINGVALUECHAININTEGRATIONANDECOSYSTEMDEVELOPMENTVALUECHAINANDECOSYSTEMRecommendation5Coordinatecoherentvaluechaindevelopmentbyfacilitatingregionalandcross-borderprojectdevelopment,buildingonbestpracticesandusecases.Intervieweesexpressedtheneedforthealignmentandoptimisationofprojectsacrossthevaluechaininordertodevelopthedifferentdimensionsofsuccessfulhydrogenecosystemsinparallel.Suchcoordinationcouldincludetheidentificationofrelevantprojects,thescreeningofpotentialwinningusecasesand,whererelevant,thepotentialprioritisationofpublicspending.Investorsalsocautionedagainstoverregulatingintermsofsectorselectivitytoavoidpickingwinners.Thispresentsanopportunityforpublicorganisations(includingtheEuropeanCommission)tosetupopencollaborationinitiatives,public–privatepartnerships,aswellasworkinggroupsorexpertpanelsthatpromotesectorcollaborationaroundkeyprojectswhileencouragingadeeperunderstandingoftheevolvingmarket,economic,regulatoryandenvironmentalcontexts.Suchinitiativescouldfosterthedevelopmentofpocketsofdemandaroundkeyclusters(e.g.industrialormobility-related).Aroundsuchhubswheredemandwouldbeaggregated,hydrogenproductionandtransportcouldbeplannedonamoresignificantscaletosupportlowercostsandimprovedeconomicsoundnessforprojects.Theallocationofpublicspendingcouldbeconsideredinawaythatwouldoptimiseconsistentdevelopmentsacrossthevaluechain.ItisnotedthattheongoingImportantProjectsofCommonEuropeanInterestprocessalreadyaimstoaddressthisissuethroughtheidentificationofprojectsbyMemberStatesandtheprioritisationandmatchmakingofshortlistedcandidates.Recommendation6Supporttheemergenceofafinancingmarketforhydrogenthroughtheintroductionandcoordinationoftargetedoutreachactivities,connectingkeyfinancial,industrialandinnovationplayersacrosstheecosystem.HydrogenfinancelabstohelptheemergenceofahydrogenfinancingsectorTargetedinitiativestodevelopthefinancingecosystemforhydrogencoulddisseminateinformationabouttheoptimalblendedfinancingsolutionsavailable,connectplayerstotheirpeersandpotentialpartners,andofferaplatformfortheexchangeofbestpractices.ThisproposaldrawsontheEIB’srecentexperienceinthespacesector,whereSpaceFinanceLabswerecreatedtoachievesimilarobjectives.Thesehavehelpedtobringthesectorintothemainstreamandimprovefinancingplayers’understandingofthekeyrisksandopportunities.Inpractice,aseriesofHydrogenFinanceLabscouldbelaunched,eitherasstand-aloneinitiativesorinsynergywithexistingsectoroutreachinitiatives(e.g.inthecontextoftheCleanHydrogenPartnership).Suchaforumcouldgatherplayersontheindustrialfrontwithpublicfinanceproviders,suchastheEIB,servingasacoordinationmechanismbetweenindustrialdevelopersandfinanciers.32Unlockingthehydrogeneconomy—stimulatinginvestmentacrossthehydrogenvaluechainThisinitiativewouldaimtocomplementexistingmarketoutreachactivitiesthroughamoretargetedapproach,connectingcarefullyidentifiedprojectdeveloperswithkeyprovidersoffinancingandhelpingenhancetrustandunderstandinginabeneficialway.Casestudiesofsuccessfulfinancingandlessonslearntcouldbesharedtofacilitatefuturecreditriskdecisions.Thegroupingcouldalsoreflectonconstraintstothefinancingofprojectsandcontributeideasforthedevelopmentoffuturefinancingresources.Figure7:DimensionsofapotentialHydrogenFinanceLabsecosystemtosupporthydrogenRecommendation7Developtailoredadvisorysolutionsforhydrogenpromoterstoaccessdedicatedfinancinginstruments,particularlyforlarge,complexhydrogenprojectsrequiringlong-termplanningandcoordination.Hydrogenprojectsarelikelytorequirespecificblendedfinancesolutionsthathavetheabilitytoabsorbsomeoftheunderlyingprojectrisks.Tohelpdeploytheseinstrumentsinrelevantprojects,marketfeedbackandtheEIBexperienceindicateaneedfortargetedsupportfromfinanceexpertstohelpnavigatetheevolvingofferingoffinancingproducts.Suchsupportwouldalsohelppromoterspositionthemselvesfortherightoffering.Giventhecomplexityandoftenlongtime-to-markettimesofhydrogenprojects,theadvisoryresourcesshouldbesizedanddesignedaccordingly.Advisorysupportcouldalsoextendtohands-onprojectdevelopmentassistance,particularlyinthecaseoflarge,complexprojectsinvolvingmultipleplayersandvaluechainsegments.Insuchcontexts,33Recommendationsthecontributionofaneutraladvisorypartnercouldactasacatalystandaccelerateprojectstofacilitatecertaindecisionsorprojectdevelopmentactivities.ThistypeofassistanceisalreadybeingprovidedundertheInnovationFund’sPDA(projectdevelopmentassistance)programme,undertheNewEntrants’ReserveNER300PDAprogrammeandcouldbefurtherexpandedinthecomingyearsunderthenewInvestEUAdvisoryHub.BasedontheEIB’sexperience,suchdevelopmentassistancecouldbeparticularlyrelevantforlargeandcomplexhydrogenprojectsestablishingnewbusinessmodelsforwhichtherearefewprecedents.Forexample,IPCEIprojects,orthekey“lighthouse”hydrogenprojectscouldbenefit.Duetothehighrisks,suchprojectsmayintheneartermliebeyondthefrontierofwhatisnormallyconsideredbankable.Tohelptheseprojects,advisorysupportshouldalsocontributetoclearfinancialsignallingandguidancetopromotersandtheirpartnerstoassistinadaptingtheiroperationalandfundingstrategiesaccordingly.Advisorysupportcanhelpaddresskeyuncertaintiesinthedevelopmentofprojects,byofferingwaystotestandarbitratebetweencertainfinancing,economicortechnicalalternativesthatmayultimatelyimpacttheeconomicviabilityandbankabilityofprojects.Forexample,advisorysupportpackagescouldmakeitpossibletoexplorehowdemandcouldbeaggregatedaroundhydrogenproductioncentres,howhydrogencouldbeintegratedintorenewableenergyprojectsasapowerstoragesolution,orhowmobilityecosystemscouldbestructured.Basedonthis,suchprojectscouldobtainpotentialfinancingfaster.Throughsuchsupport,promoterswouldbebetterplacedtoalsoseekcommensuratepublicsupportorguaranteestoachievebankability.Integrated,comprehensivesupportinstrumentsthatencompasstheentirevaluechainwillbeneededtobringdowninvestmentbarriers,catalyseinvestment,andenhancecollaborationbetweenfinanciersandhydrogensectorcompanies.Allofthesearevitalcomponentsfortheambitious2030targetstobemetandthehydrogenecosystemtomature.Exhibit3:Advisorysupporttobringhigh-riskprojectstoafinalinvestmentdecision—EIBexperience34Unlockingthehydrogeneconomy—stimulatinginvestmentacrossthehydrogenvaluechainCONCLUSIONANDNEXTSTEPSThepotentialofhydrogenandtheinvestmentopportunitiesitrepresentsareclearlyrecognisedbytheinvestmentcommunity.Virtuallyallplayersconsultedthroughthisstudyareplanningorhavealreadymadeinvestmentsinthehydrogensector.Thecurrentmomentumforhydrogenispalpableinmostinvestorconversations.However,significantchallengesneedtobeaddressedtocreatetheconditionsforthelarge-scaledeploymentandfinancingofhydrogenprojects.EconomicandregulatoryconditionswouldneedtoimprovefurtherinordertomobilisethefullfinancingneededtomeettheambitiousEUtargets.Inthiscontext,financingriskswouldneedtobeappropriatelymitigated,whilethenatureofthehydrogensectoralsocallsforacoherentvaluechainapproachtoensurecoherentdevelopmentofthevariouspartsoftheecosystem.Thisreportprovidesabasisforbothfinanciersandpolicymakerstoassessthesechallengesastheypursuehydrogeninvestmentopportunities.TheEuropeanInvestmentBank’sAdvisoryServices,whichhaveauthoredthisstudy,willcontinuetoworkbothwiththeirpartnersattheEuropeanCommissionandwiththeprojectpromotersthattheyadvisetoensurehydrogenfinancingneedsarewellunderstoodandtohelpinthedevelopmentofappropriateinstrumentsthatareequaltothechallengesoftheEuropeanUnion’sambition.ReadersandhydrogenpromoterswhowouldliketoexplorefinancingoptionswiththeEuropeanInvestmentBankareinvitedtoreachouttotheInnovationFinanceAdvisorydivisionatinnovfinadvisory@eib.orgortooneoftheauthorsdirectly.©EuropeanInvestmentBank,05/2022ENEuropeanInvestmentBank98-100,boulevardKonradAdenauerL-2950Luxembourg+3524379-22000www.eib.org–info@eib.orgUnlockingthehydrogeneconomy—stimulatinginvestmentacrossthehydrogenvaluechainInvestorperspectivesonrisks,challengesandtheroleofthepublicsectoreBook:ISBN978-92-861-5073-9pdf:ISBN978-92-861-5074-6