The hydrogen ramp-up is progressing more slowly than politically desired. A study by Capgemini Invent on behalf of the “Bundesverband der Energie- und Wasserwirtschaft” (BDEW), based on interviews with companies along the entire value chain, shows what the reasons are. An important result of the study is the so-called multicausality of risks: problems rarely arise in isolation, but from the interaction of several factors, such as regulation, market structure, financing, infrastructure, and technology, which reinforce each other. As a result, risk premiums increase, which makes financing (“bankability”) more difficult and delays final investment decisions (FID). As a consequence, even projects with high funding commitments are postponed or stopped.
Lack of offtake
The authors view offtake risk as particularly critical. For the financing of large electrolysis projects, producers require long-term offtake agreements with terms of fifteen to twenty years. However, many potential industrial offtakers prefer significantly shorter contract durations. Reasons include uncertainty about future prices, other decarbonization options, and regulatory developments. But without long-term demand, projects can hardly be financed, and without projects, no market emerges.
Financing difficult
Closely linked to this is financing risk. Banks require high equity ratios and stable revenue structures. Without secured demand, many projects are too risky from the perspective of capital providers. Funding programs can offset part of the investment costs. However, they are not sufficient to significantly reduce capital costs or sustainably improve the financing structure.
Conclusion
A market does not emerge on its own. Only when risks along the entire value chain are reduced can large-scale investment take place and a functioning hydrogen market emerge.
See more at: www.capgemini.com
