Analysis explores route to managing complexity of developing hydrogen projects


Consideration must be given to all parts of the value chain to understand what role hydrogen can play and how it can be commercialised, according to research.

On 14 December, Westwood Global Energy Group published an insight, entitled, Framing a business case for Hydrogen in Northwest Europe, where it looked to review the status of hydrogen in the region, explore the barriers to growth of the industry, and discuss factors set to influence the future role or business case for hydrogen in Denmark, Germany, the Netherlands, Norway and the UK. As it stands, the Northwest region is leading the deployment of hydrogen and associated CCUS projects for Europe. Broad support for the hydrogen economy in Northwest Europe has been reflected in the EU and UK hydrogen strategies, as well as the fact 22 EU member states and Norway launched the Important Projects of Common European Interest on hydrogen in late 2020. However, while there is this support and a strong project pipeline, there are substantial barriers that exist from turning vision into reality.

Westwood compared it to the early stages of developing renewables, though did note the hydrogen value chain is significantly more complex. It has multiple stakeholders, as well as regulatory, technical and commercial challenges, and safety concerns, all of which must be overcome. Particular hurdles include the current high cost of green and blue hydrogen, as well as uncertainty around the standards for low carbon hydrogen which, in turn, create uncertainty for some of the most important blue hydrogen-based projects.

Another challenge is selecting the right commercialisation route for each country, with multiple potential uses of hydrogen and questions over how this will be supplied, with three influencing factors identified to make a business case for hydrogen a reality: matching the opportunity of hydrogen with a country’s needs; identifying synergies and collaboration opportunities; and determining a business case facilitator.

Matching the opportunity of hydrogen with a country’s needs will involve working out whether it is the appropriate decarbonisation solution and where it use should be prioritised, with it citing three factors that merit consideration. There are structural barriers, with some hard to abate sectors set to require too significant a structural change to make hydrogen technically or commercially feasible, while there is the issue of alternatives too, with end-use markets currently assessing various alternatives to decarbonise their operations and the final option not yet set in stone.

The final factor is that of demand, with the likes of Denmark and Norway countries which have the potential to produce hydrogen, though a lack of clarity on its ultimate end-use potentially holding back the necessary investment in the required energy sources to support its growth. Imports can offer a solution but this will require clarity on the end-use market to warrant them while, on the flip side, end-use markets themselves will not develop until hydrogen is viewed as an attractive alternative. Once the appropriate target end-use sectors have been selected, along with greater clarity in the downstream part of the value chain, project leaders can then determine which other stakeholders should be involved and build synergies through collaboration. This will strengthen the business case.

Finally, a business case facilitator is a further element required to develop an opportunity for hydrogen. Westwood highlighted an example from Denmark, where the close collaboration of industry associations Wind Denmark and Brintbranchen (Hydrogen Denmark) has provided a consistent and aligned voice for stakeholders in hydrogen, something that has proven essential to frame a business case for hydrogen in a country that has low domestic demand, though substantial resources and the need to seek economic alternatives to oil and gas. The overriding point of a business case facilitator is to align a particular proposal or project with the government strategy to address its domestic emissions or create a new economic development opportunity, while it also can allow for a quicker and more focused identification of policy gaps in the value chain of a project.