A report by research and consultancy firm LCP Delta predicts that the total installed capacity of hydrogen projects across Europe could exceed 1GW for the first time in 2023, with around 2GW of projects set to be commissioned.
The From Hype to Investment: Hydrogen in 2023 whitepaper said that 7.3GW of green hydrogen projects are waiting to receive a final investment decision in 2023 to meet project go-live timelines, however added that a bottleneck of projects is occurring as project designers and investors await clarity on “rules of the game.”
“Europe has made significant progress in sourcing public and private investment for hydrogen projects, bet we also see a regulatory bottleneck emerging that is beginning to stall momentum,” said Brendan Murphey, Head of Hydrogen at LCP Delta.
Referencing the US’ passing of the Inflation Reduction Act (IRA), offering up to $3/kg in tax credits for low-carbon hydrogen production, the report said that Europe is “bogged down in getting the rules right while the US powers ahead.”
It said that 2022 say a lack of process standardisation and certification requirements in Europe, which acted as a blocker for developing projects.
It is worth noting that the European Commission, within the past month, has announced its own subsidy programme for renewable hydrogen production, and its own definition of renewable hydrogen.
Read more: European Commission plans to subsidise green hydrogen production
Read more: European Commission proposes regulation for renewable hydrogen definition
Despite the highlighted setbacks, the report wrote, “2023 should see the achievement of the strategically important giga-year milestone, with circa 2GW of hydrogen projects set to be commissioned across Europe this year.”
Nevertheless, the report indicates that increases in hydrogen capacity show little sign of slowing down, with total installed capacity expected to reach over 22GW by the end of 2027.
Murphey commented, “Our research indicates that discussion is turning into tangible action, and with increased investor confidence, we believe the sector will continue to develop rapidly. We expect to see hydrogen play an increasingly significant role in the global energy market and our daily lives in the next five to 10 years.”
The LCP Delta Hydrogen Head stressed, “To ensure the long-term energy security of Europe, governments and institutions must clarify the regulatory process and remove obstacles such as red tape to speed up approval of new projects to clear an investment pathway, so that the market can capitalise on its technology advantage to keep pace with global competitors.”
With hydrogen set to become a globally traded commodity, LCP Delta expects that the main disruptors set to drive the hydrogen market’s direction this year will be Europe (including the UK), the US, and increasingly the Middle East region, while also noting the potentially significant role of North Africa, which could compete with European domestic production on a cost basis by 2030.
Although both Governments and project developers alike have heavily focused on production and utilisation, the report expects that hydrogen distribution and storage will come into focus this year.
“Co-location of hydrogen production and consumption has been a common strategy to short-cut the missing distribution link and enable the market development in the short-term, but this is set to change in 2023,” said LCP Delta.
The company said it foresee this year bringing a focus on developing the missing links in the hydrogen value chain, whether it be developing international pipelines, storage mechanisms, or investment in hydrogen derivatives to unlock the global hydrogen marketplace. “Expect to see a new policy focus in these areas in 2023, shifting away from the strong production focus we have seen up to now.”
