Financing the Green Hydrogen Economy

Abstract

Hydrogen is expected to play a critical role in the decarbonization of the global energy system, as the IEA projects that in order to reach net-zero emissions by 2050, low-carbon hydrogen use will need to grow six times from today’s levels to meet up to 10% of total energy consumption (IRENA, 2022). Amidst growing concerns around energy security, governments and private industry are showing an appetite for tapping green hydrogen as an energy source, committing an unprecedented amount of financing to stand up a robust market in the next decade. While projects worth nearly $240 U.S. billion in the low-carbon hydrogen pipeline have been put forward in 2022, only about 10% of these have reached final investment decision (McKinsey Sustainability, 2022). To meet decarbonization goals, investment in green hydrogen facilities at a MW and above scale will need to rapidly increase. Yet, investors are faced with significant challenges and risks. Based on an analysis of large-scale green hydrogen projects that have successfully secured financial commitment, this paper sets out a framework for evaluating potential investment opportunities.