The growth of the hydrogen market and its derivatives hinges on sustained commitments and collaboration among financial institutions, industry players and government entities. However, this emerging market faces significant challenges, particularly for infrastructure investors. The high perceived risk and underdeveloped state of hydrogen projects discourage mobilisation of long-term, patient capital which is crucial for the market’s development.
Securing the necessary capital requires substantial funding from diverse sources. However, the current lack of equity funding or debt financing available for infrastructure within the hydrogen value chain is a major obstacle to market growth. The capital-intensive nature of hydrogen projects requires financing structures that are typical in project finance, requiring significant debt and equity investment. Yet debt investors remain cautious, primarily due to technological uncertainties and the absence of committed offtakers.
Added to this is a lack of operational projects, which raises concerns further. This absence makes it difficult for investors to assess risk, forecast revenues and returns, and accurately value hydrogen projects.
To catalyse investment in hydrogen infrastructure and realise the transformative potential of hydrogen and its derivatives, these issues must be addressed. As a technology with substantial upfront costs, overcoming these barriers is critical to achieving global decarbonisation efforts and fostering a more secure and resilient energy system.
This paper seeks to address these and other challenges that investors face when exploring investment opportunities in hydrogen infrastructure. It draws together the views of GIIA’s membership collected over several months and presents the areas where additional focus is needed to support investment cases, in line with five core recommendations.
Read the full report at the top right of this page.