ARTICLE Building confidence in hydrogen investments Private investors are ready to embrace the hydrogen opportunity, but we must build confidence in the potential for their investments to yield satisfactory returns. For hydrogen to succeed as the fuel that takes the world to Net offtake of hydrogen, perhaps through contracts for difference, Zero by 2050, private investors in the infrastructure needed to to ensure that prices are sufficient to allow satisfactory returns to produce, store, and transport the fuel and will need confidence investors. This strategy was implemented for hydrogen years ago that their requirements will be met. That creates an urgent in China, and is now being adopted in Europe through several necessity for governments to offset the risks associated with green-energy ‘Projects of Common Interest’. hydrogen infrastructure development. Financial risk in the hydrogen sector is, for now, greater than A third route to risk mitigation is guaranteed offtake under for other types of infrastructure because the clean fuel is at the simili Power Purchase Agreements. Long-term hydrogen PPAs outset of its industrial development. For example, the capital at prices which make investments profitable in the longer term expenditure (capex) requirements for the construction of the first would accelerate development of the infrastructure necessary large-scale electrolyzer will be significant. Most of the technology to roll-out hydrogen as a critical Net Zero solution. They will required to build and operate these green hydrogen refineries is require specific regulation or subsidy to mitigate pricing risk proven, but because very few have been constructed, they stand and to underpin the economic viability of the earliest hydrogen at the starting point of their pricing curve. investments. In Europe and elsewhere, governments are actively making such commitments. The capital expenditures required to get the hydrogen ball rolling are much higher today than they will be in ten years’ time – just It is equally necessary to develop rapidly the pipelines and as we experienced with solar energy installations. The cost storage facilities which will support the distribution of the large will reduce steadily as accumulated experience reduces the quantities of hydrogen, produced and sold. This infrastructure risk of each successive project, but first-movers face significant must also be financed, and the associated risks hedged to get uncertainties. Their large capital expenditures in the developing the early investment flowing. hydrogen market need the strong support of governments. This can be delivered in several ways. One is direct Regulation can support these goals through the creation of subsidization by governments of the necessary capital demand. One simple stimulant would be to mandate the expenditure, a proven route to success in the world of civic injection of a proportion of hydrogen into natural gas distribution infrastructure. The second is for governments to support the networks. The proportion must be stable to allow for the staged 28