Hydrogen is becoming increasingly important as an alternative to fossil fuels. A versatile energy carrier, hydrogen is poised to take on an important role on the way to a sustainable and low-CO2 world. The size of the opportunity is measured in trillions and it means banks and private capital have a fundamental role in supporting these investments.
The EU has vertebrated its EUR750bn post-Covid stimulus package around decarbonization to enable its Net-Zero commitments and support companies in their transition. The development of green hydrogen worldwide is a key element of that ambition.
A new EU body, the European Clean Hydrogen Alliance, was founded for this purpose. There is also the "Fit for 55" package, which contains several guidelines to help the EU achieve its climate goals. Among other things, it includes proposals for a Renewable Energy Directive or Energy Taxation Directive. These proposals follow the Taxonomy Act adopted in June 2021. This determines investments in sustainable economic activities, including renewable and low-carbon hydrogen. The Red Act guideline and the decarbonization package for gas and hydrogen are also intended to contribute to the achievement of climate targets. All these instruments should lead to the creation of a regulatory framework that supports the introduction of clean hydrogen in Europe.
Corona crisis accelerates the change
It is only logical that many EU countries have already developed their own hydrogen strategy. Germany is one of them. The German government's goal is to become the leading international supplier of so-called H2 technologies. By 2030, electrolysers with a capacity of 5 gigawatts are to be installed, producing around 14 TWh of green hydrogen per year and thus providing around 15 percent of the hydrogen consumed by then. To this end, the state will receive government funding of 8 billion euros from the Federal Ministry of Economics and the Federal Ministry of Transport.
Since the Corona pandemic, the issue of hydrogen has become even more pressing for Germany. "The pandemic has raised awareness of the need for an upswing through green industrialization. This also affects hydrogen," says Gido van Graas at ING. One example of that commitment is Germany national hydrogen strategy: "In June 2020, Germany allocated 9 billion euros to the development of green hydrogen as part of its Covid stimulus package to reduce its dependence on coal," says Gido van Graas at ING.
Hydrogen: Role of banks
The increasing relevance of the topics of climate protection and hydrogen is also leading to changes at the banks. After all, this is where trillions in investments are moving. ING has developed a strategy for this. "We have talked to various experts and decided on three technologies that are relevant in the implementation to the energy transition," explains Gido van Graas. These are: Hydrogen, battery storage and carbon capture and storage.
For banks, it will be important to consider both the public funding aspect and other financial resources when providing financing for corporate customers. That's because, so far, the "required investments are so large that private sector participation will be essential," Gido van Graas estimates. Thus, ING observes that interest in bank financing is already growing.
29 October 2021
Hydrogen: The complete picture
Hydrogen: It delivers both power and heat. So, how does it fit into the global energy mix and the world's environmental ambitions? In this series of articles, we look at the market and the economics, hydrogen's growth prospects, global government attitudes, and the key players in an industry which is becoming increasingly prominent and important
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