SUSI Partners has published its latest research on hydrogen energy infrastructure. The whitepaper, authored in collaboration with Swiss research institute Paul Scherrer Institute (“PSI”), provides a comprehensive overview of an emerging energy transition sector, evaluates key markets as well as overall funding needs, and assesses the potential for investments in selected hydrogen infrastructure opportunities expected to emerge in the coming years.
In recent years, efforts to reach global climate targets have primarily focused on an extensive buildout of renewable energy generation capacity, vast improvements in energy efficiency, and the cost-effective electrification of various energy-consuming sectors. However, as the 2030 checkpoint approaches, increasing consideration is given to areas where direct electrification reaches its limits. This concerns the so-called “hard-to-abate” sectors such as industrial processes, heavy-duty transport and the provision of heating and power for buildings.
The use of hydrogen as an energy carrier can offer solutions in all these areas, which is why the year 2020 has seen a wave of hydrogen strategies released by governmental bodies. A 2017 study commissioned by the Hydrogen Council concluded that by 2050, up to 18% of global energy demand could be met by hydrogen, resulting in annual CO2 savings of six gigatons. However, this would require a large-scale buildout of infrastructure which requires funding from public as well as private institutions. While public funding will be required in the early stages, private capital is expected to be instrumental in carrying this transition forward once hydrogen applications reach the commercialisation stage.
As shown in this whitepaper, proven technologies exist along the entire hydrogen value chain – from production to end use. However, there remain significant challenges to overcome, particularly related to the higher production costs of hydrogen compared to conventional options as well as regulatory uncertainties. Research institutions and regulators alike are in the process of tackling the remaining challenges inhibiting the large-scale rollout of hydrogen technologies. If the relevant bottlenecks are solved, hydrogen infrastructure investments will be added to the vast spectrum of investment opportunities already available to a sustainable energy infrastructure investor like SUSI Partners.
Given the respective rollout timelines, we have focused on a number of opportunities with the potential to become relevant for private capital by 2030. These are:
- Green hydrogen production facilities
- Hydrogen pipeline infrastructure
- Hydrogen storage infrastructure
- Hydrogen refuelling stations for fuel cell electric vehicles
We estimate that integrated projects combining renewable energy plants with electrolysers as well as opportunities related to financing hydrogen refuelling stations with guaranteed offtake agreements are most likely to become investable infrastructure themes at greater scale in the coming years.
Ultimately, infrastructure investors will have to secure visible revenues, in many cases through guaranteed offtake agreements with end customers. Once a market for such agreements develops, green hydrogen technologies can become an important pillar of the energy transition. While investments in hydrogen generating attractive risk-adjusted returns are generally expected to be scarce before 2025, individual opportunities in regions with a high penetration of renewable energies and industrial clusters in proximity may arise sooner rather than later. Accordingly, SUSI Partners – as a sustainable energy infrastructure investor taking a holistic approach to financing the energy transition and acknowledging the urgency of decarbonising hard-to-abate sectors – will continue to closely monitor developments in the hydrogen space.
Professional investors can request a copy of “Hydrogen Energy Infrastructure - Investment Potential in an Emerging Energy Transition Sector” at the following link:
