Financing green hydrogen projects

Key considerations

  • A major consideration for green hydrogen projects will be to structure an acceptable risk profile for financing by allocating risks to those best able to take them, whether this be sponsors, insurers, financiers or governments.
  • In this early stage in the development of the green hydrogen sector, public sector grants and other forms of concessionary funding will be a critical source of project financing, with blended financing solutions being key to making green hydrogen projects bankable and commercially viable. As direct financial support and investment from developing host nations is expected to be limited due to national budget constraints, development finance institutions are expected to play a key role in derisking financing in emerging economies.
  • Host governments, project developers and sponsors will need to ascertain which combination of financing sources they wish to consider when determining how to structure a green hydrogen project. Each institution will have their own specific considerations as to required elements of the structure of a project, and will need to conduct in-depth due diligence to ensure that the project complies with their applicable credit and policy requirements.
  • In developing countries, it will also be important to ensure that there is a robust costbenefit analysis, socio-economic analysis, consensus building, and balancing of interests to ensure that commitments undertaken by the host state to provide a favourable environment for investment are weighed appropriately with the state’s interests and rights to effect changes in policy. This will be critical to ensure the long-term success of the project and avoid disputes between stakeholders.

Expert:

John-Patrick (JP) Sweny 

Resource: Green hydrogen opportunities for emerging and developing economies