Hydrogen

Now the work begins as hydrogen and carbon capture projects seek financing

A flurry of project announcements in 2021 means that 2022 will be a year of lining up finance.
Now the work begins as hydrogen and carbon capture projects seek financing
(Developers now need to work to finance their project pipelines. Image: DOE)

The pace of project announcements related to low-carbon hydrogen and carbon capture and underground storage (CCUS) is unlikely to be sustained in 2022 as developers turn their focus toward lining up finance and advancing their projects toward construction.

Those are the key findings in a new report from consultancy Wood Mackenzie. The project pipeline for both CCUS and low-carbon hydrogen saw record growth in 2021. The report said that developers were encouraged by increased net zero targets, new policy support and technology advancements.

More than $66 billion was invested in hydrogen in 2021, with projects looking at every aspect of the value chain from R&D to refueling infrastructure.

The report said the CCUS pipeline of announced projects grew seven-fold, with 50 new hub projects globally. The low-carbon hydrogen pipeline more than doubled, with green hydrogen projects making up 75% of the announcements.

Mhairidh Evans, principal analyst, CCUS and Emerging Technologies, and co-author of the report said, “We don’t believe we will see the same growth rate for the CCUS and hydrogen pipelines in 2022.

She said that the coming year will be about maturing projects and securing funding. Around 75% of the CCUS pipeline is in early development. For hydrogen, almost 40% of the project pipeline does not have an estimated date of operation and 25% lacks even an estimated capacity. Evans said that a mark of success for 2022 “will be more projects in advanced development or under construction.”

Wood Mackenzie said it is tracking 15 CCUS projects aiming for final investment decision (FID) this year. If developed successfully, they will add around 35 million tonnes per annum (Mtpa) of new CO2 capture or storage capacity and would require investment of around $18 billion. The firm said that large volumes of CCUS capacity are not expected to come online in 2022.

Wood Mackenzie said more capital flow is needed for hydrogen production projects, requiring more offtake agreements. This could mobilize anywhere from $3.5 billion to $22 billion that the firm said is necessary for hydrogen production projects to reach FID in 2022.

In 2022, 33 projects – mainly in Europe and Asia – should begin operation. Those facilities would represent 0.1 Mtpa of low carbon hydrogen and 50 ktpa of green ammonia entering the market.

Wood Mackenzie also looked at the implications of the United States’ Build Back Better Act, which is stalled in the Senate due to opposition by Sen. Joe Manchin (D-WV). The report said that “significant investment hangs on the act passing Congress this year.”

In mid-December, Wood Mackenzie and the Solar Energy Industries Association said that logistical challenges and price increases in the solar supply chain could result in a 7.4 GW (25%) drop in solar installations for 2022 compared to previous forecasts. They said that passage of the Build Back Better legislation would help to mitigate that potential decline.

Flor Lucia De La Cruz, senior research analyst, Hydrogen & Emerging Technologies, said that 2022 likely will be an important year for translating policy into reality.

“It’s a tough political ask in some countries and we expect drawn-out negotiations to mean delays,” she said.

Technology scale-up will be crucial to maintain and build momentum for CCUS and hydrogen, the report said. Green ammonia has been hailed as one of the cheapest pathways to transport green hydrogen around the world but it, and hydrogen carriers in general, have their challenges.

Wood Mackenzie said it expects more technological solutions related to storage and chemical plant design in 2022. Direct Air Capture is expected to move from wildcard to reality, with drivers including $3 billion of funding through the Bipartisan Infrastructure Bill, growing demand for e-fuels and the growing voluntary carbon market.

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