What’s going to happen in green hydrogen in 2023?
This is the question we have been asked more than any other around our series of members-only Leadership Council meetings – and thankfully, due to our completely-trustworthy Tamarindo crystal ball, we have some accurate answers. Hopefully.
Here are five predictions for what we expect to happen in the green hydrogen and power-to-X sector in 2023. We’ll look back later in the year to see how we did.
- Hydrogen tax credits to put US in pole position: The US will be the hottest green hydrogen market in 2023 now that tax credits in the Inflation Reduction Act have come into force. This will spark a race between renewables hotspots California and Texas to be at the forefront of development, which will draw the attention of developers and investors from the Americas, Europe and beyond. We will also see other nations in the region, including Canada, join the party.
- Europe grapples with offshore hubs and corridors: Europe has struggled to maintain its lead in green hydrogen as the European Union got tied up with debates about ‘additionality’. However, we will see exciting projects emerge in 2023, particularly around the integration of green hydrogen into offshore hubs; and new green hydrogen corridors to enable cross-border supplies. These will help the industry find solutions to some of its most pressing questions.
- State-backed finance to spur more financial closes: One major obstacle to green hydrogen’s growth is that financial partners are uncomfortable with their risk/reward profile in these developments. In 2023, we expect more countries to follow the example of the German government, which has set up a funding body called H2Global to de-risk early schemes and help early investors. We will also see a lot of focus on its first tender, where bids are due in February.
- Inflation causes headaches for sector but is not fatal: Higher electricity prices in 2022 pushed up the price of green hydrogen and is a challenge for developers and investors. This will force firms to look hard at the economics of their projects. However, we believe that projects will also get a tailwind due to growing demand for green fuels, higher grey hydrogen prices, and the fact that oil and gas giants will keep investing in vital research and development. Inflation can’t be ignored but, for this sector, it won’t be the be all and end all.
- COP28 will maintain momentum in the Middle East: One high point from the COP27 conference in Egypt in late 2022 was that it brought with it a host of announcements of green fuels projects in the Middle East and North Africa (MENA). We expect this to continue in 2023 as the MENA region gears up for its second COP conference in succession this November, in Dubai. Power-to-X will be a niche concern in MENA given the region’s fossil fuels dominance, but seeing it step up in power-to-X at all is nonetheless a reason to celebrate.
Do you agree? What would you add or change? We’d love to hear.