1Q 2023

The State of Play for Green Hydrogen Project Financing in Europe and the US

Attracting financing for green hydrogen facilities and moving them through the various stages of project development remains a major challenge. The proportion of projects that have taken a final investment decision (FID) or begun construction is currently a small fraction of the overall pipeline, representing less than 2% of planned capacity in Europe and the US.

While Guidehouse Insights expects this situation to improve in 2023, progress will still favor projects with limited offtake risk and well capitalized backers. Potential financiers must be able to make an informed assessment of the cashflows and risk profile of a project to make a commitment. In most cases, this requires projects to have secured long term offtake agreements with creditworthy counterparties. Green hydrogen projects also present added difficulties to stakeholders familiar with more conventional forms of energy infrastructure, including increased value chain complexity, an uncertain regulatory environment, and a limited track record of technology performance and lifetimes.

This report provides an overview of the key variables likely to influence financing, with a focus on project design, risk mitigation and regulatory developments in Europe and the United States.

Pages 17
Tables | Charts | Figures 2
  • What are the key sources of risk for developers of green hydrogen projects?
  • How can developers minimize risks in project design?
  • What revenue streams are available to green hydrogen projects?
  • What is the impact of current EU and US policies on financing green hydrogen projects?
  • How will the IRA influence hydrogen development in the US?
  • Hydrogen project developers
  • Electrolyzer manufacturers
  • Industrial energy consumers
  • Hydrogen nonprofits and research organizations
  • Utilities
  • Policy makers
  • Investor community




Financing Remains a Challenge for the Green Hydrogen Sector

Project Developers Must Manage Multiple Sources of Risk

Effective Project Design Is Critical to Reaching FID

Green Hydrogen Projects Must Select a Suitable Offtake Model

Long-term Supply Agreements Will Account for the Bulk of Project Revenues

Uncertain Subsidies Are the Main Impediment to Green Hydrogen Projects in Europe

Green Hydrogen Targets

Criteria for Green Hydrogen Projects

Important Projects of Common European Interest

Carbon Pricing Impacts

The Hydrogen Bank

EU Member State Subsidy Schemes

The Outlook for the US Is Positive, but Challenges Remain

Regional Hydrogen Hubs

Production and Investment Tax Credits

Developers Can Work to Manage and Distribute Project Risks

Uncertain Regulations Will Favor Projects with Demonstrably Low Carbon Intensities

Hydrogen Stakeholders Should Look to Related Industries for Precedents

Risk Sharing Is Key to Project Success

Planning Projects over Multiple Stages Minimizes First-Mover Risks

Working with Early Adopters of Green Commodities Can Spur Project Development

  • Development Phases for a Green Hydrogen Project
  • PTC Carbon Intensity Thresholds
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