Bankability remains hydrogen’s unbreakable challenge

6 February 2025

Commentary
Jennifer Aguinaldo
Energy & technology editor

There is some indication that green hydrogen as an industry has arrived at the valley of disillusionment if the Gartner hype cycle is anything to go by.

This is evident with the dwindling number of attendees and absence of offtakers – global commodity trading companies that are expected to buy premium green hydrogen and derivative products – at previously well-attended green hydrogen summits in major cities in the Gulf.

Following frenzied announcements of multibillion-dollar integrated green hydrogen and ammonia plants in the Middle East and North Africa region, particularly Egypt, Morocco, Oman and the UAE, between 2021 and 2023, it appears that key stakeholders have started coming to grips with reality.

Of the close to 80 green hydrogen projects that MEED and MEED Projects track, only three have so far signed an offtake agreement, and only one has managed to reach financial close.

The $8.4bn Neom green hydrogen project in Saudi Arabia reached financial close in March 2023, nearly two years after it was announced.

The project, the largest of its kind requiring over 4GW of renewable energy and 2GW of electrolyser capacity, managed to reach financial close based on one of the three co-developers, the US’ Air Products, assuming the full offtake and construction risks for the project, note some experts.

A project’s bankability ultimately relies on suitable stakeholders taking on the risks for every aspect of the project, from construction to operations.

Currently, the risks or threats include evolving global regulations related to consumption and carbon emissions pricing; lack of technology maturity; supply and demand uncertainty; and the lack of mainstream demand, according to Wael Almazeedi, chief executive at Abu Dhabi-based International Renewable Energy Certification (I-rec) certified firm Avance Energy.

Almazeedi said these risks “need to be mitigated to the satisfaction of project lenders” if the planned green hydrogen projects in the region are to secure financing and reach the construction phase.

The challenges do not necessarily mean all projects will fail, however.

Similar to predecessors such as solar and electrification technologies, the hope is for the planned green hydrogen projects to eventually emerge out of the realm of disillusionment and reach the so-called enlightenment slope and, ultimately, plateaus of productivity, using Gartner’s hype cycle model.

Government support in terms of regulatory frameworks, inevitably including some form of subsidies to bridge the so-called green premium, as well as global certification standards, are at the top of suppliers’ agendas. 

Across the key aspiring Mena clean hydrogen hubs, like the UAE in particular, clearer regulatory frameworks have started to emerge, which could encourage more cohesive cooperation and enable projects to get off the ground.

Key EU countries also appear to remain committed to clean and green hydrogen imports as part of the green deal, while at least one power plant in Japan has completed a three-month trial of co-firing green ammonia with coal “with positive results”.  

But until all these come together to ensure an unencumbered global supply chain, offtakers and project financing deals will likely remain elusive. 

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Published on 1 February 2025 and distributed to senior decision-makers in the region and around the world, the February MEED Business Review includes:

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Jennifer Aguinaldo
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