18 June, Canberra – The transition to a sustainable hydrogen economy faces unique challenges, particularly with respect to financing and risk mitigation. A recent dialogue between experts from the European Union and Australia in the frame of the EU Climate Dialogues (EUCDs) project shed light on these issues, offering valuable insights and potential pathways forward.

Financing hydrogen projects involves de-risking investments to make them viable for stakeholders. The dialogue highlighted several critical issues:

  1. De-risking Projects: Hydrogen projects face numerous risks, from technology and infrastructure to market fluctuations. To attract private investments, it’s essential to de-risk these projects through structured financing mechanisms and supportive policies.
  2. Government Role: Governments play a pivotal role in mitigating risks associated with hydrogen projects. Subsidies and funding initiatives, such as Australia’s Hydrogen Headstart Initiative, are crucial in bridging the commercialisation cost gap and encouraging early investments.
  3. Social License and Certification: Social license and certification schemes are increasingly guiding investment decisions in hydrogen projects. These frameworks ensure that projects adhere to environmental and social standards, gaining public trust and regulatory approval.

Ensuring coordination across the hydrogen value chain involves multiple stakeholders, including governments, industry players, and investors. The dialogue underscored the importance of a national approach to identify and mitigate risks, facilitate infrastructure development, and create a cohesive market environment.
At the same time, the EU’s Carbon Border Adjustment Mechanism (CBAM) is set to influence global standards. By pricing carbon content in imports, CBAM encourages countries to adopt higher environmental standards, potentially leading to a “race to the top” in sustainability practices.

Harmonising sustainable finance taxonomies between the EU and Australia is vital for fostering coordinated investments in hydrogen. The dialogue emphasised the need for clear, interoperable standards to streamline investments and combat greenwashing. The emerging Australian finance taxonomy, developed in collaboration with the EU, aims to provide technical criteria for hydrogen projects, ensuring they meet stringent sustainability requirements.

Advancing technology readiness levels (TRL) across the hydrogen supply chain is imperative to meet industry expectations. Stakeholders must focus on scaling up proven technologies and addressing supply chain challenges, such as electrolyser deployment and electrical connections.

Participants drew parallels between the hydrogen sector and the renewable energy and liquified natural gas (LNG) industries. Early investments in renewable energy required substantial government support, similar to the current needs of hydrogen projects. By learning from these sectors, stakeholders can better navigate the risks and opportunities in developing a hydrogen economy.

The dialogue between EU and Australian experts provided a comprehensive overview of the current state of green hydrogen financing and highlighted the need for coordinated efforts. Addressing financing challenges, leveraging government support, and harmonising global standards, are key to the development of a robust and sustainable hydrogen economy.

Collaboration and innovation are critical to overcoming the barriers and unlocking the full potential of hydrogen as a critical component of national decarbonisation strategies and meeting Paris Agreement targets.

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