PI Partnership – KGAL Investment Management
Waiting for the first large orders
Despite the versatility and great potential of green hydrogen, the installed base of grid-based electrolysis capacity today is still limited at less than 1 gigawatt (GW) globally. According to the International Energy Agency, around 850 GWs of electrolysis capacity needs to be in operation by 2030 to meet the Paris climate targets. Yet, we are still facing a ‘chicken or egg problem’. Electrolyser manufacturers are wait- ing for the first large orders to be able to finance the expansion of production capacities. However, their potential customers will not order until they have identified viable business models with a reasonable risk-reward ratio.
Encouraging signs for hydrogen economy The situation reminds us of the renewable energy sector 20 years ago, when electricity generation with wind and solar PV was not yet competitive. Just like then, we need a regulatory framework, support schemes, technological advances and a scaling up of production to give hydrogen, based on electroly- sis, a kick-start. As a matter of fact, there are already many encouraging signs that we are on track to develop a high-growth hydrogen market in the EU. For example, the European Commission is working on a comprehensive hydrogen strategy, which will be imple- mented by the so-called “Fit for 55” legislative package and is also proposing a hydrogen bank which will invest €3bn (£2.5bn) to capitalise the hydrogen economy. New green hydrogen projects are announced almost weekly, and the experts at Roland Berger expect electrolysis capacities to increase sevenfold by 2025. KGAL first invested in renewable energies in 2003 in a compa- rable market environment – with great success. Today, the time for investors to enter the green hydrogen market appears to be just right.
The role and need for hydrogen decarbonisation
Phases of a green hydrogen project and the related infrastructure equity strategy
December – January 2023 portfolio institutional roundtable: Infrastructure
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