Clean Hydrogen Stalled: De-Risking Needed to Unlock Investment, OECD and World Bank say

January 14, 2025 — Clean hydrogen, a promising solution for slashing emissions in hard-to-decarbonize industries, faces a major roadblock: reaching final investment decisions.

A new report by the World Bank and the OECD finds that less than 10% of clean hydrogen projects worldwide get the green light for construction due to perceived risks. This is despite the potential for clean hydrogen to create a cleaner future, particularly in both developed and developing economies.

The report emphasizes the need for de-risking instruments to make clean hydrogen projects more attractive to investors. These instruments, like guarantees and subsidies, can lower project costs and uncertainties, paving the way for private investment.

Building a Pipeline of Bankable Projects

The report stresses the importance of tailoring de-risking instruments to each project's unique needs. Combining different tools creates a comprehensive risk mitigation strategy, which is essential for building a pipeline of investable clean hydrogen projects.

Investor Concerns: A Unique Challenge

The report identifies six main categories of investor concerns:

• Offtake uncertainty: Who will buy the hydrogen, and at what price?
• Political and regulatory risks: Will government policies support clean hydrogen?
• Infrastructure gaps: Is the necessary infrastructure, like pipelines, in place?
• Technology risks: Is the technology mature enough?
• Macroeconomic risks: How will economic conditions impact the project?

Clean hydrogen faces unique challenges compared to other sectors like natural gas. A lack of established market prices and proven track records make it harder to assess the effectiveness of de-risking instruments.

Collaboration is Key

The report calls for increased international partnerships and coordination mechanisms to scale up clean hydrogen financing, particularly in developing economies. Existing initiatives supporting clean hydrogen projects need to work together more effectively to identify risks, increase funding, and maximize benefits.

Learning from Success Stories

Real-world clean hydrogen projects offer valuable insights. The report analyzes 15 case studies, highlighting the importance of:

• Tailored financial and policy frameworks that attract investment.
• Risk-reducing tools like subsidies and tax credits.
• Public-private partnerships that combine financial resources and technical expertise.

Source: OECD/The World Bank (2024), Leveraging De-Risking Instruments and International Co-ordination to Catalyse Investment in Clean Hydrogen, Green Finance and Investment, OECD Publishing, Paris, https://doi.org/10.1787/9a377303-en.

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