Project Finance and the Hydrogen Wave
By Alistair Wishart, Louise Fischel-Bock and Lauren Davies at Vinson & Elkins RLLP; Peter Gorman at Wafaa Ermilate; and Sanne Rosendaal at ING Bank
Hydrogen technology is experiencing a renewed wave of interest due to the decreasing costs of producing low- or zero-carbon hydrogen and expanded applications for hydrogen in the energy sector. Although project finance has traditionally been seen as more appropriate for large-scale, long-term projects with proven technology and a clear offtake strategy, project finance lenders are engaging in hydrogen projects in both advisory and lender capacities at an earlier stage of market development than might be expected given market appetite for sustainable projects and the drive on the macro level for clean energy projects.
Hydrogen has been touted as a potential carbon-neutral replacement for hydrocarbons for more than 50 years. Hydrogen experienced cycles of hype in the 1970s, following the oil crisis, and in the 1990s, when climate change came to the forefront of politics. However, those waves of interest did not translate into a sustainable investment trend. Now, in 2020, there is, yet again, talk of the exciting potential of a hydrogen economy, with hydrogen being viably considered as a key element in the future of affordable, sustainable and reliable energy supply.
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