Clean hydrogen has emerged an essential low-carbon technology to reduce carbon dioxide emissions, especially in hard-to-abate sectors such as steel, petrochemicals, and transportation.
According to the Organisation for Economic Co-operation and Development (OECD) and the World Bank, annual clean hydrogen production could reach 40 million tonnes by 2030 if all announced projects are realised. Yet, scaling production at this level will require clean hydrogen to be more cost-competitive compared to fossil fuels-based alternatives. This is particularly important in emerging markets and developing economies (EMDEs) endowed with cheap renewable energy potential, access to water resources and land to produce renewable hydrogen at large scale.
Risk mitigation instruments associated to clean hydrogen projects (e.g., offtake guarantees, Contracts for Difference, political risk investments and interest rate swaps) are critical to reduce project costs and crowd-in private capital in support of first-mover projects. Yet, it is challenging to observe frequently utilised de-risking financial instruments and assess their effectiveness, since clean hydrogen projects are not yet deployed at full scale.
Recognising this, in 2024, the OECD, the World Bank and the Global Infrastructure Facility (GIF), with support from the Hydrogen Council, released the report Scaling Hydrogen Financing for Development, which proposed a 10 gigawatt initiative to develop lighthouse projects in EMDCs with size ranging from 100 megawatt to 1 gigawatt before 2030. Building on this work, the OECD, in collaboration with the World Bank, is preparing a new report on “Leveraging enhanced de-risking instruments and international co-ordination to catalyse investment in clean hydrogen”, with the objective to better understand the risk mitigation measures and co-ordination mechanisms to attract investment for clean hydrogen projects.
The event welcomed over 160 participants from government, industry and the financing sector who actively engaged in in-depth discussions and provided invaluable inputs on suitable risk mitigation strategies for green hydrogen projects. The discussion also fed the current analysis conducted by the World Bank and the OECD on de-risking mechanisms for clean hydrogen development in EMDEs.
The objectives of the stakeholder workshop were:
- To introduce the ongoing study on “Leveraging enhanced de-risking instruments and international co-ordination to catalyse investment in clean hydrogen”
- To identify available risk mitigation instruments that can be used to address priority risks for clean hydrogen projects in EMDEs, as well as the lessons learned and best practices for their implementation
- To discuss the importance of co-ordination and collaboration among international financial institutions and governments to unlock the required finance for clean hydrogen development.
