Hydrogen Lead

AEA, Atlanta
13 November 2023
 WBG hydrogen: country lending ops led by IBRD-IDA
are ramping up
Interest to
$150M Blended finance for replicate
CHILE
Approved IPF electrolyzer CAPEX and risk facility in
PROJECT mitigation instruments Colombia
FY23
and Brazil

$1.5B Policy support

INDIA Approved DPL FY23 (phase 1) Offtake
PROJECT $1.5B Equipment manufacturing
for approval FY23 (phase 2) RE power access

MAURITANIA IPF (for approval FY24) Blended finance and

PROJECT capacity building

BRAZIL IPF (for approval FY24) Blended finance and

PROJECT infrastructure

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 World Bank Group – 189 member countries

Public sector support Private sector support Private sector support

for developing countries in developing countries

IBRD, IDA IFC MIGA

Technical assistance Upstream Project Support Political risk insurance

Concessional financing Project Financing Credit enhancement
Grants Grants Trade finance
Risk mitigation Concessional Financing
instruments

Advice Advice

Hydrogen for Development Partnership

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 1 → 10 → 20 → 30
• Target 40 Mt clean hydrogen by 2030
US$2 trln investment
• 20 Mt in EMDC – 100 NEOM-size projects –
financing gap 10-40 bln/yr
• Expectation is 1/3 blue & 2/3 green hydrogen in 2030
and 2050: 80% of production investment needs for
green, 20% for blue Electrolyzer

• Bulkiness of commercial scale projects is an issue

• Rising interest rates and rising electrolyzer prices
make renewable hydrogen projects more difficult
 EMDC: Emerging Markers
and Developing Countries
FID+
NEOM KSA
Hyphen FEED: Front-End
Tra Vinh Vietnam
Namibia
Una India Engineering Design
Camacari Brazil

FID+: Final Investment

Decision

Note: excludes renewable power

component ~ $1 trln when this is
included – double again for 1.5 C

Source: Hydrogen Council and McKinsey

Expected ammonia demand up to 2050 for the 1.5°C scenario
• Green ammonia to replace
current ammonia demand
• Future possible green ammonia
applications as shipping fuel,
hydrogen carrier and power
generation
• 269 Mt under development
worldwide.
• 133 Mt clean ammonia projects
are under development in EMDCs
(ex China)
• EMDC 112 projects (around half
of all projects under development
worldwide) have an average size
of more than 1 Mt
Source: IRENA and AEA, 2022 • 1.4 Mt is under construction (1%)

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Current and future production costs of renewable ammonia

• Ammonia spot price peaked in

2022, back to normal since
• Green ammonia production
cost in good locations are lower
than spot prices
• Hydrogen cost dominate
renewable ammonia
Best in Class production cost (nearly 200 kg
hydrogen/t ammonia)
• Many estimates but no public
prices for green hydrogen or
renewable ammonia at this
moment – H2Global and
European Hydrogen Bank will
create some clarity through
auctions
Source: IRENA and AEA, 2022

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• Most advanced hydrogen projects are ammonia projects
• Ammonia for power – Japan and Korea – possibly 5 Mt by 2030
• Shipping
• 90 ammonia-ready vessels (Clarkson data Jan 2023), 2 dual-fuel vessels (Exmar),
CMB/Bocimar orders etc
• DNV database 2 vessels + 1 tug boat on order
• WinGD engineering, Warsila, MAN engine & systems design
• Nitrogen fertilizer prices vary widely
• Early opportunities where prices are high and import dependency is high
• CBAM – 100 USD/t CO2 translates into 150 USD/t ammonia more expensive grey
• Ammonia as hydrogen carrier – but cracking is relatively inefficient and therefore costly

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 Shipping cost matter
Infrastructure warrants attention from an economic and
enabling perspective

Ammonia is today the

only large scale
affordable hydrogen
shipping option

As long as its used as

ammonia (fertilizer,
shipping fuel, power)

Cracking efficiency
today 70% - need for
innovation

Important WB activities
related to ammonia
infrastructure
Source: Scaling Hydrogen Financing for Development, forthcoming

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 Green hydrogen production
will only become cost effective through robust innovation,
deployment support and carbon pricing and carbon financing

Cost range
support needed

A few competitive cases

Source: Scaling Hydrogen Financing for Development, forthcoming. Compiled range of estimates for different types of hydrogen based on 26 global
studies published after 2021.
Source:

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 Offtake risk
is the most critical
sub-category of risk

Source: Scaling Hydrogen Financing for Development, forthcoming

• Synonymous with “this stuff is more expensive, who will pay the premium”
• Offtake contracts specify price, duration, volume
• Delivery location and quality
• Generally offtake contact is shorter than the project life (NEOM exception)
• An MoU or a press release is not the same as an offtake contract
• Chicken or egg problems:
• Who signs a long term contact when prices are expected to fall
• Not project, no contract. No contract, no project.
• Possible solutions: regulated users, first movers (eg in shipping), carbon pricing,
government support

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 Reduction in production cost of renewable hydrogen,
2023 to 2030 – the importance of financing cost

For the reduction to happen,

early mover projects need to
happen, without which
expertise and Financial innovation Technology innovation
implementation cannot
evolve

Source: Scaling Hydrogen Financing for Development,

forthcoming

Financial innovation Technology innovation 16

 Pre-FID: Post FID:
Offtake, infrastructure, license to operate risk Policy risk, creditworthiness risk, technology risk, etc.

Can be $100 mln

for a single project

FEED: Front End Engineering and Design; FID: Final Investment Decision; COD: Commercial Operation Date
10 GW lighthouse initiative under discussion
• Create confidence and reduce financing cost
• Debottleneck EMDC project pipeline
• Get projects to FID
• Mid-size or phased projects
 Ideas in action:
Hydrogen for Development (H4D Partnership members)
Provide technical assistance
and practical guidance to
deploy clean hydrogen projects
in developing countries and
AEA to join soon !
emerging economies

• ESMAP-led initiative
established at COP27

• Has grown from 12 to

36 members

• Provides best practice advice

to WBG member countries

• Meeting to share lessons

learned in India (March 2023)
and Chile (October 2023)

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• A modular approach to certification at different stages along the supply chain
• A single methodology to calculate the emissions intensity of all H2 production pathways
• Alignment between accounting methods and policy requirements for additionality,
temporal and geographical criteria for hydrogen produced using grid electricity;
• Internationally accepted methodologies to manage blending of traded hydrogen in
order to link production criteria with market requirements;
• Harmonised systems of quality infrastructure for national standards bodies to ensure
fairness and accountability of hydrogen certification;
• Establish a process to facilitate mutual recognition between certification schemes for
hydrogen and derivatives; and
• Think beyond hydrogen and ensure continuity for the hydrogen derivatives most likely
to be traded, such as ammonia.
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 IPHE Task Force on Hydrogen Production Analysis
‘Quantification Methodology’ Working Paper Version 3
• Published Methodology for Determining the GHG Emissions
Associated with the Production of Hydrogen Working Paper
Version 3 July 2023
• Hydrogen Production Pathways:
• Electrolysis
• Steam Methane Reforming with CCS
• Industrial By-Product
• Coal Gasification with CCS
• Biomass
• Auto-Thermal Reforming with CCS
• Conditioning and Carriers of H2
• Liquefaction
• Ammonia
• Liquid Organic Hydrogen Carriers → transferred to ISO TC197/SC1/WG1
• Transportation of H2 → ISO TS 19870 expected for COP28
• Marine; Pipeline; Mobility – Train, Truck → Close of voting 14 November
October 2023
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➢ Need portfolio of internationally-recognized standards and certification boundaries and
thresholds
➢ International harmonization in methodology and boundary required.
• Wording: clean, renewable, green, low carbon
• Varied criteria for emissions threshold ranging between 1.0kg CO2e/kg
H2 (“green hydrogen”) and 4.9 kg CO2e/kg H2 (“clean/low carbon”).
• Inconsistent emissions reporting boundaries between schemes, ending at
either H2 point of use or point of production - direct comparison not possible.
• ~1/3 of existing and emerging certification schemes require RE “additionality”
➢ National policy needs to provide guidance on RE criteria (RE carbon accounting, transfer
of renew electricity GOs to H2 producers and end consumers)

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GHG standards do not pose an immediate problem to develop clean
and renewable ammonia
Most renewable ammonia export projects under development use dedicated RE power, not grid
connected

Such projects will meet all GHG standards

However need for certification in order to ensure “clean” nature of the produce to warrant a
premium price

Blue ammonia projects more susceptible to scrutiny

The use of CO2 matters – length of storage is contentious

Methane upstream emissions can be contentious

Lax standards for blue ammonia can impact the viability of renewable ammonia

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THANK YOU!
 Certification Design and Tracking &
Standard Governance Enforcement Scale Adoption
Business Model

• Defines scope and Outlines the roles and • Audit and verification Chain of Custody mode: • Demand Aggregation
boundary responsibilities of: based on standard • Mass Balance
• Data Inputs and • Standard & criteria • Book and Claim • Market
Quality (measurement Certification Owner • Awards certification Engine (normalization
Required Detail

type, • Certificate Issuing Digital credit issuing & to other metrics)

conversions/calculation, body and Registry retirement platform
Frequency) • Registry • Harmonization to
• Data handling protocol Defines any enforcement • Tradability other Standards of
(IT systems) mechanism and • Credit Value Clean H2
• Sets threshold or criteria noncompliance clauses
• Defines base unit for Product Service • Policy Integration
certification attribution • Consumer Offering pathway
(i.e., emissions
reduction)

All elements critical to scale renewable hydrogen as a differentiated product.

Source: IRENA and RMI

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Source: IRENA and RMI 15
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