Monthly Market Thoughts – A look back and a look ahead

It was hard to resist the temptation of opening this monthly editorial by commenting on the latest roller coaster that the offshore wind sector has yet again experienced lately. But given that we have done so extensively in the news, as well as here and here, the spotlight shall be shone elsewhere. And for good reason.

Hydrogen update

UK

The end of last month saw some important updates on hydrogen allocation rounds, both in the UK and in Europe. On 19 April, the UK Department for Energy Security and Net Zero (DESNZ) application window for the hydrogen allocation round 2 (HAR2) closed.

Potential bidders as of last month include Carlton Power – which also secured grants under the first round (HAR1); Protium; Grenian Hyrdogen; and HydroGenus.

Shortlisted projects will be announced in autumn [2024], with successful bidders expected to receive contracts from DESNZ in early 2025.

It is worth noting that this is a pretty ambitious auction. Up for grabs is 875MW capacity of low-carbon hydrogen production. For context, HAR1 only managed to allocate half of its tendered capacity by awarding 125MW across 11 projects for a total of £2 billion.

But that was the end of 2023, another era, it seems, for the hydrogen sector. The announcement of HAR1's results, especially in the UK, breathed new life into the sector, so much so that during inspiratia's first event of the year – Overcoming the Challenges to the Development of a Hydrogen Economy in collaboration with Squires Patton Boggs – head of Power to X at EDF – R, Matthew Day called 2024 "a year of reckoning for the industry".

The enthusiasm was also felt during inspiratia's New Tech, Hydrogen, and CCUS Summit in Berlin, where hydrogen players from across Europe shared their (high) expectations for the sector in 2024.

And here we are waiting. By the sounds of it, that optimism remains as the industry expects HAR2 to be oversubscribed. However, a few potential red flags to consider. A general election is looming, ever more so following the results of last week's local elections that confirmed an overwhelming support for the Labour party across the country.

Also, HAR1 awards remain to be firmed up, as the winning developers will need to make a final investment decision. The stakes are quite high for HAR2 as, if successful, it could make up a large portion of the UK's aim of 1GW of production projects in operation or construction by 2025.

Europe

The pressure is definitely on for the UK government to deliver, especially since the European Hydrogen Bank Auction was indeed oversubscribed after attracting 132 bids.

Out of those, only seven projects were awarded a total €720 million across four European countries. They are: eNRG Lathi – Finland; El Alamillo H2 – Spain; Grey2Green- II – Portugal; HYSENCIA – Spain; SkiGA – Norway; Catalina – Spain; MP2X – Portugal.

Winners are expected by November 2024. These seven projects are collectively expected to produce 1.58 million tonnes of renewable hydrogen over ten years.

The grant criteria require the successful projects to be fully operational within five years of award date. The output of the projects will be subsidies under an initial 10-year contract. Selected projects will receive subsidies for up to 10 years, with an obligation to commence hydrogen production within five years of the grant award.

At least two of those projects – SkiGA and Catalina – are making significant progress, with the former expecting to make FID by the end of the year and the latter being in the market for commercial debt to support construction.

A look ahead: Events

And now, a look ahead at the inspiratia's events calendar.

As well as making the final push ahead of our Financing European Renewables next week (16 May) in Madrid, we are also gearing up for the Energy Storage Summit next month (25 June) in London.

As part of that, I recently had the pleasure of hosting the Energy Storage Summit Webinar where I sat down with Zenobe's Semih Oztreves; CIBC Capital Markets' Eleanor Craig; and cQuant's Pierre Lebon to open the debate on some very topical points for the sector.

Will longer duration battery take over? Where is the pipeline for BESS outside of the UK? Will standalone projects continue to prevail on co-location? That, and much more, will be addressed in the webinar, coming out tomorrow (8 May) at 2pm BST.

Register your interest here. For more, and for an amazing networking opportunity, come to the event.