The development of green hydrogen is driven in part by a push to decarbonise heavy industries and reach net zero targets.
Industries like steel production, refining and chemicals face growing expectations to reduce their carbon footprints as they adapt to evolving regulatory and market demands.
Yet areas with high demand for green hydrogen may not be locations most effective for production powered by renewables. While some countries in Europe and Asia have significant industrial demand, the optimal conditions for renewables to power electrolysers – such as abundant sunshine or wind – are often found in more remote countries and regions such as Chile, Namibia, North Africa and the Middle East, where market needs for hydrogen are much lower.
This geographical disconnect highlights a need to scale production in these locations, combined with development of export and import infrastructure to meet industrial demands in the larger destination markets.
Policy support to spur green hydrogen development
While green hydrogen has vast potential, economic viability remains a central hurdle. Prices must be competitive with the fossil fuels that green hydrogen would gradually displace.
“One significant challenge is that the levelised cost of hydrogen (LCOH) is currently too high to compete with traditional grey hydrogen,” says Kay Radtke, Vice President of Renewable Hydrogen Europe at Worley.
Governments and industry players are acutely aware of this gap. However, GlobalData’s hydrogen database shows insufficient government support compared to other sectors where projects often receive significantly higher funding percentages. Out of its total bank of hydrogen projects, just 0.75%, or 15, received full government funding and only 18.55%, or 371, received partial government funding.
Several policy initiatives have been implemented to address this issue. The EU has launched initiatives such as the Important Projects of Common European Interest (IPCEI), designed to incentivise production by lowering capital expenditure (CAPEX). Similarly, the US Inflation Reduction Act (IRA) and the UK Hydrogen Allocation Rounds (HARs) support green hydrogen projects.
Despite these efforts, the price gap between production costs and what offtakers are willing to pay persists, necessitating further mechanisms such as the European Hydrogen Bank’s approach towards contracts for difference (CFD). These CFDs aim to match the difference between the highest market price and the lowest production cost, thereby ensuring financial feasibility for both producers and consumers.
Germany’s H2 Global initiative follows a similar approach. Although initially limited to Germany, it is expanding internationally, supporting offtake and supply mechanisms. However, as Radtke points out, a comprehensive market mechanism is necessary. “You need mechanisms on the offtake side and the supply side to make it work.”
Robust incentives and long-term policy support are essential for green hydrogen to transition from niche projects to viable mainstream operations and a competitive commodity product.
Standardising green hydrogen solutions
Another challenge in scaling green hydrogen production is the nature of current projects, which often involve custom solutions that drive up costs. Worley has identified the importance of standardisation in hydrogen plant design and delivery, which can significantly reduce capital expenditures, optimise the LCOH and streamline project development.
“We have developed a standardised package plant solution, which aims to significantly reduce the capital cost of the asset,” explains Radtke. “This package uses standardised unit blocks, capacities and an integrated supply chain solution to deliver the lowest optimised cost.”
The goal is to minimise the bespoke nature of green hydrogen projects and achieve a modular, standardised system that can be deployed quickly and at lower cost. This approach, also known as a minimum viable product, focuses on delivering functional, cost-effective hydrogen production plants that meet industry specifications without unnecessary customisation.
Making green hydrogen concepts feasible
The feasibility study for a green hydrogen project creates the foundation for a successful operation. As every project has unique drivers and outcomes, Worley starts with the customer’s business case. “Understanding our customer’s business drivers, project purpose and goals are important,” adds Radtke. “While elements of the end design may be standardised, the feasibility work needs to incorporate each project’s unique risks.”
This focused approach ensures each project is designed to meet specific goals, whether it’s producing hydrogen for export, feeding into a gas turbine, producing further derivatives like green ammonia, e-methanol or sustainable aviation fuel, or replacing grey hydrogen in an existing process. From there, a detailed analysis of the renewable energy source – wind, solar or another option – determines how to integrate energy production with hydrogen generation. Intermittency, storage options and grid stability all factor into the feasibility of a project.
“Selecting the optimal technology for green hydrogen production is another critical step in moving from concept to operations,” continues Radtke. “The choice of technology, from proton exchange membrane (PEM), alkaline or solid oxide electrolysis cells (SOEC) is heavily influenced by the project specifics.”
For example, PEM electrolysers have a smaller footprint, which may be advantageous in space-constrained environments. However, other factors, such as the maturity of the technology and the pressure requirements of the hydrogen offtake, must be considered amongst others. There might also be differences in the balance of plant around the electrolyser that have impacts on the overall CAPEX and thus play a role in the cost evaluation of an OEM solution.
Technology selection needs to consider performance and non-technical factors such as manufacturing capacities, local content requirements and production site locations. The availability of key materials such as rare metals used in PEM technology also plays a role, particularly when customers have specific environmental, social and governance (ESG) requirements.
Overcoming major challenges in green hydrogen production
Technological readiness presents a challenge. While certain technologies such as SOEC show promise for integrating with ammonia production facilities, they are not yet at the scale required for gigawatt-level applications. Until these technologies mature, project developers will need to balance the advantages of cutting-edge technologies with their readiness for large-scale deployment.
The role of engineering partners such as Worley is critical in optimising projects. Ensuring that all stakeholders, from technology providers and key equipment suppliers to fabricators and construction teams, are aligned and working towards cost-effective solutions is vital to making green hydrogen a viable option for the future.
The future path for green hydrogen
With continued innovation, standardisation and collaboration across the industry, green hydrogen’s potential to contribute to the energy transition is becoming clearer.
Worley is playing a pivotal role in addressing the technical, economic and operational challenges that come with large-scale deployment, helping partners to lower costs and accelerate the adoption of green hydrogen.
The company uses standardised systems for renewable energy integration, hydrogen production, storage and downstream derivatives, tailoring solutions to meet each project’s operational requirements.
To find out more about the hydrogen market, download the document below.
