On hydrogen production:
Reclaim Finance is not in favor of supporting hydrogen production using fossil fuels, with or without CCUS. Producing hydrogen using fossil fuels is highly carbon intensive and CCUS has no positive impact on the climate, and even a negative impact, compared to traditional use of fossil fuels. Financial institutions should not include hydrogen produced from fossil fuels in their energy transition financial and capacity targets, or in their energy transition frameworks.
Instead, financial institutions should focus their support on electrolytic hydrogen, which is the only form of hydrogen compatible with a fossil fuel-free energy system. In our view, it is the only hydrogen that can be labelled “sustainable”, provided it is produced using sustainable power.
While the current pipeline of electrolytic hydrogen projects is significant, it needs to drastically increase. Even so, the gap with the planned capacity for 2030 in the NZE seems unlikely to be closed. Financial support is critical; Reclaim Finance recommend actively supporting the development and deployment of electrolytic hydrogen projects. To enable this at the required scale, electrolyser manufacturing capacity must additionally increase; we recommend actively supporting these projects.
On hydrogen demand:
Reclaim Finance is not in favour of supporting the use of hydrogen for power storage or heating. Though hydrogen could bring benefits to power systems as a storage solution and help integrate variable renewable energy, other hydrogen-free solutions can provide this service more efficiently.
Considering the few decarbonization options available to some sectors and the strong competition for hydrogen, financial institutions should support the development of hydrogen-based transition solutions for specific hard-to-abate sectors, such as the hydrogen-based Direct Reduction of Iron and the use of hydrogen-based fuels in long distance transportation, primarily shipping.
Find out more about hydrogen in the dedicated factsheet.