5 barriers to Investment in Hydrogen With Potential Solutions

Building a robust hydrogen economy is crucial if we are to hit the UK’s net zero target by 2050.

But we can’t do this without investment.

The hydrogen industry has massive potential to help us to make the switch to cleaner fuels in so many areas, from transport to heating. But how do we turn it into a magnet for investors?

Here are five major hurdles we need to clear, and some potential solutions that could help hydrogen flourish.

It’s expensive to produce

Producing green hydrogen from renewable sources is still more expensive than from natural gas or fossil fuels.

The government has a critical role to play. It can use subsidies and tax incentives to bring costs down and create a more level playing field with other technologies.

One of the major expenses is producing electrolyzers, which are used to split hydrogen and oxygen. These high production costs are one of the main factors stifling development and scaring off investors.

Government investment could help develop more efficient and cost-effective electrolyzer designs. Meanwhile, we need to increase production to allow the industry to benefit from economies of scale.

Weak infrastructure

There are many challenges around the producing, storing and transporting of hydrogen. But one of the biggest difficulties our industry faces in 2024 is our current UK infrastructure, which simply isn’t up to the job.

Not only does it create logistical problems but it also increases costs, further putting off investors.

While it will be a huge job to build the robust hydrogen infrastructure that’s needed, the longer we leave it, the harder it will be. Plus, there are lots of innovative ideas emerging which can be explored.

The solution is collaboration between the government and the private sector. We need a joined-up approach between industry and innovation leading to pipeline retrofitting, and planning and designing a network of refuelling stations.

We should also be looking to work with – and learn from – other countries around the world as they create their own hydrogen infrastructures. And in the meantime, we need to pursue options that don’t require transporting hydrogen halfway across the country.

Producing hydrogen on-site can be achieved cheaply and easily by the gasification of waste and non-recyclable materials. Small production facilities situated near recycling facilities and waste sites could create local fuelling hubs for nearby businesses.

Lack of regulatory clarity

There’s no doubt that a lack of clear policies around the hydrogen industry is holding back investment. Failing to have a consistent regulatory framework means financial uncertainty. This regulatory limbo is a global problem, which is damaging the industry and stopping it from moving forward.

The solution again lies in the hands of our politicians. Our government could get rid of this barrier to investment by prioritising the development of a long-term hydrogen strategy.

This includes mapping future demand, setting targets, addressing safety regulations and setting standards, along with introducing financial incentives for hydrogen production, storage and use.

If we can get clarity on forward-thinking policies covering green taxes and reducing emissions, we can give people confidence to invest in the industry.

Energy inefficiencies

The energy conversion losses that take place at the various stages of hydrogen production, storage, transportation and usage also create barriers to investment.

The answer lies in more investment in emerging technologies, which can help to solve this problem and improve overall efficiency.

This includes exploring next-generation electrolyzers and fuel cells for production, and using liquid hydrogen or ammonia as a carrier in transport and storage. Small, local hydrogen production hubs would eliminate the wastage caused by transportation.

Rival technologies

Potential investors know that hydrogen faces competition from other renewable energies, such as battery-electric solutions for passenger cars and other transport. While many of these rival technologies are in more mature sectors – for example, the advanced infrastructure already in place for charging stations for electric vehicles.

The solution? We need to flip this idea on its head.

The hydrogen industry shouldn’t be working in competition with other technologies, it should be working with them.

For example, we should be concentrating on investing in hydrogen in the sectors where it is strongest. This includes long-haul transportation, the aviation industry and industrial processes.

Meanwhile, investment in research and development around batteries and other green technologies should be focused on the areas where they are most efficient. Harnessing the power of each technology in the area where it has the most potential stands to benefit everyone. 

Switching on a greener future of collaboration

If we are serious about making the UK a clean energy superpower and achieving net zero by 2050, the next few years will be crucial for hydrogen investment. We need to work harder to make it easier to invest in the hydrogen sector.

We need to see governments working together with industry to drive research and innovation. Public-private partnerships are key, along with clearer regulations and supporting technological innovation.

If the main challenges are addressed in the right way, hydrogen has the potential to become a magnet for investors -and that benefits everyone!

About The Author

Paul Willacy

Paul is a seasoned engineer with over 20 years of experience in manufacturing and gasification. Beginning his career in 1999, he specialized in designing equipment for recycling oily waste in refineries, ensuring compliance with industry standards. As Managing Director at Refgas, he led the construction of pioneering gasification systems, including a 6MW biomass plant. In 2020, Paul founded Compact Syngas Solutions to advance syngas applications, focusing on hydrogen and liquid fuels. His career is marked by securing significant funding, managing international projects, and driving energy innovation forward.