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Can you explain the significance of these large-scale projects in the context of the global green hydrogen economy ? Sebastian Surie : These large-scale projects are incredibly significant because they have the potential to supply hydrogen and its derivatives at a volume that can impact global markets . For instance , the project we are working on in Namibia – Hyphen – is expected to be one of the world ’ s largest green hydrogen developments .
Green hydrogen is key to decarbonising industrial sectors that are difficult to electrify , like steel and ammonia production . If you look at the global steel industry , for example , it is one of the largest emitters of carbon dioxide . By replacing the carbon-intensive processes used in traditional steel production with hydrogen-based processes like direct reduced iron ( DRI ), we can make significant progress towards reducing global emissions .
Additionally , the hydrogen produced at this scale allows us to drive down costs over time , making it more competitive with grey hydrogen ( produced from natural gas ). The economies of scale that come with these projects are critical to achieving that cost parity .
Financing green hydrogen projects with blended finance CFM uses a blended finance model . Could you explain how this works and why it is particularly suited for green hydrogen projects ? Sebastian Surie : Blended finance is one of the most important mechanisms we use to bring these green hydrogen projects to life , particularly in emerging markets . The concept behind blended finance is that we combine different sources of capital – donor funding , capital from development finance institutions ( DFIs ), and institutional investors – into a single fund . Each source of capital has its own risk and return profile , which allows us to use the donor capital to take on the highest risk during the early stages of a project , such as during feasibility studies or securing permits , and bring in more commercial capital at a later stage in the project lifecycle .
Green hydrogen is still an emerging sector , and projects are capital-intensive , which makes it difficult to attract purely commercial investment early on . By using donor capital to absorb the early risks , we make the projects more attractive to institutional investors once they have been de-risked . These institutional investors come in later , once the project has reached what we call an ‘ investable ’ stage , typically at start of construction . This model allows us to mobilise significant amounts of capital that might otherwise be difficult to raise .
For green hydrogen projects , this is particularly important because the technology , while proven , still requires large upfront investments and long lead times before projects start generating cash flows . By using blended finance , we are able to unlock that initial capital and move projects forward to the point where they can attract more conventional sources of funding .
From a technical standpoint , how does CFM ensure that these projects are built with long-term sustainability in mind ? Willem Frens : Sustainability is not just about producing hydrogen but also about ensuring that the entire project lifecycle is environmentally and socially responsible . One way we ensure sustainability is by carefully selecting technologies that are efficient and have a minimal environmental footprint .
In addition , we are designing these projects with scalability in mind . We want to make sure that as demand for green hydrogen grows , the projects can be expanded to meet that demand without having to overhaul the entire system . This means building flexible infrastructure , such as modular electrolysers that can be added as needed .
12 Hydrogen Tech World | Issue 19 | December 2024