Leveraging De‑Risking Instruments and International Co‑ordination to Catalyse Investment in Clean Hydrogen

Annex D. Case studies developed in 2024

Case study 1 - Ceará Green Hydrogen Hub / Industrial and Port Complex of Pecém (CIPP)

Figure A D.1. Overview of Pecém complex

Source: Case study documentation

Table A D.1. Key indicators of the Ceará Green Hydrogen Hub

Indicator	Company / Project
Value Chain step / Application	Production / Clean hydrogen and ammonia
Country	Brazil
Status	Development: feasibility, pre-FID
Production route & type of renewable	Solar PV, onshore wind, from 2035 offshore wind expected (dedicated green field infrastructures) + grid electricity; electrolysis
Key project metrics (RE capacity / Electrolyser capacity / Ammonia Production / etc.)	Renewable power capacity: 6 GW Electrolyser capacity: 2 GW with potential to increase up to 3 GW Ammonia production volume: 2 million tonnes per year by 2030
Hydrogen production (kt/y)	Phase 1: 400 kt/y (500 MW electrolyser) Phase 2: 1 600 kt/y (2 GW electrolyser)
Start-up date	Phase 1: 2025 for the first project phase; Phase 2: 2027 (expected start of construction); 2030 (expected start of operations)
Amount	USD 7 billion

Source: Authors based on case study documentation

Basic description

The Ceará Green Hydrogen Hub (Complexo do Pecem, 2022[1]), located at the premises of the Pecém Industrial and Port Complex (CIPP) in Ceará, Brazil, aims to produce clean ammonia for export, targeting mainly the European market. CIPP is a joint venture formed by the State of Ceará (Brazil) and the Port of Rotterdam (Netherlands) conceived and designed to be an industrial and port space. Currently in its development phase, the Ceará Green Hydrogen project secured almost 40 Memoranda of Understanding (MoUs) with national and international companies. Some initial steps towards project implementation have been taken, including access to land reservation and grid connection.

The project focuses on the production of clean ammonia from clean hydrogen via electrolysis, using a mix of renewable energy sources such as onshore wind and solar power and grid electricity. The project focuses on clean ammonia production for export targeting mainly European countries via the port of Rotterdam.

Total investment is estimated at USD 7 billion. The total investment includes contributions from various parties, including USD 135 million infrastructure investment from the World Bank; USD 2 billion investment from Fortescue and Casa dos Ventos together with Total Energies; expected investment of USD 150-200 million from CIPP; expected investment of USD 200 million from local storage operator; expected investment of USD 50-100 million from local partners to be deployed before final investment decision (FID). A potential investor and operator for the ammonia pipeline, tank terminal and ship operations is pre-identified. The remaining amount is expected to be financed by private and public investors as well as senior debt providers.

The project will unfold in two phases with a total electrolysis production capacity of 2 GW, which may be further increased up to 3 GW. The first phase will involve the installation of 500 MW of electrolysers, aimed at producing 400 000 tons of ammonia annually, with an investment of USD 1.3 billion (BRL 7 billion). The second phase will expand the capacity by adding 1.5 GW of electrolysers, increasing production by 1.2 million tons to a total of 1.6 million tons per year. This second phase will require an additional USD 3.7 billion (BRL 20 billion) investment.

Project Rationale 

The project is driven by the increasing global demand for clean hydrogen to achieve carbon reduction goals and the transition to a sustainable energy future. Ceará’s strong commitment to sustainability since 2021, combined with its important potential for wind and solar energy generation, makes it an attractive location for clean hydrogen production. The site's strategic geographical location as the closest point in Brazil to Europe enhances trade opportunities. Additionally, Ceará benefits from extensive connectivity with Europe through its partnership with the Port of Rotterdam, which has launched several projects to become Europe's important clean hydrogen centre. The project is further supported by shared infrastructures available within operational port premises: an available electricity grid allowing capacity factor optimisation and water networks for electrolysis, shared tanking facilities for liquid ammonia, and over 1 700 hectares available for clean hydrogen production, for which the environmental permitting is pre-approved. There are six producer customers who pre-signed contracts with CIPP and paid a reservation fee for the land.

The project is expected to create significant employment opportunities during both the construction and operational phases, contributing to local economic development. Approximately 1 500 jobs are anticipated during construction and around 200 permanent jobs once operational.

By producing clean hydrogen, Brazil aims to establish itself as a key player in the international clean hydrogen market, with significant export opportunities to regions such as Europe and Asia, where demand for clean hydrogen is high. Relying on EU import projections, the project alone aims to supply around 15% of European import 2030 target and around 25% of Port of Rotterdam import volume target.

Governance 

The Ceará state government plays a crucial role in facilitating the project by providing regulatory support and enabling infrastructure development, forming a public-private-academia partnership essential for the project’s success. Additionally, under the guidance of the Ceará state government, main local universities and institutes joined forces to accelerate R&D on green fuels, under an initiative called Rede Verdes.

Business Model 

The project aims to achieve competitive LCOH through the utilisation of abundant and low-cost renewable energy resources in Brazil. Clean hydrogen production is currently more expensive than conventional hydrogen production methods such as steam methane reforming. However, the competitive cost of renewable energy, advancements in electrolyser technology, scale effects, and tax break schemes for export processing zones (ZPE) are expected to enhance economic viability of the project.

The Ceará Green Hydrogen Hub encounters several viability barriers. Uncertainties in the clean ammonia offtake market could impact demand and price stability. Additionally, the cost gap between conventional and clean ammonia presents a challenge for competitiveness. Technological issues, particularly in scaling up production, pose further obstacles. The project also requires extensive infrastructure for hydrogen and ammonia storage, transportation, and distribution, which adds complexity. Moreover, both local and global regulatory and policy uncertainties could affect the project's long-term viability and attractiveness to investors. Addressing these barriers is essential for the project’s successful execution.

Enabling Market Conditions 

Several measures are being considered to enhance the economic feasibility of the CIPP hydrogen project. Although specific measures are not detailed, tax reliefs are expected to play a significant role, potentially including incentives linked to special export processing zones (ZPE) regulations. A dedicated tax break scheme has been approved. Additionally, offtake agreements with industrial consumers and energy companies are planned to secure long-term demand and stable revenue streams for the project.

Financing 

The project primarily relies on private financing, with significant investments from international and local stakeholders. While specific details are not provided, development finance institutions, such as the World Bank, the European Union (EU), the Brazilian Development Bank (BNDES), and Banco do Nordeste, may participate to de-risk the project and attract further private investment. Exact equity/debt ratios are not disclosed, but a mix of equity and debt financing is typical for such large-scale infrastructure projects to manage risk and ensure financial viability. The project may involve senior and subordinated debt structures to distribute risk among investors and lenders. Public sector involvement likely provides additional risk mitigation.

Lessons Learnt 

Robust infrastructure development is critical for the success of the CIPP hydrogen project. This includes large-scale production and conversion assets, as well as pipelines and storage facilities for the efficient distribution and export of clean hydrogen and ammonia. The project benefits from shared infrastructure within the operational port premises, which helps mitigate certain risks, reduces CAPEX concentration, and improves the likelihood of achieving a final investment decision (FID). Additionally, policy stability is crucial for attracting and maintaining investment, clear regulatory frameworks and incentives are necessary to enhance project feasibility. Furthermore, public-private partnerships (PPP) play a key role in ensuring industrial excellence, operational efficiency, and securing financing at the required scale.

Case study 2 – Egypt Green Hydrogen / Scatec

Table A D.2. Key indicators of Scatec’s Egypt Green Hydrogen

Indicator	Company / Project
Value Chain step / Application	Production / Clean hydrogen and ammonia
Country	Egypt
Status	Under development
Production route & type of renewable	Solar PV, onshore wind, grid electricity, electrolysis
Key project metrics (RE capacity / Electrolyser capacity / Ammonia Production / etc.)	Renewable power capacity: 203 MW Electrolyser capacity: 70 MW Ammonia production volume: 70 000 t/y
Hydrogen production (kt/y)	13 kt/y (feedstock to ammonia production)
Start-up date	Phase 1: 2024 project development Phase 2: 2025 (expected start of construction); 2027 (expected start of operations)
Amount	USD 520 million

Source: Authors based on case study documentation

Basic description

The Egypt Green Hydrogen (Scatec, n.d.[2]) project aims to produce green ammonia and export it to European end-users. It is located in Ain Sokhna, in the Suez Canal Economic Zone, a green hydrogen production complex with a strategic location and unique features that incentivise green hydrogen development, including proximity to industrial zone, sea water desalination plants, and easy access to the Ain Sokhna Port.

Recently, the project secured an offtake agreement with Hintco GmbH, a subsidiary of the H2Global Foundation, through the first H2Global pilot auction for green ammonia. The auction, funded by the German Federal Ministry for Economic Affairs and Climate Action (BMWK), will provide a total of USD 440 million (EUR 397 million), with the aim to deliver around 397 kilotonnes (kt) of green ammonia cumulatively by 2033.

The project, led by a Norwegian company specialised in renewable energy, Scatec, comprises a 100 MW electrolyser facility (including renewable power assets and water sourcing) and an existing ammonia production plant using the Haber Bosch process. Electricity will be generated in an onshore windfarm of 203 MW located in Ras Ghareb (close to the Red Sea) and a newbuild solar PV plant of 70 MW capacity in Benban (south of Egypt). Egypt’s national power grid will be used for electricity transmission to the production facility. Ammonia will be transported via a 7 km pipeline to Ein El Sukhna Port, and delivered to the Port of Rotterdam by Fertiglobe International Trading. Then, it will be sold by Hintco in batches of 500 tonnes as standardised quantities in annual auctions.

Figure A D.2. Description Scatec Green Hydrogen project

Source: (Hintco, 2024[3])

The total project value amounts to approximately USD 520 million. The construction and installation of the electrolysers will take place until 2027. Then, green ammonia will be produced, starting with 19 500 t in 2027, and 40 000 t/y from 2028 onwards.

Project Rationale 

The project is part of Egypt’s strategy to increase its domestic green hydrogen capacity, driven by its abundant renewable energy resources and strategic geographical location to export to Mediterranean countries through the Suez Canal. It is also well-suited to Europe’s plans to import 10 million tons of green hydrogen by 2030. In 2023, Scatec reached a total annual production of 4 728 MW capacity in projects in operation, under construction or reaching FID, including projects for solar, hydro and wind power generation. The Norwegian company is currently targeting USD 50–70 million (NOK 500-750 million) of annual equity investments in renewable energy.

The project is expected to create significant employment opportunities during both the construction and operational phases, contributing to local economic development. Approximately 1 250 jobs are anticipated during construction and up to 80 jobs during the operation and maintenance phase.  

By producing green ammonia, the project aims to strengthen Europe’s energy security while reducing emissions. The mitigated CO₂ emissions via green ammonia imports would be equivalent to the annual emissions of 62 000 cars. The project marks a significant ramp-up in the European green ammonia market. Based on EU’s Hydrogen Strategy, the Egypt Green Hydrogen project is expected to contribute to its 2030 import target of 10 million tons of green hydrogen, as well as to Germany’s green ammonia supply, providing 10% of annual German ammonia production.

Governance 

The project is led by Egypt Green Hydrogen S.A.E, a consortium formed by Scatec ASA, Fertiglobe, Orascom Construction, the Sovereign Fund of Egypt, and the Egyptian Electricity Transmission Company.

• Scatec is a Norwegian company specialised in renewable energy generation. It is the lead developer and majority sponsor of Egypt Green Hydrogen. The company will provide Engineering, Procurement and Construction (EPC) services in partnership with Orascom Construction, and will offer Operations & Management and Asset Management services for the project, working alongside key technology providers and project partners.

• Fertiglobe is the largest producer of nitrogen fertilisers in the Middle East and North Africa region, and a pioneer in sustainable ammonia. It operates in Egypt under its subsidiary, Egyptian Fertilizer Company, that will lead the production and trade of green ammonia through Fertiglobe International Trading.

• Orascom Construction: is a global engineering and construction contractor primarily focused on infrastructure, industrial and high-end commercial projects in the Middle East, Africa, and the United States. Orascom Construction is expected to execute the local works for the ammonia production facility, using state-of-the-art project technology and Egyptian engineers.

• The Sovereign Fund of Egypt provides investment in clean energy projects to support Egypt’s roadmap towards zero emission targets. The Fund will provide financial support to the Egypt Green Hydrogen project throughout the construction and operations phases.

• Egyptian Electricity Transmission Company is a state-owned company for electrical power generation, transmission and distribution in Egypt. The company will be used for the transmission of electricity to the production site through Egypt’s national power grid.

Business Model 

The project has set a net product price of EUR 811 per tonne of ammonia and a total price of EUR 1000 per tonne of ammonia (including in addition transport and trading costs). The Contract-for-Difference approach provides an opportunity for Scatec to sell green ammonia at a lower price of supply and highest price of demand. Hintco will compensate the difference between supply and demand prices. Therefore, this mechanism will help to reduce the price, create investment certainty as well as the risks hindering the early-stage green hydrogen market. The 7-year auction will be timely until the market develops sufficiently and trading in hydrogen and hydrogen derivatives can take place via conventional market participants and platforms.

Egypt’s green hydrogen production to replace grey hydrogen production is currently not economically viable. Yet, mechanisms that support low-carbon product development, such as EU’s carbon border adjustment mechanism, can incentivise investors’ appetite for renewable products and provide opportunities for Egypt to continue to develop and expand its hydrogen trade with the EU. The H2Global auction provides the financial support needed for Egypt to produce and trade green hydrogen/ammonia to international markets at competitive costs, and become a regional green hydrogen hub.

Currently, the project has secured offtake and is very likely to reach financial close in 2025, yet construction start still requires final governmental approval processes and completion of project finance processes.

Enabling Market Conditions 

Egypt is well-positioned as a producer and exporter of green hydrogen and ammonia. Egypt has been experiencing a rapid increase of energy demand and expansion of renewable energy capacity, with a shared of renewables of 12% in total power generation in 2020/2021. The expansion of renewables accompanies the development of initiatives for green hydrogen development. Egypt holds great potential to develop a hydrogen economy, based on great capacity of renewable energy generation, access to water, and strategic locations with geographical proximity to Europe to trade the final product.

Public and governmental support plays a key role in the development of the hydrogen industry. The Egyptian Government has established a regulatory and institutional framework for green hydrogen deployment, including (Cabinet Decrees No. 981 of 2022, and No. 104 of 2022) and a law (Law No. 2 of 2024), along with different incentive policies and measures. The Green Hydrogen Incentives Law, for instance, provides significant tax incentives for new green hydrogen and derivatives projects in Egypt, including tax credits of 33-55% and tax exemptions. Recently, the Government of Egypt has published the National Low Carbon Hydrogen Strategy, which sets the target to produce 9.2 Mt of green hydrogen per year by 2040 (3.6Mt for domestic consumption and 5.6 Mt for export), devoting USD 60 billion of investment.   

Additionally, the project has received technical assistance and financial support, which has helped to partially mitigate offtake risks and ensure project bankability. These includes the long-term offtake agreement with H2Global, as well as the feasibility study and guarantee provided by the European Bank for Reconstruction and Development (EBRD).

Financing 

The project primarily relies on public and private financing, with significant investments from European stakeholders. While specific details are not provided, the consortium’s partners cover a significant part of the project’s investment requirements. Additionally, international development institutions and multilateral banks, have committed to provide financing for the project, including the European Bank for Reconstruction and Development (EBRD), with a USD 80 million equity investment, and the United States International Development Finance Corporation (DFC), that will invest USD 5 million in the project. Other investors include KfW, the European Investment Bank (EIB) and British International Investment (BII). The H2Global auction, with an additional USD 443 million into the initiative, is expected to play a key role in lowering the production costs and attracting further international investments. The project is likely to reach financial close by half of 2025.

Lessons Learnt 

Long-term financial support: Facilitating access to financing mechanisms that support project’s development in the long run is key to accelerate its implementation and mitigate risks. The H2Global auction secures long-term (7 years in the case of Scatec) purchase contracts on the supply side and short-term (1 year) sales contracts on the demand side, thereby ensuring stable prices and mitigating offtake risks.

Infrastructure and logistics: taking advantage of Egypt’s existing infrastructure, including the Port of Ein El Sukhna and Egypt’s national power grid for electricity transmission is crucial to make the project operable.

Strong commitment: The Government of Egypt’s regulatory and financial support of green hydrogen economy, combined with the strong interest and commitment from the consortium’s partners, will be critical for the successful implementation of the Egypt Green Hydrogen project.

Case study 3 – HyDuqm / Engie, POSCO Holdings

Figure A D.3. Signing ceremony for the green hydrogen project in Oman on June 21, 2023

Source: Case study documentation

Table A D.3. Key indicators of HyDuqm

Indicator	Company / Project
Value Chain step / Application	Clean hydrogen and ammonia production for decarbonisation of power and steel industries
Country	Oman
Status	Feasibility study, currently under industrial design
Production route & type of renewable	Dedicated renewables (onshore wind, solar PV), electrolysis, battery storage, ammonia conversion facility, hydrogen and ammonia storage facilities
Key project metrics (RE capacity / Electrolyser capacity / Ammonia Production / etc.)	Renewable power capacity: 5.25 GW Electrolyser capacity: 2.5 GW Ammonia production volume: 1.2 Mt/year by 2030
Hydrogen production (kt/y)	200 kt (for ammonia production)
Start-up date	Construction starts by 2027 First production and exports by 2030
Amount	USD 7 billion

Source: Authors based on case study documentation

Basic description

HyDuqm hydrogen project (Engoie, 2023[4]), carried out by a consortium led by POSCO Holdings and ENGIE, is planned in Duqm, a port town in east-central Oman. The project aims to develop 5.25 GW of solar and wind capacity, integrated with battery energy storage systems (BESS), and will produce approximately 200 kilotonnes (kt) per year of clean hydrogen (see Figure 1). This hydrogen will feed into a clean ammonia production facility with a capacity of 1.2 million tonnes per annum (Mt/year) by 2030, targeting exports to South Korea, for the purpose of decarbonising power assets in Korea, while local industrial use of hydrogen in Oman in the steel sector is envisioned as an additional business case. The total investment is estimated at USD 7 billion, with construction starting in 2027 and the first exports expected in 2030. The project is currently under industrial design process, with the feasibility studies ongoing.

Figure A D.4. HyDuqm project description

Source: Case study documentation

Project Rationale 

This project supports multiple objectives, representing the carbon neutrality ambition of the project sponsors and their respective countries, i.e. South Korea, France and Thailand. In addition, it aligns with Oman’s goal to become a leading hydrogen exporter and achieve net-zero carbon emissions by 2050, contributing to energy diversification and economic development.

For South Korea, the project facilitates its decarbonisation targets, including a 40% carbon reduction by 2030. The venture is also set to create substantial trade opportunities, focusing on clean ammonia exports, which are key to decarbonising industries such as generation of carbon neutral electricity and steel manufacturing. Notably, POSCO Holdings1 plans to achieve net zero by 2050, according to its 2050 Carbon Neutrality Roadmap. To do that, POSCO aims to complete the development of commercial HyREX technology by 2030, and ultimately to ensure its steelmaking process does not generate GHG emissions. The generation assets owned by Korea Electric Power Corporation subsidiaries such as Korea East-West Power Company and Korea Southern Power Company are subject to decarbonisation through co-firing.

France is propelling an important part of the European Union’s decarbonisation plan. ENGIE Group2, with 115 GW power generation capacity, targets to achieve net zero carbon by 2045, with the interim goal of achieving 66% reduction in its scope 1 production and energy consumption to reach 110 grammes of CO₂ per kWh by 2030 compared to 2017. The group continues to commit to its “well below 2° SBTi certified target. Hydrogen is envisioned to take a critical role in the transformation, with 4 GW electrolyser capacity targeted by 2030.

Thailand pledged carbon neutrality by 2050 and net zero GHG emissions by 2065. In preparation for energy transition, Thai’s PTT Exploration and Production Public Company Ltd3 (PTTEP) has diversified into new businesses involving new forms of energy, advanced technology and decarbonization while emphasising on carbon emissions reduction. PTTEP aims to reach Net Zero Greenhouse Gas Emissions by 2050, through its EP Net Zero 2050 pathway (PTTEP, n.d.[5]).

Governance 

The governance structure of the HyDuqm project is built on an usufruct grant model, where Oman’s government, via Hydrom (Hydrom, n.d.[6])4, the orchestrator of Omans Green Hydrogen Strategy execution, and administrator of renewable hydrogen projects in Oman, acts as the grantor of the land rights, granting usufruct and development rights to developers; in line with Royal Decree 10/2023, with the Ministry of Energy and Minerals serving as the regulator and policy maker; yet Hydrom does not hold equity in the project’s Special Purpose Vehicle (SPV). The SPV is incorporated by POSCO Holdings and ENGIE as co-lead developers of the project. Samsung E&A5, FutureTech Energy Ventures (PTTEP subsidiary), Korea East-West Power Co. (EWP), and Korea Southern Power co. (KOSPO) participate as direct and indirect project sponsors. As majority offtake is to be ensured by the Korean sponsors in the partnership, majority shareholding is also owned amongst the Korean sponsors. Each project sponsor leveraging its capabilities associated with hydrogen, contributes to respective roles and responsibilities of the various development activities. The consortium will develop the project for the first seven years and then operate the plants for the following 40 years.

Business Model 

The project's business model leverages competitive renewable energy sources (solar and wind) to produce clean hydrogen, which is converted into ammonia. Clean ammonia has a high export value and is deemed to be a more commercially viable transportable form of hydrogen as of today’s technology. The Levelised Cost of Hydrogen (LCOH) will depend heavily on achieving economies of scale, but challenges remain, such as the high initial capital costs and competition from the cheaper, fossil-based hydrogen production methods.

Enabling Market Conditions 

Building on its LNG export expertise, Oman is actively developing hydrogen export capabilities. In 2021, the Ministry of Energy and Minerals launched the National Hydrogen Alliance (Hy-Fly), which unites 15 public and private entities to advance hydrogen production, transport, and utilisation. Oman’s green hydrogen strategy, unveiled in October 2022, targets 1 to 1.5 Mt of production by 2030, rising to 7.5 to 8.5 Mt by 2050. This plan requires a cumulative investment of approximately USD 140 billion by 2050.

The government has designated Duqm, Dhofar, and Al-Jazir as hydrogen project hubs, with approximately 50 000 km² of land set aside. This area could produce 25 Mt of hydrogen annually for export to Europe and Asia. Hydrogen Oman (Hydrom) was established to manage large-scale projects, land auctions, and shared infrastructure coordination. In November 2022, Oman launched Phase A auction, awarding eight projects worth USD 49 billion, and supporting 34.8 GW of Renewables' capacity in both Al Wusta and Dhofar governorates. These projects will operate for 47 years, including 7 years of development. Oman is on course to become a major hydrogen exporter, potentially accounting for 61% of the Middle East's exports by 2030, primarily as ammonia due to its suitability for export via sea, currently as per IEA report.

The HyDuqm project is aiming for long term offtake agreements. Among the consortium members, POSCO Holdings, Samsung E&A, KOSPO, and EWP are considering offtake in line with their respective carbon neutrality plans. HyDuqm is also looking at the local industry in Oman, the EU, and Japan as alternative markets. Tax incentives and trade agreements between Oman and South Korea further support the project.

Financing 

The project financing of USD 7 billion involves a mix of equity from the project sponsors and non-recourse debt financing. While specific details on the equity-debt ratio or the participation of development finance institutions are not yet fully disclosed, such large-scale infrastructure projects often include a combination of private and public funding. The key to achieving the financial closure of the project will depend on successful de-risking of the project and balanced risk allocation approach amongst the stakeholders.

Lessons Learnt 

One key takeaway from this project is the importance of aligning energy projects with both national and international sustainability goals. The collaborative approach between Oman, South Korea, and EU member states, leveraging expertise from multiple countries, can serve as a model for other nations looking to develop large-scale hydrogen infrastructure. The project also highlights the necessity of securing government support for large-scale direct investment, investment in common infrastructure in line with project's schedule and long-term offtake agreements to ensure economic viability.

Case study 4 – Karnataka project / JSW Group

Table A D.4. Key indicators of JSW Group’s Karnataka project

Indicator	Company / Project
Value Chain step / Application	Production / Renewable hydrogen and oxygen for steelmaking
Country	India
Status	Under construction: engineering and construction activities in progress
Production route & type of renewable	Solar PV, onshore wind + alkaline electrolysis
Key project metrics (RE capacity / Electrolyser capacity / Ammonia Production / etc.)	Renewable power capacity: 27 MW of RE power dedicated to clean hydrogen project out of total 965 MW RE capacity dedicated to green steel project (695 MW wind + 270 MW solar power) Electrolyser capacity: 25 MW
Hydrogen production (kt/y)	3.8 kt/y
Start-up date	2025
Amount	USD 24 million (excluding RE)

Source: Authors based on case study documentation

Basic description

JSW Energy’s Clean Hydrogen project aims to produce renewable hydrogen for steelmaking (JSW, n.d.[7]). The company has partnered with JSW Steel for an offtake commitment, and the plant will be developed within its Vijayanagar energy complex, in Karnataka state. The project is expected to be commissioned by the fourth quarter of fiscal year 2024 – 2025 (March 2025).

The project focuses on producing renewable hydrogen via electrolysis, using a mix of renewable energy sources from JSW’s existing renewable energy assets in Karnataka, which include 695 MW of wind power and 270 MW solar power. Clean hydrogen will be produced within the JSW energy complex and delivered via pipelines to both the direct iron reduction (DRI) plant and the blast furnace at JSW Steel's Vijayanagar facility. It will be blended with COREX gas and used in the DRI process, replacing fossil fuels such as coal and natural gas. In the long term, the company plans to expand its renewable hydrogen sales to other industries, including refining, fertilisers, and transportation.

The JSW Energy Clean Hydrogen project will support steel production at the Vijayanagar plant, with a DRI capacity of 1.2 million tonnes per annum. The use of renewable hydrogen is projected to result in the production of 50-60 thousand tonnes per annum of green steel. The project will generate 3.8 kilotonnes of renewable hydrogen annually, using approximately 27 MW of round-the-clock renewable energy (RTC-RE) and 25 MW alkaline electrolyser. To further expand hydrogen supply, JSW Energy has signed a Memorandum of Understanding (MoU) with JSW Steel to provide an additional 90 kilotonnes per year by 2030, contributing to reducing the carbon footprint of the steelmaking process.

Project Rationale 

Key market drivers for JSW Energy’s Clean Hydrogen project include the growing demand for green steel, driven by global decarbonisation efforts and the shift towards sustainable industrial practices. Potential customers are likely to come from industries with high carbon reduction targets, particularly in Europe, where green steel commands a premium due to stringent regulations and corporate sustainability goals. The project, as a pilot initiative, aims to strategically position JSW in the emerging green steel market, allowing the company to develop expertise in renewable hydrogen utilisation across various steelmaking processes. This long-term vision not only targets domestic demand but also opens potential revenue streams in international markets where green steel can attract a higher price premium. 

Governance 

The JSW Energy is a leading power company in India at the forefront of the energy transition by investing in renewable hydrogen initiatives. The company is part of JSW Group, a diversified conglomerate focused on steel, energy, infrastructure, cement, among other industries. In line with India’s ambitious goal to achieve net-zero emissions by 2070, JSW Energy has made significant strides in renewable energy, particularly in the State of Karnataka.

JSW Steel, another listed company of the JSW Group, focuses on steel production, with an annual capacity of 28 million tonnes per annum. Vijayanagar is India’s largest steel plant, with a total production capacity of 12 million tonnes per annum.

Business Model 

The project targets a competitive Levelised Cost of Hydrogen (LCOH) by leveraging abundant and low-cost renewable energy resources. The anticipated LCOH for renewable hydrogen is approximately USD 3.5 to 4.0 per kilogramme, supported by electricity costs in the range of USD 4 to 4.25 cents per kWh. These cost efficiencies are key to making the project economically viable while contributing to the overall reduction in carbon emissions in the steelmaking process.

The strategic location of the JSW Clean Hydrogen project in Karnataka, a state with abundant solar and wind resources, enhances its economic viability. The region's falling renewable energy costs make renewable hydrogen production more competitive compared to conventional methods. By utilising local renewable energy capacity and existing infrastructure and storage at the Karnataka plant, the project is positioned to optimise costs and improve overall competitiveness in hydrogen production.

Despite the significant potential of JSW Energy’s Clean Hydrogen project, several viability barriers exist. One major challenge is the high cost of round-the-clock renewable energy (RTC), which directly impacts hydrogen production costs. Additionally, starting production on a small scale limits the project's financial viability, as it misses out on economies of scale that could reduce unit costs. Another key barrier is the steelmaking process itself, which has a turndown constraint of approximately 50%. This requires incremental infrastructure development to ensure sufficient renewable hydrogen supply to meet the minimum process requirements. Scaling up production to meet industrial demands will further necessitate substantial investment in infrastructure.

Enabling Market Conditions 

The Government of India is actively supporting the development of renewable hydrogen through policy support and subsidies. As part of this strategy, the Government launched in 2023 its National Green Hydrogen Mission to drive the production and use of clean hydrogen, supported by an USD 2.4 billion (INR 19 744 crore) budget. With a target of 5 Mt of clean hydrogen annual production by 2030, the Mission will support clean hydrogen demand creation, cost-effective production and use in various sectors, including steel.

As part of the Mission, India launched two auctions in 2023: (i) the first one offers subsidies for up to 1.5 GW of electrolyser manufacturing capacity, with a total envelope of USD 541 million (INR 4 440 crore); (ii) the second one supporting 450 kt per annum of clean hydrogen capacity for 3 years, offering up to USD 0.60/kg subsidy. In 2024, a second tranche of auctions was launched, offering similar subsidies for electrolyser manufacturing and clean hydrogen production, as well as further subsidies for clean hydrogen hubs. In early 2024, JSW Neo Energy, a subsidiary of JSW Energy, was among the auction winners, with the Production-Linked Incentive (PLI) corresponding to this project.

Financing 

The JSW Energy Clean Hydrogen project is financed through a project financing structure, incorporating both debt and equity components. This approach allows the project to leverage external funding while managing financial risks associated with large-scale infrastructure investments. No concessional finance instruments have been reported as part of the financing structure, indicating that the project relies on conventional debt and equity sources.

Lessons Learnt 

The JSW Energy Clean Hydrogen project provides several key lessons. First, government support is critical to its success, with incentives, subsidies, and regulatory backing under India’s National Hydrogen Mission helping to reduce costs and improve financial viability. Additionally, as India seeks to expand its clean hydrogen applications, particularly with the decreasing cost of renewable energy, there is growing potential for hydrogen use in industries like transportation, steel, cement, fertilisers, chemicals, and refining. By positioning itself through this project, JSW Energy can become a major supplier of clean hydrogen to these sectors. Finally, as an early investor in renewable hydrogen, JSW Energy has the first-mover advantage, allowing it to establish partnerships, capture market share, and play a key role in shaping regulatory and operational standards in India’s emerging hydrogen sector.

Case study 5 – Lyhfe Grand Canal du Havre / Lyhfe

Figure A D.5. Lhyfe Green Horizon project, artist view

Source: Case study documentation

Table A D.5. Key indicators of Lhyfe

Indicators	Company / Project
Value Chain step / Application	Production / Renewable hydrogen for industry and mobility
Country	France
Status	Development at pre-FID stage: public grant secured, land identified, construction and environmental permit submitted, electrical connection secured
Production route & type of renewable	Water electrolysis through renewable electricity via PPA and grid electricity
Key project metrics (RE capacity / Electrolyser capacity / Ammonia Production / etc.)	Renewable power consumption: 750 GWh/y Electrolyser capacity: 100 MW
Hydrogen production (kt/y)	12 kt/y
Start-up date	Phase 1: 2025 beginning of construction Phase 2: 2028 beginning of operations
Amount	estimated at EUR 250 million

Source: Authors based on case study documentation

Basic description

The Lhyfe Green Horizon project develops a clean hydrogen production facility in the industrial port area at Gonfreville-l’Orcher, near Le Havre, France (Lhyfe, n.d.[8]). Qualified as an Important Project of Common European Interest by EU and supported by a grant of up to EUR 149 million from the French government, approved by the EU, the project plans to produce 34 tonnes of hydrogen per day using a 100 MW electrolyser. The facility will occupy nearly 2.8 hectares in Havre’s industrial port area, which counts on its premises multiple industrial actors including Yara and Total. The project is expected to be operational by 2028 and will contribute significantly to the decarbonisation of the area.

Project Development Stages:

• Development: currently in progress, involving detailed studies, consultations, and engineering plans; a significant public grant from the French government, approved by the EU, is secured; a land plot is identified; construction and environmental permit are submitted; electrical connection is secured.

• Construction: expected to start post-environmental authorisation in 2025, including site preparation, foundation work, and equipment installation.

• Operation: scheduled to start in 2028, with continuous monitoring and maintenance to ensure optimal performance.

Project Rationale 

The project is driven by several factors. Firstly, it addresses the growing market demand for clean energy solutions to decarbonise various industries, including ammonia production. The construction, operation and maintenance of the Green Horizon production unit will create 15 direct jobs, 100% of which will be dedicated to the project, and will safeguard around 250 direct and indirect jobs (project development, equipment and electricity supply, studies, construction, operation and maintenance, etc.). Environmentally, it aims to reduce CO₂ emissions by over 90 000 tonnes annually by supplying locally produced clean hydrogen to nearby industries. Additionally, the project strengthens leading Lhyfe's position in clean hydrogen production in France.

Governance 

Lhyfe leads the project, collaborating with public partners, including national and European authorities, as well as with private industrial partners. This public-private partnership is essential for the project's success, ensuring financial support and alignment with industry decarbonisation objectives.

Business Model 

The business model for the Lhyfe Green Horizon project focuses on achieving a competitive Levelised Cost of Hydrogen (LCOH) through economies of scale and through using competitive renewable electricity secured via dedicated Power Purchase Agreements (PPA). Viability challenge linked to a high initial capital expenditure (CAPEX) is addressed by securing an important subsidy from the French government, approved by the EU. Economic viability is ensured by using renewable energy and advanced electrolysis technology to produce cost-effective clean hydrogen compared to fossil fuel-based alternatives.

Enabling Market Conditions 

Supportive measures for the Lhyfe Green Horizon project include government grants of up to EUR 149 million from the French government, approved by the European Commission under the third wave of IPCEI (Important Projects of Common European Interest) for hydrogen. Offtake agreements are under discussion with potential industrial buyers, securing a stable market for the hydrogen produced and ensuring long-term revenue. Additionally, potential tax incentives and relief measures are being considered to improve the project's economic feasibility.

Financing 

The financing structure is not disclosed, yet includes a mix of public and private funds. For the public financing, the project benefits from a substantial grant of up to EUR 149 million from the French government. As for private investment, additional funding is considered from private investors and industrial partners. While specific equity/debt ratios are not disclosed, the financing mix is designed to balance risk and return effectively as well as to reduce the project’s weighted average cost of capital (WACC). Strategies for managing financial structure and mitigating risks are to be developed in order to ensure the project's financial stability.

Lessons Learnt 

Key lessons from the Lhyfe Green Horizon project include the importance of robust public-private partnerships and state support as well as the integration of adapted technologies at scale with hydrogen production. Additionally, a thoughtful choice of location and proximity to consumers minimises transportation costs and enhances economic and environmental efficiency. This model can be replicated in other regions and countries to achieve scalable and sustainable energy solutions for local industries decarbonisation.

Case study 6 - Clean H₂ Infra Fund / Hy24

Table A D.6. Key indicators of the Clean H₂ Infra Fund

Indicator	Instrument
Type of instrument	Financing
Instrument	Private equity (equity and quasi equity investments)
Eligible step(s) of the value chain / technologies	Infrastructure over the whole low-carbon hydrogen value chain: from upstream projects like renewable and low-carbon hydrogen production, to downstream projects like captive fleet and refuelling stations
Eligible countries	Europe, North America, Asia Pacific, MENA
Status	Completed
Amount (USD)	Available: 2 billion Committed: ~0.7 billion
Date of implementation	Phase 1: 2021 (creation year) Phase 2: ~2035 (estimated end year for the closed end fund)

Source: Authors based on case study documentation

Instrument description – Theoretical Concept

Hy24 is a joint venture between Ardian, a leading private investment house, with EUR 164 billion under management, and FiveT Hydrogen, a clean hydrogen investment platform (Hy24, n.d.[9]). Hy24 has brought together an ecosystem of over 50 industrial and financial players - including the first supporters such as Air Liquide, VINCI Concessions, Total Energies, Plug, Schaeffler and Chart Industries - all committed to supporting the advent of the low-carbon hydrogen economy, tackling firstly the infrastructures challenge. The investment scope covers the whole low-carbon hydrogen value chain from upstream projects like renewable and low-carbon hydrogen production, to downstream projects like captive fleet and refuelling stations. The fund objective is to support the decarbonisation of hard-to-abate industries like chemicals and steel production, mobility and transport sectors including maritime and aviation via e-fuels (sustainable aviation fuels (SAF), e-methanol), while being aligned with the requirements of the article 9 of the Sustainable Finance Disclosure Regulation (SFDR) regulation and the EU taxonomy.

The platform primarily mobilises capital through its EUR 2 billion Clean H₂ Infra Fund, targeting large-scale hydrogen projects and infrastructures. The fund collected investments from industrial companies, institutional investors, pensions funds and sovereign funds, distributing the capital to hydrogen infrastructure projects that meet specific sustainability (according to the article 9 of the SFDR regulation) and criteria like the project geography, competitive access to renewable resources, team expertise and background and offtakers base. Hy24 aims to mobilise up to EUR 20 billion of investment capacity over the next six years using its financial power by leveraging on debt, subsidies and co-investments. Hy24 aims mainly for minority investments, with an average investment ticket of EUR 100 million, and a total portfolio of around 20 projects.

Governance/Organisation and Implementation

Hy24 operates as a general partner with a dedicated team of 45 collaborators. The implementation process includes:

• Project Selection: Rigorous evaluation of projects based on sustainability, feasibility, profitability and potential impact.

• Investment Committees: Decision-making bodies ensure investments align with strategic objectives and envisioned financial performance.

• Monitoring and Support: Ongoing oversight and technical support to ensure successful project execution, development and business expansion.

Key Challenges and Advantages

Challenges:

• Nascent market: The clean hydrogen market is still developing, embedding risks related to technological advancements, timely market adoption at scale and regulation uncertainties. Moreover, varying regulations and standards across countries can complicate project implementation and project replicability.

• Infrastructure availability: The timeline of infrastructure availability, notably the EU H2 backbone project, is needed to be clarified in the near future to make final investment decisions (FID) on large EU projects.

Advantages:

• Significant Capital Mobilisation: The EUR 2 billion fund provides substantial financial resources to support large-scale hydrogen projects.

• Finance-Industry Partnership: By involving both finance and industry actors, Hy24 leverages a broad base of industrial expertise and financial resources.

• Focus on Sustainability: The platform ensures that investments align with the standards of the article 9 of the SFDR regulation and the European taxonomy.

Supported Projects Description

Hy24's EUR 2 billion Clean H₂ Infra Fund is dedicated to deploying important low-carbon hydrogen infrastructures. From its inception in 2021 until summer 2024, Hy24 has committed around EUR 700 million through private equity (both equity and quasi equity) investments in 8 companies:

• HysetCo - France, hydrogen integrated offer of hydrogen infrastructures (hydrogen refuelling stations) and mobility solutions for professionals, mainly taxi operators, aiming to decarbonize the intensive urban mobility. Total investment round is of EUR 200 million led by Hy24 alongside RAISE Impact and Eiffel Investment Group, Hy24 became the main shareholder of the company.

• InterContinental Energy - Australia and Oman, renewable hydrogen and its derivatives production at scale. Joint equity investment of USD 115 million alongside GIC, a global long-term investor established in 1981 to manage Singapore's reserves.

• Elyse Energy - France and Spain, e-fuels production to support e-methanol and SAF projects in France and Spain aiming to decarbonize industrial, maritime and aviation sectors. Financing transaction (non-disclosed amount) signed with Hy24 and Mirova.

• Stegra (previously H2 Green Steel) - Sweden, building the most advanced large-scale, green steel plant in the world in Boden, Sweden, with Europe’s largest electrolyser. Hy24 was lead investor in the EUR 1.5 billion private equity funding round closed in 2023 with the participation of other investors Altor, GIC and Just Climate.

• H2 MOBILITY - Germany, development of hydrogen refuelling stations network to decarbonize intensive and heavy mobility in urban areas. EUR 110 million investment round, led by Hy24 alongside significant investments from existing industrial shareholders. Next to the Hy24 fund, Air Liquide, Daimler Truck, Hyundai, Linde, OMV, Shell, and Total Energies contributed to the capital raise.

• Enagas Renovable - Spain, production of green hydrogen and biomethane. Hy24 signed an agreement with Enagás, the Spanish energy infrastructure company, to become a shareholder in Enagás Renovable (30%) to accelerate the development of its leading renewable-to-gas platform.

• Everfuel - Denmark, making green hydrogen for industry and heavy-duty mobility, and developing and operating large-scale hydrogen production projects to offer competitive hydrogen supply and fueling solutions. A Joint Venture (JV) between Everfuel (51%) and Hy24 (49%) brings EUR 200 million in equity. The JV’s first investment was to acquire the HySynergy Phase 1 20 MW green hydrogen production plant in Fredericia, Denmark. The JV will further benefit from Everfuel’s pipeline of hydrogen production projects as they are matured to final investment decision (FID) and transferred to the JV subject to predefined criteria.

• Hy2gen - France, Germany, Canada, Norway, and the United States, green hydrogen and e-fuels production to decarbonize maritime, ground transport, aviation and maritime applications. Hy24, Mirova, CDPQ and Technip Energies jointly made a EUR 200 million investment.

Total investment size including co-investors typically ranges from tens to hundreds of millions of euros, depending on the project's scale and scope, with a Hy24 average investment ticket size of around EUR 100 million.

Impact of the Solution on the Projects

Advantages vs. Conventional Financing:

• Dedicated Hydrogen Focus: Unlike conventional financing, Hy24 is specifically tailored for hydrogen projects, providing targeted industrial expertise and important financial resources.

• Venture to infrastructure approach: Hy24 supports globally the developers of hydrogen projects and equipment providers who are advanced in the value chain, and offer an important potential for industrialization.

• Risk Mitigation: Private investments in today's early market help alleviate the risk notably thanks to Hy24 bringing other investors to mutualize risk and making investments more attractive to private and institutional investors and debt providers.

• Long-term Commitment: The fund's substantial size, patient infra-like capital and strategic focus on hydrogen infrastructures ensure long-term support for project development at scale.

Impact on Business Model or Access to Finance:

• Enhanced Access to Capital: Projects gain easier access to significant funding, which might be challenging through traditional financing routes and get a possibility to find further support as their needs grow, either with the fund following-on on its initial investment or with Hy24 leveraging its capability to funnel external investments.

• Increased Credibility: Backing by a dedicated hydrogen fund enhances project credibility and attracts additional private investors and facilitates debt leverage.

• Innovative Financing Structures: Hy24 offers flexible financing solutions, including equity investments, quasi equity investments (such as convertible bonds), and hybrid instruments enabling fair risk and profit sharing for employees, founders and investors at different stages and maturity of a wide range of company types.

Improving Enabling Conditions:

• Policy Advocacy: Hy24 engages with policy makers via global hydrogen associations such Hydrogen Council and national hydrogen associations to facilitate favourable regulatory frameworks.

• Accelerating Hydrogen Market: Today’s investment in hydrogen projects at scale accelerates global hydrogen market development.

• Stakeholder Collaboration: Facilitating partnerships and co-investments across the hydrogen value chain enhances project viability and scalability.

Lessons Learnt and Replicability

Hy24 has effectively mobilised a significant amount of private capital and engaged a diverse set of stakeholders, demonstrating the feasibility of large-scale hydrogen investment platforms today. The collaborative approach and robust governance model are crucial to its success. Additionally, having a team fully dedicated to clean hydrogen creates an alignment in the understanding of risk and long-term strategic value of projects.

While Hy24 has streamlined the investment process, the complex nature of hydrogen projects and evolving regulation implies that fund disbursement timelines can still be long. However, the platform's support has generally accelerated project timelines compared to conventional financing routes notably thanks to the support it brings in the execution and development of projects.

The involvement of industrial, private, institutional and public-backed funds has been instrumental in attracting private capital, reducing perceived risks, and enhancing investor confidence. Available country and region level public funding, often in the form of CAPEX and OPEX subsidies, serves as a catalyst for larger private investments with public funding being a direct attractor for any private funding including from the fund.

Hy24 employs adaptive equity and quasi equity investment approaches as well as co-investment strategies, to de-risk and ensure the efficient use and disbursement of funds. These instruments have successfully mitigated risks for co-investors and debt providers and facilitated project financing.

Conditions for replicability of the Hy24 model include establishing strong partnerships that ensure collaboration and strategic alignment between government, industrial, and private financial actors. Creating dedicated funding mechanisms is essential, with substantial, focused investment funds supported by industrial expertise and private equity mobilisation. Developing supportive regulatory frameworks is critical, involving long-term policies that address clean hydrogen production and usage, alongside comprehensive regulatory environments. Finally, leveraging specialised industry expertise in hydrogen technologies and project management is necessary to ensure the success and scalability of similar initiatives.

Case study 7 - Foreign Private Capital Mobilisation and Currency Hedging Programme / Inter-American Development Bank and Ministry of Finance of Brazil

Table A D.7. Key indicators of the Foreign Private Capital Mobilisation and Currency Hedging Programme

Indicator	Instrument
Type of instrument	Mixed (de-risking and financing)
Instrument	Loans and credit lines for blended finance, long term foreign exchange liquidity facility, foreign exchange derivatives
Eligible step(s) of the value chain / technologies	Projects aligned with the Ecological Transformation Plan, in the areas of Technological densification of the productive sector; Bioeconomy and agri-food systems, Energy transition, Circular economy, and Infrastructure and adaptation to climate change.
Eligible countries	Brazil
Status	Under implementation
Amount	Planned: USD 3.4 billion initial potential derivatives for hedging provided by IDB Planned: USD 2 billion from IDB + USD 1 billion from WB Disbursed: n/a
Date of implementation	Phase 1: 2023 conceptualisation year Phase 2: 2024 implementation year

Source: Authors based on case study documentation

Instrument description

Initiated in 2023 by the Brazilian Ministry of Finance and the Inter-American Development Bank (IDB),6 the Foreign Private Capital Mobilisation and Currency Hedging Programme (also called Eco Invest Brazil) is a financial solution platform to reduce foreign exchange risk for investments aligned with socio-environmental principles and climate change adaptation and mitigation in Brazil (IDB, 2024[10]). Eco Invest Brazil, also known as The Brazilian Foreign Private Capital Mobilization and Currency Hedging Programme (“the Programme”) under Brazil’s National Climate Change Fund, is a sustainable financing platform designed to reduce the cost of capital and attract foreign investments into Brazil’s green economy. It leverages blended finance, a long-term foreign exchange (FX) liquidity facility, foreign exchange derivatives, and project structuring to facilitate integrating Brazilian companies into the global financial system, ensuring sustainable and resilient economic growth.

Eco Invest Brazil objectives are to:

1. Foster and incentivise sustainable investments in projects that promote ecological transformation, particularly in the areas of technological advancement, bioeconomy, energy transition, circular economy, green infrastructure, and adaptation;

2. Attract foreign investments in sustainable projects to Brazil;

3. Enable transactions in capital markets to raise funds internationally for companies and investors based in Brazil to finance sustainable projects;

4. Support the development, liquidity, and efficiency of the long-term foreign currency hedging market in Brazil.

To attain those objectives, Eco Invest Brazil has put in place four different solutions, addressing both domestic and foreign companies and investors. The articulation between four solutions and addressed objectives is represented in Table A D.8. The Eco Invest Brazil program aims to create incentives to increase investment in the Brazilian Ecological Transition.

Table A D.8. Instruments of Eco Invest Brazil

Instruments	Description	Objectives addressed
Blended finance (in the form of long-term loans in BRL)	Aims to reduce the cost of capital through blended financing to facilitate integration of Brazilian companies into the global financial system, attract foreign investments, and foster a sustainable and resilient economy	1, 2, 3
Long term foreign exchange liquidity facility (in the form of contingent credit in BRL)	Aims to mitigate challenges faced by companies with foreign currency debt and revenues generated in Brazilian Real (BRL) in cases of material devaluation, allowing for effective cash management and credit enhancements	1, 2
Foreign exchange derivatives (in the form of credit lines in BRL)	Aims to mitigate challenges faced by companies with foreign currency debt and revenues generated in BRL in cases of material devaluation, allowing for effective cash management and credit enhancements	1, 2, 3, 4
Project structuring1) (in the form of long-term loans in BRL)	Aims to catalyse the development of large sustainable initiatives in Brazil, bridging the current gap in the nation’s green project landscape	1, 2

Note: The project structuring is not an instrument as such yet an important assistance solution. This reimbursable financing is limited to the project preparation covering detailed plan and feasibility analysis stages.

Source: Authors based on case study documentation

Actors Involved:

• Ministry of Finance of Brazil is responsible for economic policy and public finance management, plays a crucial role in defining guidelines and allocating resources;

• Ministry of Environment and Climate Change provides the environmental vision, expertise, and technical depth necessary to align the Eco Invest Brazil program with sustainability and conservation goals;

• Inter-American Development Bank (IDB)7 is the leading technical partner in the design and operationalisation of the derivatives pipeline and credit lines to be offered, as well as the primary provider of technical assistance for the design and implementation of governance, monitoring, and evaluation of the Eco Invest Brazil programme;

• Central Bank of Brazil, with its expertise in regulating and supervising the financial system, contributes to the financial structuring and economic stability of the transactions. It internalises the derivatives to be obtained by the IDB in the domestic market through accredited financial institutions;

• Financial institutions, commercial and investment banks, national and international, that complement the financing structure by offering various forms of credit and investment for projects, with impact in capital mobilisation.

Financial Flows: Initially, the Eco Invest Brazil platform has the potential to mobilise FX coverage of up to USD 3.4 billion. Financial flows for this FX derivatives pipeline are represented below in Figure A D.6. With the Central Bank, the IDB will support the development, liquidity, and efficiency of the long-term exchange-rate protection market in foreign currency. The IDB will offer Eco Invest Brazil an initial limit of USD 3.4 billion for exchange-rate coverage which may increase over time, the capacity to acquire derivatives for coverage under better conditions, facilitated by its AAA rating, and Treasury services.

Figure A D.6. Financial flows representation for FX derivatives pipeline of USD 3.4 billion

Source: Case study documentation

Moreover, the IDB might provide a USD 2 billion credit line and offer technical assistance to the Brazilian Ministry of Finance in implementing policy reforms associated with Eco Invest Brazil. The articulation of financial flows of this USD 2 billion credit line is represented in Figure A D.7 Figure A D.7. The mentioned amount will be provided through direct support and potentially leveraging additional sources through co-financing and donor mobilisation. The Programme promotes financial, fiscal, and environmental policy reforms on structural changes to the current regulatory framework, adopting new methodologies and institutional mechanisms, and the implementation of financial innovations under the Ecological Transformation Plan of Brazil (ETP).8 Such reforms imply profound changes to the fiscal, financial, and environmental policies.

Figure A D.7. Financial flows representation for credit line of USD 2 billion

Source: Case study documentation

The World Bank contributes with the financial support of the International Bank for Reconstruction and Development (IBRD) with USD 1 billion. Related actions will be primarily directed towards developing projects dedicated to ecological transformation. This strategic partnership also seeks to mobilise significant financial resources and foster dialogue among various stakeholders, ensuring participants' autonomy in their operations and administration decisions.

Governance/Organisation and Implementation

The Eco Invest Brazil program will be overseen by the Ministry of Finance in collaboration with the Ministry of Environment and Climate Change. The Programme is supported by technical expertise from the IDB, internationally recognized consultants, and an independent verification company. The governance committee, composed of representatives from the Ministry of Finance and the Ministry of Environment and Climate Change, handles responsibilities such as defining the eligibility framework, accrediting implementation partners, and evaluating and approving transactions. Additionally, they will establish monitoring and evaluation indicators, including Key Performance Indicators (KPIs). They will oversee the approval and dissemination of allocation and impact reports.

The National Monetary Council regulates the financial conditions of the credit lines of Eco Invest, and the Ministry of Finance establishes the norms for participation in the Programme, encompassing the qualification and selection process for financial institutions, the allocation limits for resources, and the procedures for accountability and impact evaluation reports. The selection process for financial institutions will be conducted via public calls for proposals, with the National Treasury Secretariat reviewing submissions based on pre-defined criteria. The Executive Committee will homologate the results of the auctions. Transparency is ensured through the publication of selection results and periodic resource allocation reports on the Transparent Treasury website. Independent verification reports will also be regularly published, providing assessment and program improvement recommendations. This structured governance framework ensures accountability and makes the Programme a global model for climate change initiatives.

Challenges and key advantages to Implement the Instrument

Challenges:

• High costs of credit and long-term hedging: The costs associated with hedging for more extended time horizons are high and often prohibitive, making it financially challenging for investors to commit to long-term ecological projects. Blended finance and foreign exchange risk mitigation tools, such as the long-term liquidity facility and derivatives, can lower these costs, making hedging more affordable.

• High volatility of the Brazilian FX market: The high volatility of the Brazilian currency poses a significant risk for foreign investors. The Programme’s FX derivatives and liquidity facilities aim to mitigate these risks, making investments more stable and attractive.

• Low liquidity for long-term FX hedges: The market for foreign exchange hedges beyond one year is characterised by low liquidity, with very minimal liquidity for periods longer than five years. Introducing a long-term FX liquidity facility and attractive hedging options can help address this issue.

• Low share of private investment in developing countries, including Brazil: Developing countries, including Brazil, face a low share of private investment in ecological projects. The Programme aims to increase private sector involvement through attractive financing instruments and structured support.

• Need to leverage investments for ecological transformation: Significant investment is required for ecological transformation, often beyond the capacity of public funding alone. The Programme’s design to attract private capital is crucial for bridging this investment gap.

• Ensuring Robust Governance and Transparent Financial Flows: Maintaining robust governance and transparent financial flows is critical. The Programme’s structured approach, involving independent verification and regular impact reports, addresses this challenge by ensuring accountability and transparency.

Advantages:

• Blended Finance: The Programme reduces the cost of capital through blended finance, making investments more attractive and financially viable. This can mitigate the high costs of long-term hedging by lowering the overall financial burden on investors.

• Long-Term FX Liquidity Facility: The creation of a long-term FX liquidity facility mitigates foreign exchange risks for companies with foreign currency debt and revenues in local currency, providing a cash management tool and credit enhancement for companies. This provides an alternative and a more cost-effective alternative to classical FX cross-currency swaps, directly addressing the challenge of high-cost for long-term FX hedges.

• Foreign Exchange Derivatives: The Programme will offer access to long-term FX hedging derivatives at favourable conditions through the IDB AAA status, attracting foreign direct investments. This advantage can counteract the low availability, and accessible conditions of long-term hedging and the deterrent effect of margin calls.

• Project Structuring: The Programme fosters the development of large sustainable projects by bridging Brazil's existing green project gap. Structured governance and technical support ensure that project structuring is effective and sustainable.

• Enhanced Climate Resilience: By mobilising foreign private capital for ecological projects, the Programme significantly contributes to climate resilience and sustainable development, aligning with global environmental goals.

• Structured Governance and Transparency: The involvement of the Ministry of Finance, the Ministry of Environment and Climate Change, the IDB, and independent verification ensures robust governance, transparency, and accountability. This structured approach includes public calls for proposals, transparent publication of selection results, and regular impact reports. Such governance can manage the complexity of FX risk mitigation tools and ensure transparent financial flows.

Supported Projects Description

Eco Invest Brazil has the potential to mobilise coverage of up to USD 3.4 billion for green projects, focusing on infrastructure, renewable energy, and sustainable agriculture in Brazil. Projects span various sectors, including renewable energy, agribusiness, and infrastructure, with investments ranging from small to large scale. Examples of the projects include but are not limited to reforestation, storm-resilient infrastructure in cities, energy transition, green hydrogen, or low-carbon agriculture. The first auction for blended finance was published in July 2024 (Secretary of the National Treasury of Brazil, 2024[11]). The guidance on demand from financial institutions will be aggregated and revealed in a pre-allocation report in fall 2024.

Impact of the Solution on the Projects

Eco Invest Brazil offers several advantages over conventional financing mechanisms, particularly through its innovative financial structuring and risk management strategies. By utilising blended finance, the Programme significantly lowers the cost of capital for green projects, making sustainable investments more economically viable. Moreover, enhanced FX risk management capabilities further distinguish this Programme, providing robust hedging solutions that mitigate currency fluctuations and financial uncertainties. This comprehensive approach reduces financial risks, increasing the attractiveness of green investments and encouraging more foreign and domestic investors to participate in Brazil's ecological transformation initiatives. As a result, Eco Invest Brazil not only supports sustainable development but also promotes financial stability and investor confidence in the green economy.

The Programme significantly transforms the business model and financing landscape for Brazilian companies by enhancing access to international capital. By offering robust financial planning and risk management tools, particularly for businesses focused on green projects, the Programme reduces financial risks through innovative FX hedging and blended finance strategies. This support enables companies to secure essential funds more easily and at lower costs, fostering more predictable financial outcomes and stability. Consequently, this encourages broader participation in sustainable development, bolstering Brazil's green economy.

Strengthening policy frameworks and regulatory environments significantly boosts investment attractiveness by providing a stable and predictable context for investors. This stability is essential for attracting long-term capital. Additionally, offering technical assistance and capacity-building initiatives ensures effective implementation and long-term sustainability of projects. By creating a supportive environment, these improvements enhance the effectiveness of de-risking and financial solutions, making green investments more feasible and appealing, and driving sustainable development.

While it is not specific to a single sector, Eco Invest Brazil has significant implications for the clean hydrogen developments, particularly in addressing the financial and operational challenges associated with large-scale projects. Clean hydrogen initiatives typically involve high capital expenditures (CAPEX) and long development timelines, making long-term financial planning and risk management essential. The sector’s challenges are addressed by the Programme as follows:

Currency Risk and FX Hedges: For green hydrogen projects, investments, operational costs, and sales can often occur in different currencies, leading to substantial foreign exchange (FX) risk. Long-term FX hedging solutions provided by the Eco Invest Brazil program addresses this risk, ensuring financial stability, and making the projects more attractive to foreign investors.

High CAPEX Intensity: Green hydrogen projects require significant upfront capital investment. Long-term hedging is essential to protect these large CAPEX investments from currency fluctuations over the project's lifecycle. The Programme’s hedging solutions can lock in exchange rates, mitigating financial risks associated with currency volatility.

Natural Hedge Scenarios for export: In cases where green hydrogen is exported, there is a natural hedge as the revenues will be in foreign currency. The Programme can still support these projects through its blended finance line and project preparation line, enhancing financial viability and reducing the cost of capital.

Natural Hedge Scenarios for export for local consumption: For green hydrogen projects targeting local markets, the revenues will be in BRL. The FX Hedging solutions offered by the Eco Invest Brazil program will be beneficial in stabilising operational costs and revenues, ensuring that local currency earnings are protected from adverse exchange rate movements.

Lowering capital cost: The Programme’s blended finance options and project preparation support are critical for the green hydrogen sector. They lower the overall cost of capital and provide necessary financial and technical backing, fostering the development and scaling of green hydrogen projects in Brazil.

Eco Invest Brazil addresses financial risks and supports the clean hydrogen sector through comprehensive FX risk management and long-term financial stability solutions. This alignment with Brazil’s National Hydrogen Plan (Ministry of Minery and Energy, 2023[12]) is important for advancing the country’s green hydrogen initiatives and promoting sustainable energy development.

Lessons Learnt and Replicability

Eco Invest Brazil is conceptualised, established by Provisional Measure (Secretaria Especial para Asuntos Jurídicos, 2024[13]), and with its governance established (Gabinet of the Ministry, 2024[14]). The blended finance credit line has already been regulated by the National Monetary Council (Central Bank of Brazil, 2024[15]), and the other three lines are currently under financial regulation. The first auction for the allocation of Eco Invest resources in the blended finance credit line has been published (Secretary of the National Treasury of Brazil, 2024[16]), with expected results in October 2024.

Mobilisation of capital for candidate projects will count from the day of publication of the blended finance auction process. In this sense it is not expected to increase the project preparation timeline. The blended finance model and risk mitigation strategies enhance the mobilisation of private local and international investments. The loans and credit lines under Eco Invest Brazil are not yet attributed, the first auction for blended finance being published in July 2024.

Replicating the Programme successfully requires strong institutional frameworks and effective public-private sector collaboration. Customising financing instruments to align with local market conditions is essential to address specific challenges. Continuous monitoring and adaptation to evolving economic and environmental factors are also crucial to ensure the Programme's long-term relevance and effectiveness. These elements combined create a foundation for replicating the Programme in various contexts, promoting sustainable investments on a global scale.

Case study 8 - Green Hydrogen Facility to support Green, Resilience, and Inclusive Economic Development Project for Chile / World Bank and CORFO

Table A D.9. Key indicators of the Green Hydrogen Facility

Indicator	Instrument
Type of instrument	Financing
Instrument	Concessional loans / Risk mitigation instruments
Eligible step(s) of the value chain / technologies	Electrolyser production / Electrolysis / Storage and transport infrastructure / End-Use / Cross-cutting / …
Eligible countries
Status	Planned
Amount (USD)	Planned: 260 million (private capital) Available: 150 million (IBRD) Disbursed: n/a
Date of implementation	Phase 1: July 2023 – June 2028

Source: Authors based on case study documentation

Financial instrument description

The Project supports the early deployment of green hydrogen production in Chile through the creation of a Green Hydrogen Facility (GHF) to be implemented by the Government of Chile (GoCl) through its Economic and Development Corporation (CORFO) and supported by Chile’s public commercial bank, Banco de Estado (BE) (World Bank, n.d.[17]). Together with CORFO, the World Bank convened other multilateral partners, such as European Investment Bank (EIB), Interamerican Development Bank (IDB), German Development Bank (KfW) among other, to leverage a USD 1 billion GHF to support the development of the nascent green hydrogen industry.

The Project will establish a financing mechanism and capacity building to: (i) contribute to kick-start a new industry that will create local green jobs and value chains; (ii) decarbonize and increase the competitiveness of local industries (i.e. mining, agriculture, freight and heavy industry) and create new export opportunities through green hydrogen derivatives such as green ammonia and e-fuels; and (iii) help achieve Chile’s vision of producing the world’s cheapest green hydrogen by 2030.

The USD 150 million Investment Project Financing (IPF) loan aims at reducing the cost of producing a kilogramme of green hydrogen and help develop the enabling environment through the following components:

• Component 1: Green Hydrogen Investment Sub-loans and Risk-Mitigation Facility. Under this Component, the Project will provide investment sub-loans (by on-lending IBRD funds) on a preferential,9 but cost-covering basis to partially finance renewable green hydrogen production10 sub-projects in Chile and risk-mitigation reserve accounts.

• Component 2: Capacity Building and Project Management. This component will finance technical assistance, capacity-building activities, and overall Project management, including the establishment of an Implementation Support Unit (ISU) at Banco Estado, the public commrecial bank that will support CORFO.

Figure A D.8. Financial Mechanism for the World Bank Chile Green Hydrogen Facility Project

Source: Case study documentation

Supported project(s) description

Under the project, the GHF will provide:

• Green Hydrogen Investment Sub-loans to financial intermediaries and directly to green hydrogen sub-projects, for up to 40 percent of the investment costs (capital expenditures, CAPEX) for green hydrogen production. The IBRD loan resources will finance investment costs associated with the production of green hydrogen, including, inter alia, the capital cost of the electrolyser, compressor, storage, and dispenser equipment, as well as related installation, engineering, transport, and civil works—items that can represent between 60 and 80 percent of the total costs of a green hydrogen production plant.

• Risk-Mitigation Reserve Accounts, a typical instrument used in project finance, to mitigate the payment and operational risk associated to the green hydrogen production sub-projects. Specific characteristics of the reserve accounts are described below:

  • Debt service reserve account (DSRA): The DSRA will mitigate risks related to debt repayment arising from the uncertainty of a continuous and stable cash flow due to the nascent nature of the technology. The DSRA will be available to cover 6 months,11 of private sector debt instalment repayment of a GH project, thereby reducing the risks related to potential payment default by GH projects.

  • Liquidity reserve account (LRA): The LRA will provide liquidity to a sub-project to cover unexpected short-term technical underperformance that impact the production level in the green hydrogen production plant. This risk-mitigation instrument is intended to reduce the cost of EPC performance guarantees and will strengthen confidence among EPC firms, financiers, or lenders in the operational performance of the green hydrogen sub-project. Given the limited track record of green hydrogen technology, the LRA would be available for the initial five years of a green hydrogen sub-project to mitigate its potential technical underperformance. The LRA will be created to provide additional liquidity and facilitate the sub-project’s continued operation. The LRA’s triggering will be requested solely when sub-projects face non-structural technical challenges (especially early on) that could arise due to the early development stage of the green hydrogen industry.

It is expected the Chile GHF Project will support various sub-projects throughout Chile, to be evaluated and selected as part of the implementation phase. The potential sub-projects to be supported can be found in the Northern, central, and southern regions of Chile, in the country’s main “hydrogen valleys.” There is a robust pipeline of about 20 GH projects which are shown below.

Figure A D.9. Pipeline of green hydrogen projects in Chile

Note: Selected dynamic sample of projects.

Source: Case study documentation

Impact of the solution on the project

The hydrogen ecosystem is still at a nascent stage with the need to foster a market to develop the industry creating an investment environment that attracts not only equity but also debt investors as early as possible will be crucial for the development of Chile’s Green Hydrogen industry. Typically, nascent industries are first developed by large and strategic equity investors, which use their own financial resources (R&D) to conduct prefeasibility and feasibility studies, as well as initial small testing pilot projects.

However, industrial development at scale can only be achieved with the participation of debt investors (e.g., commercial banks) that have the required financial resources to accelerate the transition from pilot projects to medium- and large-scale industrial projects. It is these large-scale projects that can have a meaningful impact on the development of a new industry and its market. When commercial banks are assessing whether to finance a GH project, risks related to the lack of a track record of the technology, large financing amounts involved, and the long tenors required are likely to result in high interest rates with standard grace periods and tenors, which are far from the soft financing terms that are critical to achieve competitiveness and industry development. It is thus essential for the creation of a green hydrogen market to pass on the cost of IBRD funding and using risk mitigation instruments to help lower the cost of producing green hydrogen, reducing the risk perceived by lenders on this nascent technology.

A robust market sounding undertaken by the World Bank identified key risks to developing green hydrogen projects in Chile as perceived by developers, financial institutions, and other stakeholders. The market sounding included engineers with experience in green hydrogen, equity investors pursuing pilot projects or with interest in future investments in the industry, and large international commercial banks with an extensive track record financing large energy-related projects (with and without a local presence in the country). The market sounding had two main objectives: (i) to identify key drivers of project and production costs that should be addressed to achieve market competitiveness and thus industry development as opposed to success of a single project; and (ii) to identify key issues that equity and debt investors consider as “industry-specific issues of concern/risk factors”, which could have a defining role in their decision to invest or not in a green hydrogen production project. The second objective also included identifying the risk-mitigation instruments that could lead to an acceptable risk profile.

The market sounding identified that critical risks included the high cost of electrolysers, the lack of a track record for the technology, and a deficit of local capacity to assess and operate these types of projects:

• High cost of electrolysers

• Relative uncertainty regarding the technical performance of green hydrogen production and/or its derivatives due to the limited track record of the technology

• Novelty of the industry due to limited track record of large-scale projects

• High cost of transportation infrastructure and logistics

• Scarcity of specialised personnel and cost of international experts

Lessons learnt and replicability

The proposed Project can become a reference of a global public good to other countries in the Latin American and the Caribbean region and globally, since it can boost positive externalities and spillovers on decarbonizing hard-to-abate sectors, energy security, food security, productivity diversification, and innovative financing. In terms of climate change, (i) green hydrogen is a zero-carbon energy carrier, just like electricity, but it has an edge when it comes to decarbonizing sectors that are hard to electrify (e.g., heavy industry or long-haul transportation), and (ii) it can be stored for long periods, which facilitates greater integration of variable renewable energy and increases countries’ energy security.

Key lessons learned that were included in the project design include:

• An adequate understanding of the local conditions and market is fundamental to design interventions that are fit for purpose.

• A coordinated set of institutional development and capacity-building tasks should be incorporated into projects to ensure that appropriate technical, financial, legal, and Environmental & Social assessments are conducted transparently.

• Risk-mitigation instruments can help support new clean-energy sources by enabling sub-projects to reach successful financial closure and by addressing market failures related to new technologies that remain relatively unknown to financiers.

• Implementing financial instruments together with parallel capacity-building activities helps increase their effectiveness and improves their design. This has been critical in other clean energy industries, such as renewable power generation.

• Committed partners and RFIs with strong environmental and social policies are critical for the success of sub-projects, for facilitating implementation, and to strengthen overall outcomes.

• Relying on third-party independent advisors or experienced financial institutions to assess new technologies and fill capacity gaps can be an effective approach to advance an incipient industry and share knowledge and expertise.

• Financial intermediaries must clearly define the eligibility criteria for sub-projects, and special attention should be paid to an adequate due diligence of the underlying risks.

• Enhanced dissemination of project objectives, components, and activities is recommended to ensure swift implementation. A valuable sub-project may be hampered by poor communication among the implementing agencies, sponsors, and other stakeholders.

The Chile GHF Project will establish a financing mechanism and capacity building to: (i) contribute to kick-start a new industry that will create local green jobs and value chains; (ii) decarbonize and increase the competitiveness of local industries (i.e. mining, agriculture, freight and heavy industry) and create new export opportunities through green hydrogen derivatives such as green ammonia and e-fuels; and (iii)  help achieve Chile’s vision of producing the world’s cheapest green hydrogen by 2030. The investments supported by this operation are expected to generate local economic development, green jobs, and capacity building while decarbonizing local industries and reducing emissions.

The proposed GHF will act as a global public good by testing an innovative financing mechanism that proposes targeted public financing to leverage private investments and building local capacity to accelerate the deployment of green hydrogen sub-projects, providing a blueprint to other countries in the Latin America and Caribbean region and beyond. The GHF’s innovative financing mechanism will mitigate the risks associated with this new technology, thus increasing investor confidence to spur the energy transition.

Case study 9 - Green Hydrogen Incentives Law – Government of Egypt

Table A D.10. Key indicators of Egypt’s Green Hydrogen Incentives Law

Indicators	Instrument
Type of instrument	Tax credit and tax exempt
Eligible projects/technologies	Projects involving green hydrogen and its derivatives (such as green ammonia and green methanol), as well as upstream and midstream facilities where 95% of the output is dedicated to servicing green hydrogen. Projects focused exclusively on the transportation, storage, and distribution of green hydrogen and its derivatives in Egypt. The incentives also extend to projects that directly and exclusively manufacture production inputs and supplies for midstream and downstream facilities, provided a cabinet decree has been issued. Detailed executive regulation will be released by the end of 2024 (tbc) encompassing application procedures and how investors can benefit from both tax and non-tax incentives
Eligible countries	Egypt
Status	Under implementation
Date of implementation	27 January 2024

Source: Authors based on case study documentation

Context

The regulatory and institutional frameworks of Egypt to support green investment targeting low carbon technologies such as renewable energy or green hydrogen deployment have been rapidly evolving (see table 2). Egypt has established a regulatory and legislative framework in supporting the green hydrogen sector, including several decrees (Cabinet Decrees No. 20, 981, and 983) and a law (Law No. 2 of 2024), along with different incentive policies and measures. The approach of Egyptian government to have an integrated approach to developing renewable energy and hydrogen production capacity opens a new transition pathway for the country, as it provides more flexibility to utilise intermittent renewable energy capacities, particularly in a time of energy surplus and foreign exchange shortages.

Table A D.11. Key incentives law and decree announced in Egypt

Subject	Law	Ministerial Decree
Hydrogen	Gas Market Law No. 196 of 2017 Investment Law No. 72 of 201712 (Incentive law)	Ministerial Decree No. 239 for 2018 Cabinet Decrees No. 981 of 2022, and No. 104 of 2022 (incentive law)
Electricity	Electricity Law No. 87 of 2015	Ministerial Decree No. 230 of 2016
Renewable Energy	Renewable Energy Law No. 203/2014
Environment	Environment Protection Law No. 4 for 1994	Ministerial Decree No. 228 for 1994
Suez Canal	Special Economic Zone Law No. 83 of 2002	Ministerial Decree No. 1625 of 2002 Ministerial Decree No. 2282 of 2015

Note: Law No. 2 of 2024, the Green Hydrogen Incentive Law, takes a stronger enforcement approach than other current laws or ministerial decrees, notwithstanding other laws and decrees.

Source: Authors based on case study documentation

For the production and usage of green hydrogen for both domestic use and export, the Egyptian Parliament has ratified a suite of incentives for green hydrogen producers, aiming to establish Egypt as a key player in the emerging export market. These incentives are designed to create an attractive investment climate through tax concessions and streamlined administrative processes. As a result of these plans and policy measures, Egypt anticipates over USD 60 billion in investments for green hydrogen and ammonia projects in the coming years, with a target to produce 5.6 million tonnes of green hydrogen and ammonia by 2040 for exporting according to the green scenario, in line with the country's green hydrogen strategy.

The provisions of this law apply to projects for the production of green hydrogen and its derivatives, provided the Project Agreements are concluded within five years from the law's effective date. The new law detailed the scope of the incentives, types of incentives, and the associated conditions and requirements.

Actors involved

Currently, four government authorities oversee Egypt’s green hydrogen development: The New and Renewable Energy Authority (NREA), The General Authority of the Suez Canal Economic Zone (SCZone), the Egyptian Electricity Transmission Company (EETC), and The Sovereign Fund of Egypt (TSFE).

• NREA is responsible for granting land for renewable energy infrastructure development. It manages applications for green hydrogen project proposals and conducts pre-feasibility studies. NREA charges an annual land use fee of 2% of the renewable energy production revenue, aligning with existing BOO projects in operation.

• EETC provides transmission and distribution services, ensuring that green electricity reaches hydrogen production sites. It acts as the sole buyer of all electricity generated in Egypt and charges a 7% wheeling fee on electricity revenue for grid integration. This fee has raised concerns among developers about the increased costs of green hydrogen production, as electricity generation accounts for approximately 70% of total hydrogen production costs.

• The General Authority of SCZone manages and regulates green hydrogen facilities, most of which are located within the SCZone. It supports prospective investors by providing necessary administrative services and infrastructure support.

• The Sovereign Fund of Egypt (TSFE) coordinates all parties involved in green hydrogen projects. Established in 2018 with total assets of USD 2.42 billion, TSFE works closely with the Egyptian government to manage investment deals related to state-owned assets. It participates in green hydrogen projects as an equity partner and provides support for signing green hydrogen Memorandums of Understanding (MoUs).

Supported Scheme Description and Scope

Under the Green Hydrogen Incentives Law, Egypt outlines the targeted production of green hydrogen and its derivatives (the “Green Hydrogen Projects”) as follows:

• Factories for the production of green hydrogen and its derivatives;

• Desalinated water production plants that allocate at least 95% of their production for use in the production of green hydrogen and its derivatives;

• Plants producing electrical energy from renewable energy sources, which shall allocate no less than 95% of their production to fuel the factories producing green hydrogen and its derivatives and desalinated water production plants;

• Projects whose activity is limited to the transport, storage or distribution of green hydrogen and its derivatives produced within the Arab Republic of Egypt;

• Projects whose activity is directly limited to the manufacture of production requirements or inputs necessary for the factories producing green hydrogen and its derivatives.

The Green Hydrogen Projects must meet the following criteria to benefit from the incentives of the law: 

• The commercial operation date must be within five years from the date of the project agreements. Future expansions can benefit from the incentives if their project agreements are executed within seven years from the commercial operation date.

• Foreign currency financing must be sourced from offshore sources to cover no less than 70% of the investment cost.

• Local content, to the extent available in the local market, must be no less than 20% of the project components.

• Transfer and localization of technology into Egypt with the set-up and implementation of a training program to Egyptian labour.

• Corporate social responsibility activities for the areas in which the project is based.

• Once the project meets the criteria, the project developers can take advantage of taxation incentives and non-taxation incentives.

Table A D.12. Scope of Law No. 2 of 2024

Category	Law
Taxation Incentives	A cash investment incentive known as the Green Hydrogen Incentive (State Information Service of Egypt, n.d.[18]), equivalent to 33% up to 55% of the tax paid upon declaring the income resulted from initiating activities in the project or its expansions. VAT exemption on equipment, tools, machines, devices, raw materials, supplies, and necessary transportation means needed for initiating the project. VAT rate for exports of green hydrogen projects and their derivatives is 0%.
Non-taxation Incentives	Regulatory Approval: Obtaining the single approval (i.e., Golden License) for the companies working in green hydrogen production project. Import and Export Rights: Allowing the project company to import any necessities needed to establish the project or expand it or operate it from raw materials, production requirements, machines, spare parts, and the appropriate means of transportation to the activity’s nature, without the need to register the project company in the importer’s register. It is also entitled to export its own products without a license and without the need to register the project company in the exporter’s register. Employment of Foreign Worker The project company is entitled to use foreign employees within the limits of 30% of the total number of employees in the project during the first ten (10) years commencing from the date of signing the project agreements. Special Customs Zones: Establishment of special customs ports for the project’s exports and imports. Special Customs Zones: A 30% deduction from the value and categories fees, for the use of seaports and sea transport and fee services provided to ships in the Egyptian seaports. Land Use Fees Reduction A 25% deduction on the value of the usufruct right of industrial lands, which are allocated to establish a hydrogen production plant and its derivatives. In addition to, a 20% deduction on the right to use the storage warehouse lands at the ports. Grace Period for Fees Granting a grace period for the payment of the usufruct right of the project’s industrial and storage lands, where the payment starts from the project’s commercial operational date, without imposing any interest and/or fines. Licenses Tenure Determining the terms of the licenses granted to green hydrogen production projects as the same term as the right of usufruct of the project’s land.

Source: Law No. 2 of 2024 Regarding Investment Incentives for Green Hydrogen Production Projects and its Derivatives:

Unofficial Translation, Deloitte

Challenges and key advantages

Egypt benefits from immediate access to the Mediterranean and, consequently, the European market. The newly enacted Green Hydrogen Incentives Law is positioning Egypt as a regional hub for green hydrogen and derivatives projects, driven primarily by renewable energy sources such as wind and solar. Beyond its environmental impact, the law is expected to generate positive spillover effects across various sectors. The attractive investment environment it creates for Project Companies is poised to bolster Egypt's economic standing by promoting sustainable development, increasing employment opportunities, reducing unemployment rates, and fostering competition among stakeholders. Furthermore, Egypt’s commitment to advancing technological innovation and research in green hydrogen production solidifies its position as a leader in clean energy technology. However, many governments are now announcing lucrative incentive schemes, such as Oman’s 47-year land concessions. The impact of these competing incentives on the global market remains to be seen.

To realise full intended impact of the incentive law, there remains a need for further clarification and refinement for law’s enforcement scope and process. According to the law, certifications issued by the competent minister or an authorized representative, which grant incentives to Project Companies, are considered final and effective without the need for additional approvals from other related entities. As a result, investors are currently following two main approaches to benefit from the law: either by directly engaging with the EETC/NREA for preliminary approvals and signing MoUs, or by directly communicating with the Prime Minister, typically through embassies and foreign investment chambers in Egypt. It is important to note that meetings with the Prime Minister are generally reserved for concrete investment proposals. However, the types of project documents that qualify under the incentive law, as well as the processes and scope, have yet to be standardized. Currently Government is in the preparation of developing a detailed executive regulation for this law, which is currently under preparation and review. It is expected to be released by the end of 2024. This regulation will include all the necessary details regarding application procedures and how investors can benefit from both tax and non-tax incentives.

Case study 10 - HySure risk transfer / Munich Re

Table A D.13. Key indicators of HySure

Indicator	Instrument
Type of instrument	De-risking
Instrument	Warranty insurance for product, performance and availability warranties
Eligible step(s) of the value chain / technologies	Electrolyser systems and fuel cells
Eligible countries	Global
Status	Under implementation / Completed
Amount (USD)	n/a
Date of implementation	n/a

Source: Authors based on case study

Instrument description – Theoretical Concept

HySure is an innovative insurance solution developed by Munich Re, specifically designed to address the risks associated within the hydrogen industry. The product provides comprehensive risk coverage for electrolyser manufacturers or project developers, HySure covers three primary risk categories: (i) product warranty: protects against excessive maintenance costs due to product failures; (ii) performance warranty: insures against underperformance in terms of hydrogen production rate and efficiency metrics such as cell voltage; (iii) availability warranty: provides coverage for unforeseen downtime.

Munich Re’s HySure product is designed to alleviate the financial burden on electrolyser manufacturers by covering excessive warranty costs associated with repairs or replacements (see Figure A D.10). The insurance structure includes three key elements: the deductible, co-payment, and limit. The deductible represents the amount of risk the manufacturer is willing to bear before the insurance coverage begins. Once the deductible is exceeded, Munich Re covers the majority of additional warranty costs, up to an agreed-upon limit. The manufacturer also shares a portion of the loss through a claims-proportional co-payment, allowing for a balanced risk-sharing approach that supports financial stability while managing insurance premiums.

Figure A D.10. HySure insurance structure

Source: Munich Re Green Tech Solutions - HySure documentation

The HySure solution ensures that manufacturers can offer long-term performance guarantees without overburdening their balance sheets, thus enhancing the overall bankability of clean hydrogen projects.

Key actors involved in HySure are:

• Munich Re13: as the insurer, Munich Re performs risk assessments, offers tailored insurance solutions, and underwrites the associated risks. Munich Re collects premiums from manufacturers and disburses payments in the event of a valid warranty claim.

• Electrolyser manufacturers: the primary users of the HySure insurance product. By leveraging this solution, manufacturers can offer enhanced warranties, which boost sales and enhance financial stability by mitigating the risks associated with excessive warranty claims.

• Project developers and owners: these entities benefit from the enhanced warranties provided by the manufacturers, reducing financial risks and improving the predictability of cash flows.

• Investors and banks: the financial stakeholders benefit from the reduced risk profile of projects insured under HySure. The enhanced warranties and performance guarantees make projects more attractive to financiers, leading to lower financing costs and increased investment security.

There are three main contracts/agreements in the HySure package: (i) insurance agreement: between Munich Re and the electrolyser manufacturers, defining the terms of coverage; (ii) warranty contracts: enhanced by the HySure insurance, these contracts are between the insured such as the manufacturer and their respective customers; (iii) financing agreements: between project developers and investors, improved by the risk mitigation provided by HySure.

Munich Re works closely with electrolyser manufacturers through a structured process that includes risk assessment, technical due diligence, and the development of a customised insurance solution. The process typically takes between 3 to 6 months, depending on data availability and project complexity.

HySure requires comprehensive technical due diligence and the customisation of insurance solutions to meet specific project needs. To achieve widespread market adoption, manufacturers and project developers will receive extensive education and targeted market development support to understand and embrace this new insurance solution. This is expected to enable especially smaller manufacturers or projects with constrained budgets to embrace the benefits of this innovative insurance solutions.

HySure offers several advantages for manufacturers and project developers. It improves liquidity by transferring a substantial portion of risk to Munich Re, enabling manufacturers to maintain stronger financial flexibility. The solution enhances the bankability of clean hydrogen projects by reducing perceived risks, making them more attractive to investors and financiers. Its scalability allows for adaptability, as manufacturers can tailor the insurance to suit their specific risk appetite and financial requirements. Additionally, HySure provides effective risk mitigation, shielding manufacturers from excessive warranty claims and allowing them to concentrate on growth and innovation.

Supported Projects Description

The exact number of projects supported by HySure is not publicly disclosed, but the solution is designed to support a wide range of clean hydrogen initiatives, from small pilot projects to large-scale industrial operations.

HySure is a global solution applicable to industry sub-sectors within the clean hydrogen space, particularly those involved in hydrogen production.

Impact of the Solution on the Projects

The capacity to provide extended and more comprehensive warranties enhances the appeal of clean hydrogen projects to developers and financiers, contributing to their overall attractiveness and potential for successful funding. HySure enables manufacturers to provide such warranties and acts as an enabler for improved bankability.

HySure aims to have a direct impact on business models and access to finance. It provides increased financial flexibility by transferring risk to Munich Re, allowing manufacturers to allocate capital more efficiently and support operational scaling. The insurance solution also improves market position, as it offers a form of validation that can enhance customer trust and potentially increase market share for manufacturers.

The involvement of a reputable reinsurer like Munich Re helps build confidence among investors and project developers, facilitating smoother project development and execution. This, in turn, supports the broader growth of the clean hydrogen industry by enabling the scaling of projects.

Lessons Learnt and Replicability

The structured co-creational process ensures that the insurance solutions are effectively tailored to the specific needs of each project, thereby improving their financial viability and attractiveness. While the detailed due diligence process might slightly extend the project preparation timeline, this is counterbalanced by the significant benefits in terms of reduced risk and improved financing conditions. The implementation of HySure has the potential to facilitate mobilisation of significant private capital by de-risking investments in clean hydrogen projects, thus attracting a broader range of investors.

The conditions for replicability of HySure include its scalability across various regions and project sizes, as long as adequate underwriting and risk assessment capabilities are in place. Market acceptance is also crucial, successful replication relies on manufacturers and project developers adopting insurance solutions as part of their standard financing and risk management strategies. Positive outcomes from early adopters can support wider market acceptance and adoption.

Case study 11 - Insurance facility / Marsh

Table A D.14. Key indicators of Marsh’s Clean Hydrogen Insurance Facility

Indicator	Instrument
Type of instrument	De-risking
Instrument	Insurance solutions for construction and operational risk of clean hydrogen production and use projects
Eligible step(s) of the value chain / technologies	Electrolysis, fuel cell and CCS technologies, end-use sectors (incl. marine and cargo industries)
Eligible countries	Global
Status	Under implementation: implemented with use of facility ongoing
Amount (USD)	Planned: USD 400 million insurance capacity per project Available: USD 400 million insurance capacity per project Disbursed: disbursed value does not erode insurance capacity
Date of implementation	Launched in 2022

Source: Authors based on case study documentation

Instrument description – Theoretical Concept

The Marsh Clean Hydrogen Insurance Facility is an insurance platform designed to support and facilitate the insurance of clean hydrogen production and end-use projects (Marsh, n.d.[19]). It offers risk transfer solutions across all phases of hydrogen projects including both construction and operational stages.

The facility provides a tailored project risk management framework, with risks thoroughly reviewed and evaluated by a dedicated risk engineering team. Appropriate risk mitigation strategies and insurance products are proposed based on specific project factors such as location, technology, contractors, and project duration. To ensure effective risk transfer to the commercial insurance market, Marsh manages a competitive tender process involving A-rated global insurance carriers, selecting the most competitive and comprehensive coverage available. Core insurances include coverage for construction and operational property damage, delay in start-up, business interruption, third-party liability, and marine cargo, as well as associated financial risk insurance (see Figure A D.11). Launched in 2022, the facility provides up to USD 400 million in insurance capacity per project, supporting clean hydrogen projects with capital expenditures of up to USD 600 million and enhancing bankability through pre-approved financier-focused insurance programmes.

Figure A D.11. Marsh Clean Hydrogen Insurance Facility insurances

Source: Marsh Clean Hydrogen Insurance Facility documentation

The key actors involved in the Marsh Clean Hydrogen Insurance Facility are:

• Marsh: the risk and insurance advisor managing the facility. Marsh, part of Marsh McLennan, a New York, USA, headquartered and stock exchange listed company in the S&P 500, is an insurance broker and risk advisor, offering data-driven risk solutions and advisory services to commercial and individual clients in over 130 countries. As a business Marsh McLennan supports clients through comprehensive risk management, strategy, and people advisory.

• Project developers, EPC contractors, operators, owners and any parties with contractual risk of loss for the project: clients developing clean hydrogen projects and requiring appropriate risk advisory and insurance transfer products.

• Investors and lenders: financial institutions seeking to reduce exposure to risk before committing capital to clean hydrogen projects.

• Global insurers: A-rated (re)insurers providing pre-agreed coverage for projects.

In the contractual flows of Marsh’s Clean Hydrogen Insurance Facility, clean hydrogen project developers pay insurance premiums to cover various project risks. Marsh serves as an intermediary, negotiating insurance coverage with global insurers and transferring these risks from the project owners' balance sheets to the commercial insurance marketplace. Financial investors provide capital investment for the projects, with their risk exposure mitigated by tailored insurance coverage. In the event of insured incidents, such as property damage or business interruption, Marsh manages the claims process, ensuring developers are properly compensated and project disruptions are minimised.

Clean hydrogen projects face several challenges that benefit from Marsh’s clean hydrogen insurance facility. One common issue, especially in large-scale infrastructure projects, is the complex ownership structures, often involving multiple stakeholders, which can complicate both risk management and insurance arrangements. Additionally, technological uncertainty, as hydrogen production is sometimes perceived as relying on emerging technologies, requires thorough risk assessments, which differs for prototype or scale-up projects. Furthermore, the high production costs of clean hydrogen, compared to carbon-based hydrogen, make early-stage projects more financially challenging, potentially limiting investment appeal and heightening the need for customised insurance solutions.

The Marsh Clean Hydrogen Insurance Facility provides several practical advantages for project developers and investors. It simplifies the process of securing core insurance needs by offering a single platform with pre-agreed terms and competitive pricing from a global panel of A-rated insurers. The facility offers comprehensive risk coverage across both construction and operational phases, addressing risks such as technology failure, political uncertainty, and sabotage. Its flexible structure allows developers to select construction phase, operational phase, or combined coverage extending into the first year of operations. Marsh also tailors insurance solutions to the specific risk characteristics of each project, taking into account location, technology, contractors, and supply chain. Additionally, the facility is designed to meet lender requirements, including a Brokers Letter of Undertaking and appropriate lender insurance clauses. These advantages help reduce project risk, enhance investor confidence and improve access to financing.

Supported Projects Description

The Marsh Clean Hydrogen Insurance Facility offers risk transfer solutions for a variety of clean hydrogen projects globally, including renewable hydrogen, hydrogen production based on natural gas with carbon capture, clean steel production, and hydrogen fuel cell applications, although specific projects are not publicly disclosed. It serves a range of clients, such as local governments, independent project developers, and large-scale conglomerates, to manage their project risks. The facility is active in both OECD and select emerging markets, supporting clean hydrogen production and use, as well as carbon capture projects. It is structured to handle large investments, covering projects with capital expenditure up to USD 600 million and providing insurance capacity of up to USD 400 million.

Impact of the Solution on the Projects

The Marsh Clean Hydrogen Insurance Facility offers several advantages over conventional financing methods. It de-risks complex hydrogen projects by providing a comprehensive insurance package, simplifying risk management and enhancing investor confidence. The facility reduces complexity by allowing project developers to secure the majority of core insurances under a single platform, streamlining the risk transfer process and lowering administrative burdens. Additionally, by mitigating risks related to construction, operations, and political uncertainties, the facility improves access to both institutional and private financing, potentially reducing borrowing costs for project developers.

The Marsh Clean Hydrogen Insurance Facility improves access to finance by making projects more attractive to institutional and private investors through effective risk mitigation. This risk reduction supports developers in securing long-term financing. The facility offers flexible, tailored insurance coverage that aligns with the specific risk profile of each project, enabling more precise financial planning. This customisation further strengthens the project's investment appeal and financial viability.

Improving enabling conditions can complement the de-risking solution offered by the Marsh Clean Hydrogen Insurance Facility. Government incentives, such as tax breaks and revenue support, make clean hydrogen projects more attractive to investors and work in tandem with the risk transfer solutions provided by the facility. Additionally, as hydrogen production technologies and infrastructure mature and scale, the facility further reduces perceived risks associated with early-stage projects, supporting their viability and improving investor confidence. These factors contribute to a more favourable environment for financing hydrogen projects.

Lessons Learnt and Replicability

The Marsh Clean Hydrogen Insurance Facility has been effectively implemented in multiple projects globally, providing a comprehensive risk management framework that enhances project viability and secures financing. While the facility requires an upfront risk assessment and project evaluation by in-house risk engineers, typically taking up to six weeks, this preparation time helps reduce long-term risks and ensures smoother project execution. By simplifying the process of securing insurance coverage and de-risking hydrogen projects, the facility also helps mobilise private capital, making these projects more attractive to institutional and private investors.

The replicability of the Marsh Clean Hydrogen Insurance Facility depends on several key conditions. Countries with mature clean hydrogen policy frameworks and regulatory clarity are more likely to adopt and benefit from the facility. Its flexible design allows for application across a wide range of clean hydrogen projects with varying risk profiles, making it adaptable to different markets and project types. Successful replication also requires strong engagement between project developers, insurers, and financial institutions, as collaboration among these stakeholders is crucial to effectively implementing the facility in other sectors and regions.

Case study 12 - IRA Hydrogen / Government of the United States

Table A D.15. Key indicators of the IRA

Indicator	Instrument
Type of instrument	Economic
Instrument	Tax credits
Eligible step(s) of the value chain	Fuel cell electric vehicles, hydrogen infrastructure, electrolysers, and a range of other products
Eligible countries	United States
Status	Completed
Amount	There are multiple credits and the planned credit amounts vary by technology and other factors: aggregate maximum USD 10 billion for advanced energy projects, including manufacturing of certain hydrogen technologies, such as electrolysers and fuel cells; maximum USD 40 000 for commercial fuel cell buses and trucks; maximum USD 3/kg of qualified clean hydrogen production.
Date of implementation	IRA was enacted on August 16, 2022. Rulemakings associated with individual tax credits are ongoing.

Source: Authors based on case study documentation

Instrument – Theoretical Concept

The Inflation Reduction Act of 2022 (IRA) provides a comprehensive suite of economic instruments, including tax credits and incentives aimed at fostering the production and adoption of clean energies, including clean hydrogen (White House, 2023[20]). These measures are designed to support the transition to a low carbon economy by enhancing the economic viability of hydrogen projects through various tax credits. The main instrument is the Clean Hydrogen Production Tax Credit (45V), offering a tax credit based on the carbon intensity of hydrogen production. Other relevant credits include those for carbon capture (45Q), clean vehicles (30D, 45W), and energy projects (48C). Incentives for clean hydrogen under IRA are summarised in the table below:

Table A D.16. Zoom on hydrogen-related tax incentives

Incentive	Description	Funding / Duration	Additional information
Advanced Energy Project Credit (48C)	Extends 30% investment tax credit for qualifying advanced energy projects, including those for manufacturing of hydrogen technologies (e.g. electrolysers, fuel cells, etc.).	USD 10 billion, ongoing	Includes retrofitting for low-carbon industrial heat, carbon capture, storage, recycling and energy efficiency projects. Taxpayers must adhere to wage and apprenticeship standards to access full credit value.
Alternative Fuel Refuelling Property Credit (30C)	Extends and increases 30% credit for alternative fuel refuelling property, with a cap of up to USD 100 000 per dispenser or storage unit.	Through 2032	Credit is only for property installed in low-income or rural areas. For business installations, taxpayers must adhere to wage and apprenticeship standards to access full credit value.
Carbon Capture Tax Credit (45Q)	Enhances tax credit for carbon capture and direct air capture, extending the deadline for construction to 2033.	Through 2032	Cannot be combined with the 45V hydrogen credit. Taxpayers must adhere to wage and apprenticeship standards to access full credit value.
Clean Hydrogen Production Tax Credit (45V)	Production tax credit for clean hydrogen production with a variable rate based on carbon intensity (up to USD 3 per kg of H2 with carbon intensity lower than 0.45 kg of CO2 per kg of H2), for projects that began construction before 2033.	Ongoing, 10 years incentive plan	Taxpayers must adhere to wage and apprenticeship standards to access full credit value, cannot stack with 45Q.
Clean Vehicle Credit (30D)	Maintains USD 7 500 credit for FCEVs with new limits on price, battery components, and income eligibility. Eliminates the previous manufacturers quotas, which phased out the tax credit for manufacturers as they neared 200 000 clean vehicles sold.	Through 2032	Reduces credit if components are not sourced from the US/FTA countries14 or if EV is not assembled in North America.
Elective Payment for Clean Energy Projects	Allows direct payments in place of tax liability reduction for certain clean energy credits, including the clean hydrogen production credit, the energy investment tax credit, the carbon capture and sequestration credit, alternative fuel vehicle refuelling, property credit, advanced energy project credit, and others.	Direct pay available through 2032	Elective payment is generally limited to tax-exempt and governmental entities but businesses can also access elective payment for 45V and 45Q credits for five years.
Energy Credit (Extends 48)	Extends 30% fuel cell investment tax credit, transitioning to a technology-neutral credit in 2025.	Through 2024	Offers bonuses for domestic sourcing, projects in energy communities and projects in low-income communities. Taxpayers must adhere to wage and apprenticeship standards to access full credit value.
Energy Storage Credit (New, 48 and 48E)	Adds energy storage, including hydrogen storage, to the energy investment tax credit.	Through at least 2032; the transition from 48 to 48E will occur in 2025	Offers bonuses for domestic content, projects in energy communities and projects in low-income communities. Taxpayers must adhere to wage and apprenticeship standards to access full credit value.
Qualified Commercial Clean Vehicles Credit (New, 45W)	Creates a 30% credit for commercial FCEVs, capped at USD 40 000.	Through 2032	Includes USD 7 500 for smaller vehicles, and up to USD 40 000 for larger ones.

Source: Authors based on case study documentation

Being an important measure in the overall clean hydrogen incentives package, the Clean Hydrogen Production Tax Credit (45V) provides a 10-year incentive for the production of clean hydrogen based on lifecycle greenhouse gas (CO₂ equivalent) emissions. The credit amount is determined by multiplying the kilogrammes of qualified hydrogen produced annually by a credit rate that depends on the carbon intensity of hydrogen production and on whether the project meets prevailing wage and apprenticeship requirements. There are four tiers of credit rates, with a maximum of USD 3 per kilogramme of hydrogen for a carbon intensity of less than 0.45 kilogramme of CO₂ equivalent per kilogramme of hydrogen, as shown in Table A D.17.

Table A D.17. IRA four-tier incentives

Carbon intensity (kg CO2 equivalent per kg H2)	Max Hydrogen Production Tax Credit (USD per kg H2)
4 - 2.5	USD 0.60
2.5 - 1.5	USD 0.75
1.5 - 0.45	USD 1.00
<0.45	USD 3.00

Source: Authors based on case study documentation

To qualify for the credit, projects must be placed into service before January 1, 2033, and may not be combined with the 45Q Carbon Capture and Sequestration Tax Credit. Hydrogen production is evaluated using 45VH₂-GREET15 , which calculates emissions from the production process, excluding downstream emissions. Retrofits of existing facilities may also qualify, offering flexibility for expanding clean hydrogen production.

Actors involved and Financial Flows

Under the 45V Clean Hydrogen Production Tax Credit, the key actors include the Treasury Department and the Internal Revenue Service (IRS) for administering the tax credits, and the U.S. Department of Energy (DOE) for maintaining the 45VH₂-GREET model and evaluating applications for pathways not yet in 45VH₂-GREET through the Emissions Value Request Process (IRS, n.d.[21]; Department of Energy (DOE), n.d.[22]).

Private sector entities, such as hydrogen producers and technology developers, are eligible for the tax credit in the years that they produce clean hydrogen. The tax credit incentivizes investment in hydrogen projects by reducing the cost of clean hydrogen production. Other tax credits, such as 48C, 48, 30C, and 45W, incentivize investments in manufacturing technologies, infrastructure, and transportation end uses. Incentives within IRA include production tax credits (i.e. an incentive for every unit of a particular good that is produced, such as clean hydrogen), investment tax credits (i.e. a one-time incentive for deployment of a particular type of facility, such as an electrolyser facility), and grants (i.e. funds provided for direct use in a particular type of qualifying project, such as construction of an electrolyser manufacturing facility).

Governance/Organisation and Implementation

The governance involves Treasury and IRS, which develop regulations and guidance developed to implement the IRA provisions. The IRS issues guidelines, while the DOE maintains the 45VH₂-GREET model and reviews applications for pathways not yet in 45VH₂-GREET (through DOE”s Emissions Value Request Process).

Challenges and key advantages

One of the key challenges in utilising the Clean Hydrogen Production Tax Credit is accurately verifying the carbon intensity of hydrogen production, which may require sophisticated tools, particularly regarding electricity tracking. Procedures for taxpayers to obtain emissions analyses if their pathway is not in 45VH₂-GREET may also be lengthy, which can delay the initiation of projects. Additionally, the need for effective coordination with international regulations introduces complexity, particularly for taxpayers intended to export hydrogen.

The Clean Hydrogen Production Tax Credit provides several advantages, particularly in encouraging investment by lowering costs through tax incentives. It drives technological advancements and deployment of hydrogen production facilities, while also promoting job creation via prevailing wage and apprenticeship schemes. The significant financial benefits improve project feasibility, and the availability of the credit for up to 10 years supports sustained local investments. Additionally, the flexibility to combine the credit with others, such as renewable energy production tax or zero-emission nuclear credits, strengthens overall project financing and feasibility.

Supported Projects Description

Projects supported under the 45V Clean Hydrogen Production Tax Credit primarily focus on the development of hydrogen production facilities with significantly reduced carbon emissions. These include both the retrofitting of existing facilities to meet clean hydrogen criteria and the construction of new plants designed to produce hydrogen with minimal lifecycle greenhouse gas emissions. The tax credit encourages projects that integrate innovative technologies for clean hydrogen production, with the goal of achieving lower emissions thresholds, thus contributing to the broader decarbonisation of the energy and industry sectors.

Under the 2022 Budget Reconciliation bill, IRA will invest approximately USD 369 billion in Energy Security and Climate Change programs over ten years. The exact number of hydrogen projects supported is contingent on projects meeting eligibility criteria and project commencement before 2033.

The supported projects are developed in the United States. Projects in a wide array of industry subsectors can benefit from this incentives: fuel cell electric vehicles (FCEVs), hydrogen infrastructure, electrolysers, and a range of other products including retrofitting facilities for low-carbon industrial heat, carbon capture, transport, utilisation, and storage systems, and equipment for recycling, waste reduction, and energy efficiency.

Impact of the Solution of the Projects

The IRA’s economic incentives significantly reduce the financial burden on hydrogen projects and enhance project feasibility, making them more viable and attractive to local and international investors. It helps accelerate the transition towards clean hydrogen energy and build up new clean infrastructures locally.

Advantages vs Conventional Financing: The IRA offers more favourable terms compared to conventional financing by providing direct tax credits and incentives, reducing upfront capital requirements, and enabling faster cost recovery.

Impact on Business Model or Access to Finance: The introduction of tax credits and incentives under the IRA improves access to finance for hydrogen projects, making them more bankable and attractive to private investors.

How Improving the Enabling Conditions Can Complement the De-risking and Financial Solution: Enhancing regulatory clarity, streamlining application processes, and improving coordination with regulations in other countries (e.g. RED II) can reduce project timelines and increasing private sector participation.

Lessons Learnt and Replicability

Key lessons learned include the necessity of clear eligibility criteria and streamlined administrative processes to ensure efficiency and fairness in resource allocation. Additionally, maintaining high workforce standards is crucial for sustaining public support and trust. Adhering to these standards helps ensure that quality and integrity are upheld, which in turn supports continued public confidence.

The solution is implemented effectively through clear regulatory guidance and collaboration between government agencies, ensuring that the economic incentives are accessible and operational in a timely manner to support the clean hydrogen market uptake locally. The solution has successfully mobilised investment and accelerated clean hydrogen projects. Key indicators of success from the Bipartisan Infrastructure Law and the IRA include the announcement of over USD 2.9 billion in investments for electrolyser and fuel cell manufacturing facilities since 2021. These investments represent over 15 new or expanded facilities with an annual manufacturing capacity of approximately 12 GW for electrolysers and 4 GW for fuel cells. As of May 2024, existing and planned electrolyser installations in the U.S. (including firm commitments and projects under construction) totalled around 4.5 GW.

The regulatory complexity may increase preparation timelines, but the financial benefits often outweigh these delays. Plus, the solution successfully mobilised private capital, as mentioned above, by reducing investment risks and accelerated the implementation timeline through substantial tax credits and incentives.

The funds have begun to be used, though challenges in disbursement may arise due to the complexity of compliance. The funds are utilised effectively, with clear disbursement criteria ensuring that projects meet environmental and economic objectives.

Successful replication of clean hydrogen projects under the 45V Clean Hydrogen Production Tax Credit framework hinges on robust regulatory support, well-defined eligibility criteria, and region-specific economic frameworks. While replication in advanced economies can thrive under these conditions, emerging markets and developing economies (EMDEs) may face substantial barriers. The high capital costs and complex regulatory requirements could make the scheme too costly and difficult to implement in these regions, especially where financial and institutional capacities are limited. Tailored solutions may be needed to enable broader participation in clean hydrogen initiatives.

Case study 13 - Japanese government subsidy scheme / Government of Japan

Table A D.18. Key indicators of the Japanese government subsidy scheme

Indicator	Instrument
Type of instrument	Economic
Instrument	Contract-for-Difference Subsidy
Eligible step(s) of the value chain	Hydrogen production and derivatives
Eligible countries	Japan
Status	The Hydrogen Society Promotion Act was put into force on 23 October 2024.
Amount	Planned: USD 19.2 billion Available: n/a Disbursed: n/a
Date of implementation	The Hydrogen Society Promotion Act was put into force on 23 October 2024.

Source: Authors based on case study documentation

Instrument – Theoretical Concept

Japan’s low-carbon hydrogen subsidy is an economic instrument set by the Japanese Government and the Japan Organisation for Metals and Energy Security (JOGMEC) in 2024 (JOGMEC, n.d.[23]). It aims to stimulate investment in robust international supply chains for low-carbon hydrogen and its derivatives that meet the following requirements:

Table A D.19. Criteria for low-carbon hydrogen derivatives

	System boundary	Carbon intensity
Hydrogen	Well-to-gate	3.4 kg-CO2-eq/kg-H2 (or less)
Ammonia	Well-to-gate	0.87 kg-CO2-eq/kg-NH3 (or less)
e-Fuel	Whole supply chain	39.9 g-CO2-eq/MJ (or less)
E-methane	Whole supply chain	49.3 g-CO2-eq/MJ (or less)

Note: CO₂-eq stands for CO₂ equivalent.

Source: Ministry of Economy, Trade and Industry (METI)

The supply-side subsidy is structured as a Contract for Difference (CfD), providing financial support to cover the cost gap of low-carbon hydrogen production with fossil fuels. The CfD will be in place during the first 15 years of the relevant low-carbon hydrogen supply period, with an obligation for the hydrogen supplier to extend the supply for another 10 years. The subsidy will be paid in Japanese Yen (JPY) and will be granted after a competitive selection process to determine the eligibility of hydrogen producers.

The subsidy will cover the amount by which low-carbon hydrogen production costs (and imports and transportation costs, if applicable), also called ‘Strike Price’, exceeds the Reference Price to be set, depending on the actual use of low-carbon hydrogen and its derivatives. If the ‘Reference Price’ exceeds the ‘Strike Price’, the supplier will be required to pay the difference (see Figure 1).

The applicants will have to present the ‘Strike Price’ in the form of a calculation formula in accordance with the Government and the JOGMEC, reflecting the price at which the supplier is able to recover its cost of production, importation and supply of fuels and make a reasonable profit. The ‘Reference Price’ will be determined project-by-project by the Japanese Government, based on the following criteria:

• If the low-carbon hydrogen type is used in an industry where it has not been generally or commercially used, the ‘Reference Price’ will be equivalent to the cost of comparable “conventional” products landed in Japan.

• If the low-carbon hydrogen type has already been generally and commercially used in a relevant industry, the ‘Reference Price’ will be equivalent to the historic cost.

It is expected that low-carbon hydrogen and ammonia products for power generation will get the ‘Reference Price’ based on Liquefied Natural Gas (LNG) and coal prices.

Figure A D.12. Contract for Difference low-carbon hydrogen subsidy strategy

Source: Ministry of Economy, Trade and Industry (METI)

Actors involved and Financial Flows

• The Government of Japan is responsible for defining the criterion and requirements for the subsidy.

• The Ministry of Economy, Trade and Industry (METI) is mainly in charge of conducting the business plan evaluation and supervising the selection process.

• The Ministry of Land, Infrastructure, Transport and Tourism (MLIT) is in charge alongside with and provides support to METI if the candidate projects involve pipeline construction, roads or port sites.

• The Japan Organisation for Metals and Energy Security (JOGMEC) is responsible for supporting the selection process and paying the subsidy to the selected suppliers.

Governance/Organisation and Implementation

The Japanese Government is developing the subsidy pursuant to the Act on Promotion of Supply and Utilisation of Low-Carbon Hydrogen and its Derivatives for Smooth Transition to a Decarbonised, Growth-Oriented Economic Structure (“the Hydrogen Society Promotion Act”), which was passed on 17 May 2024. The Hydrogen Society Promotion Act establishes a basic policy, code of conduct and regulatory framework to promote the demand, supply and use of low-carbon hydrogen and its derivatives in Japan.

This act is part of the efforts to meet the Basic Hydrogen Strategy (2023), which aims to reach 12 million t/year of hydrogen use by 2040 (The Ministerial Council on Renewable Energy, Hydrogen and Related Issues, 2023[24]). It also aligns with the current sixth Strategic Energy Plan (2021), targeting 1% of hydrogen/ammonia in its power generation fuel mix by Fiscal Year 2030, with a goal of introducing and popularising 30% volume co-firing of hydrogen at gas-fired thermal power plants or mono-firing of hydrogen for power generation, and 20% co-firing of ammonia at coal-fired thermal power plants (Agency for Natural Resources and Energy, 2023[25]).

JOGMEC aims to ensure energy security by providing financial assistance to Japanese businesses to achieve carbon neutrality. It includes equity investments in hydrogen and fuel ammonia production and storage, as well as carbon dioxide capture and storage (CCS) projects.

Challenges and key advantages

Advantages: 

• Promotes investment in Japan’s clean hydrogen industry by covering the price gap.

• Ensures industrial competitiveness by covering hard-to-abate industry sectors.

• Offers long-term financial incentive (15-year) in forms of grant financing.

• Once commenced, quick implementation of the application process.

Supported Projects Description

To be considered for the subsidy, low-carbon hydrogen suppliers either produce in Japan or import into Japan low-carbon hydrogen products. Projects need to provide over 1000 tons of low-carbon hydrogen annually from 2030 onwards. The projects also need to contribute to Japan’s industrial decarbonisation by supplying to hard-to-abate sectors, including steel, chemicals and transportation.

Low-carbon hydrogen supply projects proposed under the CfD subsidy scheme need to submit a business plan to the METI and MLIT (if involving pipeline installation, ports or roads). The business plan needs to include the duration and implementation structure and the source of funding for the development and operations of the project. Additionally, it needs to (1) be prepared jointly with the offtaker(s) or end-user(s), (2) include a capital investment plan, and (3) demonstrate that the supply of low-carbon hydrogen will start by the indicated time (i.e., Fiscal Year 203016) and continue for at least 25 years, i.e. the 15-year subsidy period plus a further 10-year period.

In August 2024, the Government and JOGMEC circulated a set of draft basic principles and criterion for the country’s new CfD subsidy scheme. This draft outlines the requirements for low-carbon hydrogen supply projects to be considered for the subsidy, in accordance with the Hydrogen Society Promotion Act, and was put into force on 23 October 2024.

The criterion to approve the business plan, currently under review, are the following:

• The business plan meets the criteria set out in the basic policy of the Hydrogen Society Promotion Act;

• The business plan is economically and commercially viable;

• The business plan will contribute to strengthening the industrial competitiveness.

The Japanese Government will invest approximately USD 19 billion (JPY 3 trillion) for the low-carbon hydrogen subsidy over fifteen years. The exact number of hydrogen projects supported is contingent on applications meeting eligibility criteria.

Country, Industry Subsector, Size of Investment:

• Country: Japan  Industry Subsectors: Low-carbon hydrogen, ammonia, e-fuel and e-methane.

• Size of Investment: USD 19.2 billion (JPY 3 trillion).

Impact of the Solution of the Projects

Japan’s CfD subsidy can allow producers to sell low-carbon hydrogen at the same price as fossil alternatives. Additionally, it helps accelerate the decarbonisation of the industry and the power sectors.

Advantages vs Conventional Financing: The CfD supply subsidy provides producers and importers a top-up payment above a pre-established reference price. By providing price protection, it can lower down the production costs and promote financial support from private investors. In the long term, the more the technology is deployed, the more the costs will decrease through economies of scale and learning curve effects, driving competitiveness against conventional technologies. Additionally, the CfD-based subsidy can help to achieve Japan’s decarbonisation targets by allocating public money towards carbon neutrality goals.

Impact on Business Model or Access to Finance: The introduction of a government-led subsidy scheme improves access to finance for projects and attracts private investors seeking to enter the low-carbon hydrogen market, by providing a stable revenue profile for projects.

Enhancing regulatory clarity, streamlining application processes, and harmonising low-carbon hydrogen standards can benefit the subsidy scheme implementation, mitigating system complexities and reducing project timelines.

Lessons Learnt and Replicability

Key lessons learned include the importance of involving both supply and demand for the eligibility criteria and the necessity to implement a sound regulatory framework for the subsidy mechanism.

The regulatory complexity (i.e., setting basic criterion and requirements for the subsidy) may increase preparation timelines, with an expected delay of the application opening of two to five months. But once it is commenced, the selection process is likely to move quickly. It is expected to encourage private investments through public finance support.

Successful replication requires strong regulatory support, clear eligibility criteria, and robust co-ordination among public agencies involved in the implementation process.

Case Study 14 – National Hydrogen Mission / Government of India

Table A D.20. Key indicators of India’s National Hydrogen Mission

Indicator	Instrument
Type of instrument	Economic
Instrument	Enabling policy framework under development, including consumption quotas for end use sectors and bidding auctions for clean hydrogen production; Financial incentives in the form of reimbursements for electrolyser manufacturing under PLI (Production Linked Incentives)
Eligible step(s) of the value chain	Electrolyser manufacturing / Electrolysis / Storage and transport infrastructure / End-Use Sectors
Eligible countries	India
Status	Under implementation
Amount	Planned: USD 2.4 billion (INR 19 744 crore) Available: n/a Disbursed: n/a
Date of implementation	Phase 1: 2023-26 partly addressing domestic demand of 5 Mt per year and increasing local electrolyser manufacturing capacity Phase 2: 2026-30 scaling up clean hydrogen production domestically up to 10 Mt per year and exploring export opportunities

Source: Authors based on case study documentation

Instrument – Theoretical Concept

Launched in August 2021 and formalised in January 2023, the India National Green Hydrogen Mission aims to establish the country as a global hub for the production, usage, and export of clean hydrogen by 2030. The mission's target is to build capabilities to produce 5 million metric tonnes (Mt) of clean hydrogen annually by 2030, with the potential to scale to 10 Mt as export markets grow. It focuses on replacing fossil fuels and fossil fuel-based feedstocks with renewable alternatives across various sectors, including ammonia production, petroleum refining, steel production, and in the mobility sector. The mission aims to decarbonise the economy, reduce dependency on fossil fuel imports and position India among leaders in the clean hydrogen sector by advancing the manufacturing of electrolysers locally and stimulating domestic clean hydrogen production (Ministry of New and Renewable Energy, 2023[26]).

Figure A D.13. National Green Hydrogen Mission components

Source: Case study documentation

The National Green Hydrogen Mission will implement a wide incentive program to foster the growth of the clean hydrogen industry in India. The targeted sub-sectors include domestic and export-oriented clean hydrogen production, green ammonia for domestic fertilisers market, green steel, transport, shipping pilot project, and clean hydrogen hubs. The key enabling actions, on the top of elaborating enabling economic and policy frameworks, will be articulated around elaboration of regulations, costs and standards; support of research and development activities; set up of skill development programs for technology, operational and maintenance aspects; establishment of public awareness programs and stakeholder outreach; as well as establishing strategic international cooperation partnerships.

The mission’s policy framework is expected to include financial and non-financial measures to support low-cost hydrogen production and domestic manufacturing of related technologies, including but not limited to consumption quotas for end use sectors and bidding auctions for clean hydrogen procurement. The Strategic Interventions for Green Hydrogen Transition (SIGHT) plan will include an incentive program designed to stimulate the growth of the clean hydrogen industry in India. Initially, the program will focus on providing financial incentives for electrolyser manufacturing and green hydrogen production. To ensure quality, eligibility criteria for procurement will require the use of government-approved equipment, with a list of approved models and manufacturers potentially updated over time. These interventions are expected to reduce production costs, support emerging sectors, and establish a domestic manufacturing base by mitigating risks for early adopters and innovators.

Some of measures were implemented by the Ministry of Power in February 2022, shortly before the formalisation of the National Green Hydrogen mission, and include for clean hydrogen and ammonia production projects. These include waiving of inter-state transmission charges for 25 years for projects commissioned before 2025; facilitating timelines and access to renewable energy; allotmenting land in renewable energy parks and manufacturing zones; streamlining the permitting process via a single governmental portal; and aggregating demand from different sectors through the Ministry of New and Renewable Energy (MNRE), with bid consolidation by designated agencies (Ministry of Power, 2022[27]).

Additionally, as part of the Atmanirbhar Bharat (Self-Reliant India) initiative, the Indian government launched in 2020 the Production Linked Incentive (PLI) scheme to strengthen domestic manufacturing competitiveness, including electrolysers manufacturing for clean hydrogen production (Cordonnier and Saygin, 2023[28]). With the total program amount of USD 26 billion (INR 1.97 lakh crore17), the PLI offers financial incentives in the form of reimbursement of between 1 and 10% of net sales over up to six years, fostering investment in advanced technologies, economies of scale, and export growth. While specific PLI programs target sectors like advanced chemistry cells and high-efficiency solar modules, electrolyser manufacturing is supported through the general scheme. This incentive promotes local production and advances India's clean hydrogen goals.

The National Green Hydrogen Mission will be implemented in phases, starting with Phase I, from 2022-23 to 2025-26, focusing on creating demand, enabling supply through domestic electrolyser manufacturing, and initiating pilot projects in hard-to-abate sectors. This phase includes pilot projects in refineries, fertilisers, and city gas sectors, alongside the development of R&D, regulations, and standards. Phase II, from 2026-27 to 2029-30, aims to make clean hydrogen cost-competitive in refineries and fertilisers, expand to sectors like steel and mobility, scaling up production and exploring commercial-scale projects.

Actors involved and Financial Flows

The National Green Hydrogen Mission in India involves a coordinated effort across multiple ministries and governmental bodies to achieve its ambitious goals. The Ministry of New and Renewable Energy (MNRE) leads the mission, responsible for overall coordination, financial incentives, and the development of the clean hydrogen ecosystem. Key line ministries, such as the Ministry of Power, Ministry of Petroleum and Natural Gas, or the Ministry of Chemicals and Fertilisers, play crucial roles in specific sectors like energy, transportation and industry. Scientific institutions, educational bodies, and international collaborations will further enhance the mission's success through research, innovation, and skill development.

State governments also contribute by establishing supportive subnational efforts and initiatives. Gujarat aims to produce 60% of India’s clean hydrogen by 2030, targeting 3 million metric tonnes per year under its forthcoming Green Hydrogen Policy (Bioenergy Times, 2024[29]). Pilot projects are underway, such as hydrogen blending with Piped Natural Gas (PNG) in North Gujarat, led by Gujarat State Petroleum Corporation and Gujarat Power Corporation Ltd, supported by a 100 MW solar project. Further projects in Surat and Mehsana are also planned, with an estimated USD 240 million (INR 20 billion) investment by 2030 for 1 million metric tonnes annually clean hydrogen capacity.

Uttar Pradesh through its Green Hydrogen Policy 2024 promotes investments in clean hydrogen and clean ammonia production, aiming for 1 million metric tonnes annually by 2028 (Invest Up, n.d.[30]). Key incentives include a capital subsidy of up to 30%, with the first five projects receiving up to 40%. Land and power supply incentives are provided, such as discounted land prices, exemptions on electricity duties, and intra-state transmission costs. The policy also encourages ease of doing business through a single-window portal and environmental clearance under the White Category for clean hydrogen projects. The estimated maximum capital subsidy is USD 27 million (INR 225 crore).

Punjab, under its 2023 Green Hydrogen Policy, aims to achieve a production capacity of 100 kilo tonnes per annum of clean hydrogen by 2030. The policy leverages agricultural biomass, such as paddy straw and other residues, to produce hydrogen. The state has allocated a capital subsidy of up to USD 1.8 million (INR 15 crore) per project for biomass-based hydrogen production, targeting 10 projects. Additional incentives include land allocation, exemptions on electricity duties, and transmission cost reductions to promote clean hydrogen development and boost investment in renewable energy infrastructure (Punjab Energy Development Agency, n.d.[31]).

Governance/Organisation and Implementation

The National Green Hydrogen Mission is led by the Ministry of New and Renewable Energy (MNRE), with an empowered group chaired by the cabinet secretary, including officials from key ministries and industry experts. This group oversees policy, progress, and alignment with broader government initiatives. The MNRE’s mission secretariat handles policy development, project management and risk assessment. Government agencies like the Solar Energy Corporation of India (SECI) are responsible for managing auctions and tenders for clean hydrogen projects, ensuring transparent procurement and competitive bidding to attract investments. An advisory group provides further technical and R&D support.

Challenges and key advantages

Challenges: The National Green Hydrogen Mission faces several challenges. First, establishing strong market demand for clean hydrogen, both domestically and internationally, remains difficult. High production costs due to expensive electrolysers and renewable energy inputs further hinder competitiveness. Currently, global electrolyser manufacturing capacity is limited to around 4 GW annually, posing a challenge to meeting the 200 GW target by 2030. Additionally, the absence of a fully established policy framework creates uncertainty, potentially delaying the mission’s key milestones for 2026 and 2030, along with related investments.

Advantages: The National Green Hydrogen Mission offers several advantages. It contributes to decarbonisation by replacing fossil fuels across different sectors with clean hydrogen, aligning with India’s Net Zero emissions goal by 2070. Financial incentives and R&D support help reduce production costs, making clean hydrogen more economically viable. Expanding domestic electrolyser manufacturing strengthens India’s position as a leader in clean hydrogen technology and integrates it into global supply chains. Additionally, fostering domestic clean hydrogen production reduces dependence on imported fossil fuels, enhancing energy security and lowering energy import costs.

Supported Projects Description

The National Green Hydrogen Mission, with a budget of USD 2.4 billion (INR 19 744 crore), supports a range of clean hydrogen projects and R&D initiatives across various sectors. Initial focus includes driving demand in refining, fertilisers, and city gas, with pilot projects in steel, mobility, and shipping. Several auctions have been organised for electrolyser capacity and clean hydrogen production (see table below):

Table A D.21. Auctions of the National Green Hydrogen Mission

Date	Auction Title/Scope	Capacity	Financial Support	Winners (if available)
April 2023	Electrolyser manufacturing Tender under SIGHT scheme (1st Auction)	1.5 GW of manufacturing capacity	PLI incentives	RIL, Adani, L&T
July 2024	Electrolyser manufacturing Tender under SIGHT scheme (2nd Auction)	1.5 GW of manufacturing capacity	PLI incentives	Ongoing, proposals received
July 2023	Green Hydrogen Production Tender under SIGHT scheme	450 000 tonnes of clean hydrogen per year of production capacity	An average incentive for kg of clean hydrogen from USD 0.2 (INR 19) to USD 0.4 (INR 35)	Greenko, ACME, Reliance, Hygenco for capacities over 75 000 tonnes of clean hydrogen per year
September 2024	Green Hydrogen Hubs Tender under National Green Hydrogen Mission	N/A	N/A	Ongoing, N/A
June 2024	Green Ammonia Production Auction under SIGHT scheme	539 000 tonnes of clean ammonia per year of production capacity (5.39 lakh tonnes per year)	N/A	Ongoing, N/A

Source: Authors based on (Solar Energy Corporation of India, n.d.[32]; ManufacturingToday, 2024[33]; PV Magazine, 2024[34]; MERCOM, 2024[35]; Ministry of New and Renewable Energy, 2024[36])

The auction summary table above provides insights into India’s growing clean hydrogen sector. Major auctions for electrolyser manufacturing and clean hydrogen production have seen significant interest from key players like Reliance, Adani, and L&T, signalling strong industry participation. The second electrolyser auction, with proposals exceeding 2.8 GW, reflects the rapid scaling of production capacity. Additionally, upcoming auctions for green ammonia further indicate the government's push to diversify hydrogen applications. These auctions aim to meet national hydrogen production targets and foster technological advancements through competitive bidding. Further auctions target clean hydrogen hubs and ammonia production, reflecting growing capacity and investment in the sector.

Impact of the Solution of the Projects

Advantages vs Conventional Financing: The mission addresses the entire clean hydrogen value chain. Leveraging on the public budget for the first domestic clean hydrogen projects it targets to promote use of clean hydrogen in different industrial sectors as well as increase local electrolysis production capacity for the needs of both domestic and export markets.

Impact on Business Model or Access to Finance: The mission's support framework, which is currently under development and formalisation, will enable the implementation of new business cases and industrial projects in the clean hydrogen sector and can facilitate future private investments.

To complement envisioned economic and financial support, the mission will include regulatory frameworks, standards, and international collaborations to create a conducive environment for clean hydrogen adoption at scale.

Lessons Learnt and Replicability

Key lessons learned include the importance of involving both supply and demand for the eligibility criteria and the necessity to implement a sound regulatory framework for the subsidy mechanism.

The National Green Hydrogen Mission covers the entire value chain, but its full impact remains to be assessed as it progresses through its phases. Early auctions, such as those for electrolyser manufacturing, have demonstrated effective mobilisation of industry stakeholders, showing initial success in the implementation.

The mission may extend project timelines due to the complexity of supporting mechanisms, such as bidding auctions, and condition the final investment decisions upon implementation timeline of dedicated policy frameworks.

The mission has successfully attracted private capital, as seen in the electrolyser auctions, where major players like Reliance, Adani, and L&T secured bids. Government incentives reduce risks and support the higher costs of early clean hydrogen projects, encouraging private sector participation and enabling first domestic clean hydrogen projects.

For replicability, a robust governance structure, clear policy support, and significant public investment are crucial. The mission’s phased approach and comprehensive focus on the demand-supply ecosystem can serve as a model for other countries, especially given the success of early auctions in mobilising both private and public resources.

Case study 15 - SDG Namibia One Fund / Climate Fund Managers and Environmental Investment Fund of Namibia and Invest International

Table A D.22. Key indicators of SDG Namibia One Fund

Indicator	Instrument
Type of instrument	Financing
Instrument	Blended Finance: development loans and equity (junior, ordinary, and senior equity)
Eligible step(s) of the value chain / technologies	Green Hydrogen project, including but not limited to green hydrogen and ammonia production, hydrogen refuelling stations, green iron production
Eligible countries	Namibia
Status	Under implementation
Amount (USD)	Planned: 1.1 billion Available: 70 million Disbursed: 25 million
Date of implementation	Phase 1: 2023 (creation year) Phase 2: 2038 (estimated end year for closed end fund)

Source: Authors based on case study documentation

Instrument description – Theoretical Concept

SDG Namibia One is a USD 1.1 billion blended finance vehicle designed to mobilise investment in Namibia's green hydrogen sector (Environmental Investment Fund of Namibia, 2023[37]). It combines public and private funds to support clean hydrogen projects, leveraging grants and investment capital to reduce financial risk and attract further private sector financing. SDG Namibia One was created in 2023 through a partnership between Climate Fund Managers, the Environmental Investment Fund of Namibia and Invest International.

Climate Fund Managers (CFM) is a joint venture between Dutch Development Bank (FMO), a development finance institution, and Sanlam Infraworks, Africa’s largest non-banking financial institution. CFM is a Dutch partner bringing expertise in climate finance. The Environmental Investment Fund of Namibia (EIF) is a fund established by the Government of Namibia, with a mandate to raise and provide funding for Namibia's economic and sustainable development. Invest International (II) is a joint venture between the Dutch Government and Dutch Development Bank (FMO), with a mandate to support Dutch-linked companies in financing impactful projects that contribute to the achievement of the SDGs.

SDG Namibia One articulates different types of instruments including development funding, junior equity, ordinary equity and senior equity (see Figure A D.14). The development funding is attributed at the pre-financial close state and addresses mainly project’s development risk. The junior, ordinary and senior equity are generally attributed at the post financial close state prior to the project’s construction phase and project’s capital expenditure needs. The junior, ordinary, and senior equity within its priority order benefit the project’s cash waterfall, being exposed to different risk levels.

Figure A D.14. Different types of instruments articulated by SDG Namibia One Fund

Source: SDG Namibia One Fund documentation

SDG Namibia One addresses the development risk through its development tranche of USD 100 million, as well as construction risk through its equity tranche of USD 1 billion (covering junior, ordinary and senior equity financing), while the long term debt is being externalised.

Financial/Contractual Flows

Financial flows involve an initial grant of EUR 40 million from Invest International. The European Commission gave approval, within its Global Gateway strategy, for EUR 25 million additional investment. EIF and CFM, as general partners (GP), will contribute 1% of the total fund size in the tier two, as per private equity (PE) market standard. The European Investment Bank and the Government of the Republic of Namibia concluded a letter of intent at COP27 for the raising of EUR 500 million, a portion of which is to be proposed to be designated for investment via SDG Namibia One. Further on, the vehicle will look to raise money from local institutional investors and investors from around the world, including development finance institutions and multilateral development banks as likely candidates, to develop Namibian green hydrogen projects and related infrastructures.

Governance/Organisation and Implementation

SDG Namibia One is managed by NH₂ Fund Managers, a partnership between EIF and CFM. The establishment involved Memorandum of Understandings (MOUs) and agreements with various stakeholders, aligning with Namibia’s Harambee Prosperity Plan II18 and the EU climate objectives.

SDG Namibia One governance boards structure is represented in Figure 2 and is as follows. NH₂ Fund Manager is 51% owned by CFM NL, which is a 75% – 25% joint venture between CFM and Invest International, and 49% by EIF. SDG Namibia One replicates typical GP - LP (general partner - limited partner) structure with a discretionary investment committee, which includes an independent member, an advisory board, which includes all investors from a certain level of investment, and general member meetings. Any investment decisions are to be approved by its investment committee, while certain strategic decisions need to be approved by the advisory board or general member meetings.

Figure A D.15. SDG Namibia One governance boards’ structure

Source: Case study documentation

The investment process is best seen as a two-phased one, where the investment committee first approves the development work, after which it will look at approving the construction work only when development has successfully commenced. Decision making process at project level differs per project, as SDG Namibia One will not always be a majority investor, yet NH₂ Fund Manager endeavours to be an active investor, and ensure important financial and ESG related topics to remain reserved matters.

Key Advantages and Challenges to Implement the Instrument

Challenges:

• Co-ordination among multiple international and local stakeholders;

• Ensuring long-term financial sustainability and risk management within an evolving policy framework;

• Overcoming technological and infrastructural challenges in a developing market.

Advantages:

• Mobilises significant capital without burdening Namibia’s fiscal budget;

• Attracts international investment and expertise;

• Supports the development of a nascent green hydrogen sector, fostering economic growth and energy independence;

• Ensure International Finance Corporation (IFC) Performance Standards on Environmental and Social Sustainability (PS)19 compliance for all projects by bringing along donor or development financial institutions (DFI) investors.

Supported Projects Description

The platform aims to mobilise USD 1.1 billion for renewable hydrogen projects and targets to finance 207 kilotonnes (kt) of renewable hydrogen production per year. The fund solely focuses on investments in Namibia under the Southern Corridor Development Initiative (SCDI). The realisation of the SCDI aims to generate significant energy propelling Namibia to become energy self-sufficient, improve regional energy security by exporting 14 GW of clean power into the Southern Africa Power Pool and supply various international ports, including the Port of Rotterdam will clean molecules to decarbonise hard-to-abate sectors.

SDG Namibia One fund targets 15-25 investments, with an average ticket size varying between USD 25 million and USD 200 million. The investment scope covers the entire supply chain with a particular focus on production assets for green hydrogen and ammonia, including desalination, renewable energy, and electrolysis assets. Other sectors covered are transportation and transmission up until the port as well as downstream use, including green iron production. Projects with clear local benefits such as local offtake, job creation, energy generation etc. will be prioritised.

SDG Namibia One invested USD 25 million to support the development budget of Hyphen’s renewable ammonia production project in Lüderitz, Namibia (OECD, 2022[38]). The commissioning of the first phase of the project is foreseen at the end of 2026, aiming for an annual output of 1 000 kt of green ammonia, produced from 175 kt of renewable hydrogen. The installed electrolysis capacity is 1.5 GW coupled with almost 2 GW of wind and 2 GW of solar generation installations. The total project cost is estimated at USD 7 billion, out of which USD 100 million of development cost. Targeted Levelised Cost of Green Ammonia (LCOA) is USD 400 per tonne by 2030, with weighted average cost of capital (WACC) seen as the key lever to drive down LCOA.

3. Impact of the Solution on the Projects

Blended finance offers significant advantages over conventional financing methods, particularly for large-scale, capital-intensive projects. By combining public and private investment, blended finance reduces risk, making projects more attractive to private investors and accelerating their implementation. This approach enables the undertaking of projects that might not be feasible with traditional financing alone due to their scale and capital requirements. Additionally, blended finance provides a mechanism for multilateral development banks and other public sector-oriented investors to participate in private sector finance, fostering greater collaboration and resource mobilisation. This structure also promotes country ownership, as evidenced by the involvement of the Environmental Investment Fund of Namibia in similar frameworks, ensuring that governments have a stake in the projects' success. Moreover, blended finance typically offers a lower cost of capital compared to conventional finance, which helps to lower the levelised cost of clean hydrogen, making it more competitive with conventional hydrogen. This financial model thus enhances the economic viability and attractiveness of green hydrogen projects.

Blended finance significantly enhances the business model and access to finance for clean hydrogen projects. For instance, it boosts Namibia's ability to attract international investment by demonstrating a lower-risk financial structure. This improved access to finance supports the growth of the clean hydrogen sector and stimulates the local economy growth.

Improving enabling conditions plays a crucial role in complementing financial solutions for clean hydrogen projects at scale. International partnerships and knowledge-sharing are instrumental in mitigating risks and accelerating technological advancements, making these projects more viable and attractive. These collaborations bring in expertise and innovative solutions that enhance project implementation and operational efficiency. Additionally, establishing a clearer hydrogen policy framework can significantly increase the region's attractiveness for private international investments. Well-defined policies provide investors with the confidence and stability needed to commit to long-term investments, thereby fostering a more supportive environment for the growth of the hydrogen sector.

Lessons Learnt and Replicability

Initial steps, including the signing of MOUs and the allocation of grant funding, suggest effective start of the implementation. The successful implementation will be achieved with further mobilisation of additional funds and project execution. Given the complexity and scale, project preparation timelines may be extended. However, the blended finance approach aims to streamline processes through clear frameworks and extensive partnerships.

The initial public grant funding from Invest International and the European Commission aims to de-risk the fund project and attract private investment. NamH₂, and CFM, are currently in active conversations with several private sector investors. The funds are allocated to address the development risk through development tranche and construction risk through a junior equity tranche.

Several conditions can be generalised for the replicability of successful clean hydrogen projects. First, there should be a strong alignment with national and international climate policies and objectives, ensuring that the project supports broader environmental goals and benefits from regulatory support. Second, effective public-private partnerships are crucial, combining the strengths of government entities and private companies to leverage resources, expertise, and risk-sharing mechanisms. Lastly, commitment from both local and international financial stakeholders is necessary to provide the funding and financial stability required for such capital-intensive projects. These conditions create a robust framework that can be adapted and replicated in different regions, fostering the global expansion of green hydrogen initiatives.

References

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Notes

← 1.  POSCO Holdings, headquartered in Seoul, South Korea, is Holding company of the POSCO Group, whose main business areas include steel, rechargeable battery materials, lithium/nickel, hydrogen, energy etc. (POSCO, n.d.[39])

← 2.  ENGIE is a French multinational utility company headquartered in La Defense, France, and operates in the fields of electricity generation and distribution, natural gas, nuclear, renewable energy, energy services and green hydrogen (ENGIE, n.d.[40]).

← 3.  PTT Exploration and Production Public Company Ltd, also known as PTTEP, is a national petroleum exploration and production company based in Thailand (PTT Exploration and Production Public Company, n.d.[41]).

← 4.  Hydrom is an Oman Government entity responsible for planning and overseeing green hydrogen projects in Oman.

← 5.  Samsung E&A, headquartered in Seoul, South Korea, is a global engineering, procurement and construction (EPC) company, focusing on energy and environmental sectors (Samsung E&A, n.d.[42]).

← 6.  The Inter-American Development Bank (IDB) is an international development finance institution headquartered in Washington, D.C., United States of America, and serving as the largest source of development financing for Latin America and the Caribbean. Established in 1959, the IDB supports Latin American and Caribbean economic development, social development and regional integration by lending to governments and government agencies, including State corporations.

← 7.  Established in 1959, IDB is a leading source of long-term financing for economic, social and institutional development in Latin America and the Caribbean (IDB, n.d.[43]).

← 8.  ETP is a comprehensive, inclusive, and sustainable development strategy to promote employment, productivity, environmental sustainability, and social justice. Such reforms imply profound changes to the fiscal, financial, and environmental policies (Ministerio da Fazenda, 2023[44]).

← 9.  Compared to commercial market rates.

← 10.  Green hydrogen production means renewable energy-powered electrolysis.

← 11.  The DSRA can go up to 12 months in certain specific cases.

← 12.  The Golden Licence is defined as a "single approval" issued by the Cabinet on establishing, operating and managing a project, which includes building licences and the approval on the allocation of the properties necessary for such project. It may be granted to companies upon a decree of the Council of Ministers. Under Article 5(1) of the Green Hydrogen Incentives Law, the Investment Law and the Cabinet Decrees, green hydrogen projects are entitled to obtain a Golden Licence.

← 13.  Munich Re, or Munich Reinsurance Company, is a German multinational insurance company, established in 1880 and headquartered in Munich, Germany. It’s among the world's largest reinsurer. The company is offers an extensive range of insurance and reinsurance services, which cover a variety of sectors, including solutions like HySure for hydrogen projects. With operations worldwide, Munich Re aims to play a critical role in managing risk and supporting financial stability across industries, leveraging its deep technical expertise and strong financial position (Munich Re, n.d.[45]).

← 14.  FTE country is a Free Trade Agreement country. The US has free trade agreements in force with 21 countries, including 20 countries listed on the United States Trade Representative website (Office of the US Trade Representative, n.d.[46]), plus Japan.

← 15.  Office of Energy Efficiency and Renewable Energy (Office of the Energy Efficiency and Renewable Energy, n.d.[47]).

← 16.  In Japan, the government's financial year is from 1 April to 31 March.

← 17.  Crore and lakh are units commonly used in the Indian numbering system to represent large numbers. A crore amounts to 10 000 000 (ten million) in the international numbering system. A lakh amounts to 100 000 (a hundred thousand).

← 18.  Namibia’s Harambee Prosperity Plan II (HPP II) is a comprehensive government initiative designed to drive economic recovery and inclusive growth from 2021 to 2025. The plan focuses on five key pillars: effective governance, economic advancement, social progression, infrastructure development, and international relations. It emphasises job creation, youth empowerment, digital transformation, and sustainable development to enhance the quality of life for all Namibians. A key aspect of the plan includes developing a green hydrogen industry, positioning Namibia as a leader in renewable energy and creating new economic opportunities. HPP II website for more information: https://hppii.gov.na/.

← 19.  IFC's Performance Standards on Environmental and Social Sustainability website for more information: https://www.ifc.org/en/insights-reports/2012/ifc-performance-standards.