"Green" policies are destroying this country

As the world faces this unprecedented energy shock and the other overlapping crises, we need to be clear on how we got here and where we need to go. The analysis in this Outlook is particularly important to shed light on these questions and to dispel some of the mistaken and misleading ideas that have arisen about this energy crisis.

For example, there is a mistaken idea that this is somehow a clean energy crisis. That is simply not true. The world is struggling with too little clean energy, not too much. Faster clean energy transitions would have helped to moderate the impact of this crisis, and they represent the best way out of it. When people misleadingly blame climate and clean energy for today’s crisis, what they are doing – whether they mean to or not – is shifting attention away from the real cause: Russia’s invasion of Ukraine.

Another mistaken idea is that today’s crisis is a huge setback for efforts to tackle climate change. The analysis in this Outlook shows that, in fact, this can be a historic turning point towards a cleaner and more secure energy system thanks to the unprecedented response from governments around the world, including the Inflation Reduction Act in the United States, the Fit for 55 package and REPowerEU in the European Union, Japan’s Green Transformation (GX) programme, Korea’s aim to increase the share of nuclear and renewables in its energy mix, and ambitious clean energy targets in China and India.

Momentum behind the global low‐emissions hydrogen sector has been given a major boost by Russia’s invasion of Ukraine. By 2021 the sector was already converting more of its bulging project pipeline into investment decisions, and hydrogen‐focused companies were raising more money than ever before. With EU member states now aiming to reduce natural gas and oil demand by increasing low‐emissions hydrogen use, and higher formal targets in the United Kingdom and elsewhere, it seems likely that major projects around the world will start construction in the near term.

Capital flows indicate where investors and companies see opportunities in the coming years. Two of the world’s largest electrolysers started operations in 2022. In China, the capacity of a captive electrolyser supplying a methanol and chemical plant was expanded fivefold to 150 MW. In Spain, a solar‐powered 20 MW electrolyser was commissioned at an existing fertiliser plant. Two large electrolyser projects received final investment decisions. First is a 260 MW electrolyser that aims to start supplying a refinery in China from 2023. Second is a 200 MW plant operating on wind power in the Netherlands, which is due to start in 2025, and is coupled with an existing refinery with high hydrogen demand. Overall, capital spending in 2021 on hydrogen electrolyser projects starting operation or under construction was around USD 1.5 billion, more than three‐times as much as in 2020. In each project, the investment case was supported by the simplicity of the value chain.

The large pipeline of projects on which investment decisions are due to be taken in the near term depends on the scaling‐up of companies across the value chain. Investors have taken note and are directing money to companies all along the hydrogen value chain. The 33 “pure play” hydrogen companies tracked by the IEA have increased their capitalisation by around USD 20 billion since mid‐2020. Investors looking even further ahead allocated USD 700 million in 2021 of early stage venture capital to start‐ups that are developing hydrogen technologies, which is nearly five‐times the amount invested in 2020. This increase was driven by investor confidence in start‐ups that offer project development services, which reinforces the perception that projects will soon be built, and in innovative technologies for hydrogen end‐uses as well as for potential non‐electrolysis routes to low‐emissions hydrogen production, such as methane pyrolysis.