Given the urgency of the transition, the magnitude of investment needed, and the long lead times, the timeline for hydrogen value chain development is pressing. Investment in parts of these value chains is, to a large extent, driven by the ratio of risk and return. There is a substantial amount of existing work on the system values and business cases for (parts of) hydrogen value chain, but much less attention for risks, uncertainties, and the need for sharing of revenue and risk between collaborating stakeholders. These factors must be known and analysed to formulate effective hydrogen policy, but also to help public and private-sector investors de-risk projects and formulate investment strategies in complex supply chains. This report is a first attempt to address this gap. We focus on identifying (quantifiable) risks and (unquantifiable) uncertainties to market participants, their impact, and the needs and mechanisms for the sharing of risk and revenues between collaborating parties. To identify key risks and uncertainties, we have conducted three workshops with experts and stakeholders in hydrogen supply chains. From these workshops, it is clear that investors in the hydrogen supply chain face a wide variety of risk and uncertainty. Moreover, to get a wide-ranging overview of these risks and uncertainties, stakeholders need to collaborate. Many risks that initially affect part of the supply chain eventually propagate up and down the supply chain. No single stakeholder that was involved in our workshops had a full overview of all the 85 risks and uncertainties that were identified during the workshops. The 85 risks and uncertainties identified during the workshops were subsequently clustered based on common impact on the system. A selection of the resulting risk events was then modelled with a series of energy system and market models, to quantify their impact. This has yielded the following main insights: Investment in commercial storage capacity is much more susceptible to certain types of risk, including the risk of lower than planned electrolysis capacity, than other parts of the supply chain. To some extent, the same is true for import facilities. Since storage is a key component of a reliable system, collaboration on storage investment could be key; e.g., through mechanisms that are currently used in natural gas systems, where system operators book storage capacity and charge the costs of this to all users of the system. Infrastructure is, according to current plans, initially overdimensioned. A uniform reduction in the capacity of infrastructure is therefore not a large immediate risk for other parts of the supply chain. However, there are parts of the national infrastructure that, if they are not completed in time, would have major effects on hydrogen supply chains, both locally and nationally. These effects do not always manifest themselves in obvious locations; there are network effects. Initially, electrolysis has little effect on electricity prices. Even an order-of-magnitude change in electrolysis capacity has no significant effect on (spot) electricity prices. This means that investments in large-scale electricity generation capacity are, at least before 2030, relatively immune to what happens in the hydrogen system. The opposite is not true: the amount of offshore wind present in the system has a significant impact on the hydrogen system. Local markets that are not connected to national markets are very difficult to make work without coordination. Only a large amount of hydrogen storage can locally balance supply and demand, if both are responding only to price thresholds rather than local optimization. What is more, local risks are much larger in distribution networks. These results have a number of important implications. Most importantly, they indicate the importance of explicitly considering risk and uncertainty in hydrogen value chains. They also highlight the importance of collaborative de-risking. For policy makers, they highlight the fact that policy uncertainty can be an important hurdle for the development of hydrogen systems. Moreover, they indicate that stochastic methods and other ways to include uncertainty and risk in research has important added value in understanding hydrogen investments.

Dit project is medegefinancierd door TKI Nieuw Gas | Topsector Energie uit de PPS-toeslag onder referentienummer TKI2022-HyDelta.