According to JPMorgan, the European Union’s announcement of €5.4 billion in funding for the first global hydrogen project will act as a “positive catalyst” for subsector growth in the second half of the year.
In accordance with EU state aid regulations and as a component of the REPowerEU plan, which was unveiled in May to diversify the EU’s energy sources in the wake of disputes with Russia over its invasion of Ukraine, the European Commission announced late last week that public funding for the Hy2Tech project had been approved.
A total of €14.2 billion is anticipated in investments for the significant project of common European interest (IPCEI), which includes 35 businesses and 41 projects from 15 member states.
Developing cutting-edge solutions for the hydrogen value chain to decarbonize industrial processes and mobility is the goal of IPCEI Hy2Tech, the first IPCEI in the hydrogen industry.
According to European Commissioner Margrethe Vestager, the project will play a part in helping the EU start to diversify its energy supplies and contribute to decarbonization targets, even though the European hydrogen market is still in its early stages as a result of Russia’s attack on Ukraine. The research and development will also be “widely disseminated” and benefit other businesses.
It “stands as a good trigger for kick-starting the H2 transition here in Europe,” the JPMorgan analysts said, to provide a generous amount of financing to promote the hydrogen transition in Europe and speed up growing portions of the hydrogen supply chain.
JPMorgan stated in a letter to clients that further EU financing announcements are anticipated in the third and fourth quarters of the year.
The IPCEI news confirms our belief that H2 investment is moving swiftly and that larger project FID approvals are probable over the next 12 to 18 months, even though policy momentum in the US once more seems to have possibly halted.
“We also anticipate that growing anxiety about Russia’s supply of gas to Europe will hasten investment in green H2.”
Given the low entry hurdles and consequent margin pressure in the European hydrogen subsector, JPMorgan stated that it is still “more cautious” and “continues to urge investors to adopt a relative approach to the industry.”
