Reducing low-carbonhydrogen investmentand operating costsA prerequisite for mass adoptionCo-funded bythe European UnionExecutive summaryThe low-carbon hydrogen'sector experienced a period of wide-spread hype and enthusiasm since2021.However,this enthusiasm has faded with market and regulatory uncertainties with very fewprojects making it to the investment stage.According to the International Energy Agency(IEA),in2023,only 4%of projects have entered the Final Investment Decision(FID)phase.It is this stark disparity between expectations and tangible results that led us to dig deeper andcommission this report.Together with EIT InnoEnergy,we aim to uncover the blockages standing inthe way of low-carbon hydrogen cost reduction and mass adoption.In our extensive research,wesurveyed professionals from nearly 120 companies and organizations in the hydrogen industry betweenNovember 2023 and February 2024.These organizations were based in:France(62%),Germany (6%),Restof Europe (20%),North America (4%),Asia (3%),Africa Middle East(5%).1 Low-carbon hydrogen remains too expensive and uncompetitive comparedwith hydrogen produced from other sourcesSurvey participants generally agreed that price will decrease below E7/kg by 2030,while the price ofunabated hydrogen is between E1.5/kg and 3/kg.However,respondents disagreed on the finalfigure.Currently,there is no common vision and a lot of real uncertainty,with estimates far awayfrom previous predictions made just a few years ago,where the consensus was that renewablehydrogen production costs would dip below E3/kg.Now,approximately 21%of those surveyed seethe price going between 3 and E4/kg,while 19%predict between E4 and E5/kg.2 Major players are encountering strong difficulties in developinglow-carbon hydrogen projects at a competitive priceFirstly,57%of respondents identified electricity prices as a major difficulty.This comes as no surprisebecause the cost of electricity for electrolysis represents around 45 to 60%of the levelized cost ofhydrogen (LCOH).Secondly,lack of demand remained a big issue for 41%of respondents,as well asthe price of carbon (36%),which remains too low globally (36%).Additionally,38%mentionedinadequate public support directed towards offerings as being a pain point.Thirdly,equipment costswere highlighted as a pressing concern by 48%of respondents.These are the second most importantcost factor within CAPEX and represent around 35%of LCOH (depending on electricity costs).In contrast,a lack of employees with the right skill sets was not seen as a large difficulty to overcome,with only 19%of respondents agreeing that this was an issue.This sentiment seems to assuagetensions around previously held assumptions regarding jobs in the sector.3 Respondents stressed that regulatory and legislative environmentsare essential in making hydrogen more competitive in the years aheadAccording to 64%of respondents,public support is key in driving demand focused on traditionalapplications.Offtake contracts were seen as essential for 51%of respondents when it comes tocarrying out hydrogen projects at scale in the future.Although,allocations of public aid remain slowparticularly in the European Union with IPCEls.However,globally,it is starting to be consideredmore with the launch of several auctions and contracts for difference(CFDs).For example,theEuropean Hydrogen Bank launched its first auction worth E800 million on November 2023,132 bidswere received from 17 European countries.These figures testify to an "enthusiastic market",said KurtVandenberghe,Director General of Climate Action.61%of experts surveyed feel an increase of CO2 taxes is essential here,while 51%believe marketelectricity reform to develop more Power Purchase Agreements(PPA)2 is critical4 In addition to external levers,there are several internal levers that can reduce2