"Risk on steroids": Investing in the hydrogen economy

A global energy transition requires alternatives to fossil fuels in energy-intensive industries and transport sectors, which are particularly reliant on the unique material properties of fossil fuels as fuel and as feedstock. Renewable energy transitions, therefore, demand large-scale investments in green hydrogen to produce substitutes as a means of indirect electrification. In the context of European climate governance, a political consensus has emerged to support the establishment of such production networks to lower emissions and create renewable-based fuels and feedstock. Yet, despite seemingly strong momentum, investment decisions are far behind global net zero scenarios. Through interviews with key actors, participant observation and document analysis, we explore investments in this type of production capacity, focusing on the challenges associated with financing such investments. We argue that risk expectations and uncertainties around profitability are holding back energy companies and institutional investors from investing in hydrogen and hydrogen derivatives. While investors and creditors await public derisking, fossil fuel incumbents maintain favourable financing conditions vis-à-vis renewable energy developers. These findings suggest clear limits to derisking and highlight the relevance of disciplinary measures to compel incumbents to scale up alternatives to fossil fuels.