After the hype – what makes a viable hydrogen energy project?

The backbone of a strong green hydrogen project is demand and revenue certainty – we consider offtake security as a fundamental, standalone pillar. The most successful developers secure offtake agreements first, and only then shape the project around those needs. Without buyers in place from the outset, even the most elegant technical solution will struggle to attract investment. 

Contractual obligations of offtake should provide financial security in order for the project to be bankable. Commodity fees should be structured including long-term, fixed-price or indexed contracts with creditworthy offtakers. Incorporating ‘take-or-pay’ provisions – where the offtaker remains liable for penalties if they terminate early, temporarily suspend offtake or reduce their committed volumes – further mitigates risk and strengthens confidence among lenders and investors. 

In our experience, projects that reach final investment decision (FID) are often those where offtake is the founding motivator for the project. Conversely, we’ve seen well-engineered and well-developed projects stall due to inability to confirm offtake. 

Once the critical foundational aspects are secured, further focus on risks and opportunities is required to gain interest from investors. An independent review and thorough due diligence by qualified experts is highly valuable for both investors and developers preparing for approaching the market. 

• Investors are naturally conscious of risks and will thus want to see evidence of robust risk management for the project. No development project is without risks, and poor risk identification and/or lack of well-considered mitigation measures will greatly reduce investor confidence. In Arup’s experience, good risk management should be an ongoing process and is evidenced by up-to-date risk registers, cost and schedule risk assessments and robust project execution documents (including project execution plan (PEP), project objectives and project charter). 

• Equally important are the capabilities of the organisation. The skills required for the different phases of the project – from project development to FID, from FID to construction, and beyond commercial operations date (COD) into operation – all vary greatly and investors will want to see that the organisation have competent skills and experience for each phase.  In Arup’s experience, demonstration and/or preparation for the operational phase often takes a backseat to the earlier phases, and failing to integrate an operations and maintenance (O&M) strategy during project development creates significant investor risk.  

• When it comes to contracting key roles to third parties, the contracting strategy is a critical element to ensure risk pass-through to the developer is limited to a reasonable extent and thus palatable to investors. A sound contracting strategy is one that is well understood and well defined. Limiting the number of contractors, selecting those with vested interests in the project and appropriate skills and experience, having a robust interface management strategy with clear scope delineation, and including appropriate protections in contractual clauses are all key elements. An independent Owner’s Engineer is often engaged to ensure contractual and regulatory compliance, manage interfaces, and oversee acceptance testing and commissioning. This approach mitigates project risks and offers greater assurance to investors and lenders. 

• Finally, business plans must be credible and resilient. With investors increasingly sceptical of “hockey‑stick” growth, confidence depends on evidence‑based assumptions, robust sensitivity analysis, and realistic contingencies for key inputs (availability, ramp-up timelines, hydrogen pricing). Arup’s experience shows that substantiating assumptions—such as through Reliability, Availability, and Maintainability (RAM) studies—materially strengthens investor confidence. 

Green hydrogen is not a purely commercial market, driven by buyers and sellers; at this stage it is fundamentally shaped by policy. This makes strategic alignment a critical factor in determining whether a project will succeed. 

• The strongest projects are those that fit squarely within national and regional priorities for hydrogen. In the UK and across the EU, governments have identified specific focus areas, such as decarbonising industry, heavy transport, and energy storage. Projects that align with these agendas are more likely to secure public support, regulatory approvals, and investor and offtaker interest. 

• Equally important is the political stability of the host country or region, as well as more broadly. Hydrogen projects typically involve large upfront investments and long development timelines. Investors need confidence that the regulatory framework will not shift dramatically during project development, undermining project economics. A stable, predictable environment provides the reassurance that capital-intensive projects require. 

• Finally, access to policy support can make or break a business case. Grants, subsidies, and mechanisms like contracts for difference (CfDs) help to bridge the gap between today’s high production costs and tomorrow’s competitive markets. The best projects are those that position themselves to qualify for these support schemes while also building resilience against future policy changes.