GREEN HYDROGEN: RISK LANDSCAPE FOR IN-HOUSE COUNSEL
The challenges imposed by climate change and energy transition efforts have given hydrogen a new hype over the past couple of years. The recent threats to energy security have created additional urgency for decision makers to take final investment decisions on hydrogen projects.
Given the lack of a clear regulatory and legal framework in most jurisdictions, in-house counsel are under pressure to act as risk managers and identify risks throughout the lifecycle of hydrogen projects.
The purpose of this article is to assist in-house counsel advising boards and executive teams on risk-spotting, with a focus (for simplicity) on clean hydrogen, which is normally referred to as ‘green’ hydrogen and produced through electrolysis of water powered by clean energy sources, such as wind and solar power.
Once identified, risks may be avoided, mitigated, allocated, hedged against, or at least understood and managed. An early risk assessment and adequate dispute resolution design is likely to reduce the chances of disputes that may put investments at risk, which can happen at any stage of a project lifecycle: from the development phase, through the construction and operation phases, up to the divestment phase.
As a backdrop to their risk assessments, in-house counsel may need to consider two factors in their risk analysis.
First, the unprecedented need for cross-sector engagement in hydrogen projects. For instance, traditional oil and gas players seeking to produce green hydrogen may need contractors, equipment and service suppliers they have not engaged previously, to build wind and solar farms, and electrolyser plants.
Jan-Mar 2023 issue
Mayer Brown International LLP