Fortescue Cancels Flagship Hydrogen Projects: UK Should Take Notice

Fortescue’s recent decision to abandon two major hydrogen-for-energy projects after reaching Final Investment Decision (FID) serves as an important signal for policymakers around the world, particularly in the UK, which is pretending its autumn hydrogen strategy update will be evidence led. These cancellations, one located in Gladstone, Australia, and another in Arizona, USA, represent more than just isolated setbacks.

They illustrate a broader economic reality. Hydrogen as an energy source, as opposed to its use as an industrial feedstock, is increasingly failing under scrutiny. Fortescue’s projects had significant financial backing, government support, and appeared viable on paper. Yet the underlying economics simply could not withstand changing conditions.

The Arizona project was an 80 MW green hydrogen facility originally intended to establish Fortescue’s foothold in the American market. As I noted a year ago, building a green hydrogen project in an increasingly waterless desert was insane to begin with. The project’s cancellation followed shifts in US energy policy under the Trump administration, particularly the removal of certain hydrogen-related subsidies. This policy uncertainty quickly revealed the true economics of hydrogen production. With the incentives removed, the project’s already tenuous financial viability vanished, prompting Fortescue to write off approximately $150 million in pre-tax losses.

In Australia, Fortescue’s PEM50 hydrogen plant in Gladstone had already commenced partial operations. The project had secured approximately $40 million (about A$60 million) in government grants. Despite initial optimism, the facility proved costly and uncompetitive. As a result, the company decided not only to shut the facility down but is now evaluating whether the government grants will need to be repaid. This scenario highlights the fundamental economic challenge facing hydrogen projects globally. Without extensive subsidies, hydrogen struggles against cheaper, more established energy alternatives.

Fortescue’s cancellations are not isolated incidents. A recent Reuters analysis catalogued an extensive list of abandoned or postponed green hydrogen projects globally. Companies such as BP, Shell, ArcelorMittal, Iberdrola, and Woodside have shelved or significantly scaled back major hydrogen-for-energy projects due to escalating costs and market realities. I’d noted as much a couple of weeks ago, writing about the brutal 30 days hydrogen had experienced, with tens of billions of project commitments and a million tons of hydrogen a year of projected supply disappearing in a puff of red ink.

The European Union initially set an ambitious goal of 40 gigawatts of electrolyser capacity by 2030, yet current projections suggest the industry will fall far short, with only around 12 gigawatts expected to materialize, and that’s still optimistic. The practical challenges of hydrogen infrastructure, including storage, distribution, and demand uncertainty, continue to impede growth, despite the generous subsidies previously made available.

In light of these trends, one would expect policymakers, particularly those in the UK, to take careful note. The UK government is currently finalizing its Autumn 2025 hydrogen strategy update, presenting it as “evidence-led.” However, an examination of the stakeholders shaping this policy raises concerns.

The UK’s Department for Energy Security & Net Zero (DESNZ), previously BEIS, remains highly committed to promoting hydrogen beyond industrial feedstock uses. Its April 2025 shortlist of 27 hydrogen projects explicitly includes power generation, sustainable aviation fuels, and hydrogen use in everyday life. Additionally, its July 2025 Hydrogen Update continues explicit support for hydrogen transport and storage infrastructure. Policy announcements, such as the Hydrogen to Power Business Model introduced in late 2024, reinforce this stance, positioning hydrogen as central to Britain’s energy transition.

Hydrogen UK, led by CEO Clare Jackson, actively promotes hydrogen’s role in broader energy applications. The organization’s 2024 manifesto argues strongly that hydrogen is essential for sectors where electricity alone is insufficient. Clare Jackson’s 2025 statements emphasize the importance of government-supported demand policies, warning that billions of pounds in private investment hinge upon broader adoption of hydrogen beyond industrial use. Recent reports from Hydrogen UK underscore their position that hydrogen is essential for reaching clean power targets by 2030.

ITM Power, a leading manufacturer of electrolysers, continues investing significantly in hydrogen infrastructure aimed at mobility and energy integration. Despite leadership changes since Graham Cooley’s departure in 2022, ITM has secured new contracts focused on transportation and infrastructure decarbonization, including collaborations with Deutsche Bahn. This strategy indicates a clear intent to maintain a broad role for hydrogen, specifically in energy and transport rather than limiting their focus to industrial feedstock production alone.

Jo Bamford, through Ryze Hydrogen, Hygen Energy, and Wrightbus, continues to advocate strongly for hydrogen in transportation. His investments emphasize hydrogen-powered buses and heavy transport, pushing beyond purely industrial uses. Recent developments, such as Hygen Energy’s renewable-powered electrolyser facility near Bradford, underline his belief that hydrogen remains viable as an energy carrier, especially in the public transportation sector.

Industry Minister Sarah Jones MP consistently champions hydrogen’s broader energy role within the UK government. In recent public statements tied to the April 2025 funding announcements (HAR2), she emphasized hydrogen’s potential to power homes, transport, and aviation, significantly exceeding its traditional industrial uses. Her consistent advocacy indicates strong internal government support for hydrogen’s wider application in the UK’s energy future.

The UK’s Hydrogen Advisory Council and Hydrogen Taskforce continue quietly shaping policy frameworks supportive of hydrogen-for-energy roles. Although recent public statements have been limited, their ongoing work directly supports initiatives like the Hydrogen to Power Business Model. Both groups influence market structures and demand-creation policies, effectively positioning hydrogen as a core part of the UK’s long-term energy planning rather than solely a feedstock resource.

Economic advisory councils in Germany and France recently issued strong recommendations against funding hydrogen infrastructure for transportation. France’s Cour des comptes specifically criticized the allocation of over 9 billion euros toward hydrogen, arguing the cost per ton of carbon avoided, around €520, is dramatically higher than alternative solutions like direct electrification. Both German and French economic councils clearly concluded that hydrogen in road freight transport is uncompetitive, inefficient, and economically unjustifiable. They recommended ending public funding for hydrogen in transportation and redirecting resources toward battery-electric vehicles and electrification infrastructure instead.

Given these authoritative statements, Fortescue’s project cancellations, mounting global evidence and the clear biases of the participants, the UK’s claim of pursuing an “evidence-led” hydrogen strategy is questionable at best. Rather than responding to clear economic signals, British policymakers appear heavily influenced by established hydrogen industry interests, entrenched lobby groups, and existing policy inertia. This scenario risks creating significant stranded assets and squandering public resources, particularly if substantial funds continue to be allocated to projects without clear, economically sustainable outcomes.

Fortescue’s cancelled hydrogen projects provide a stark and valuable lesson. Projects heavily supported by government grants and optimistic early-stage financial assessments are failing as real-world economics become clear. UK policymakers should learn from these global examples. Rather than continuing down the hydrogen-for-energy path, the UK should shift public investment to sectors where hydrogen genuinely makes sense. Those sectors are primarily industrial processes, such as ammonia production, refining, and steelmaking, where electrification is impractical. These industries represent genuinely hard-to-decarbonize areas where hydrogen has clear, well-documented advantages.

If the UK government is sincere about being guided by evidence, it will recalibrate its hydrogen strategy accordingly. Continuing down the existing path, ignoring clear economic signals from Fortescue and similar global cases, will likely result in substantial economic waste. The Autumn 2025 strategy update represents a critical opportunity. Policymakers have a clear choice: embrace economic reality and limit hydrogen’s role to industrial applications or continue supporting economically questionable energy projects. How they choose will determine whether the UK hydrogen strategy ultimately succeeds or fails.