Green hydrogen retreat poses threat to emissions targets
- Shelved projects knock lofty ambitions for green hydrogen
- Subsidies alone are not enough to drive investment
- Prices remain uncompetitive compared with alternatives
Hard-to-electrify industries that were seen as ideal candidates for green hydrogen, such as steelmaking and long-distance transportation, have found that transition to the low-carbon fuel looks prohibitively expensive.
The gap between ambition and reality in Europe shows the extent of the reset happening within the industry, said Jun Sasamura, hydrogen manager at research company Westwood Global Energy.
Only about a fifth of planned hydrogen projects across the European Union are likely to come online by the end of the decade, he said. That equates to roughly 12 GW of production capacity against an EU target of 40 GW, Westwood Global Energy data shows.
He, added:
In the current state, I really don’t see the EU 2030 (hydrogen production) target being reached,
INFLATED EXPECTATIONS
Companies say that high costs and a lack of demand for green hydrogen have rendered many plans unprofitable.
Miguel Stilwell d’Andrade, chief executive of Portuguese power company EDP (EDP.LS), said:
Green hydrogen was an inflated expectation that has turned into a valley of disillusionment,
“What’s missing is the demand. There are 400 million euros ($464.2 million) of subsidies for hydrogen in Spain and Portugal, but we need someone to buy the hydrogen.”
The company has several projects in advanced stages but cannot move forward because of a lack of buyers, said Ana Quelhas, EDP’s hydrogen chief and co-chair of the European Renewable Hydrogen Coalition.
Across the border, Spain’s Iberdrola (IBE.MC),has shelved plans to increase capacity at a green hydrogen plant with electrolyser capacity of 20 MW until it finds buyers for additional output, company executive Iban Molina said at an energy event in Madrid.
They are among more than a dozen large companies that have trimmed spending or shelved projects across Europe, Asia, Australia and elsewhere in recent years.
Companies had scrapped or delayed more than a fifth of all European projects by the end of last year, Westwood Global Energy says.
At Aurora Energy Research, Emma Woodward said: “In 2020-2021 we had this view of hydrogen and the fact it was going to be used in almost every sector that hadn’t been electrified.
“I think we’ve realised now that there are other, probably more commercially viable, alternatives for lots of sectors. Maybe we don’t need as much hydrogen as initially expected.”
TOO EXPENSIVE
Many governments have long supported development of green hydrogen – produced through electrolysis that splits water into hydrogen and oxygen using electricity from renewables – to help to decarbonise energy, transport and industry.
Countries including Australia, Britain, Germany and Japan announced ambitious investment strategies they hoped would bring down costs and eventually create a profitable green hydrogen sector that would no longer need support.
Minh Khoi Le, Rystad Energy’s head of hydrogen research, said:
Production, however, remains more expensive than for natural gas and other fossil fuel-based alternatives,
It is at least three times more expensive than natural gas as a fuel for power generation, for example, and twice as expensive as grey hydrogen. The latter is produced from natural gas and coal and is already used in industries such as oil refining and production of ammonia and methanol.
Costs could fall by 30-40% in 10-15 years if equipment prices decline and the broader supply chain scales up, he added, while Aurora’s Woodward and Westwood Global Energy’s Sasamura said that green hydrogen is unlikely to become competitive before then.
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Green hydrogen retreat poses threat to emissions targets,source
