Despite the EU heavily promoting hydrogen in its ‘green agenda’ and net-zero ambitions, the industry is struggling, with many project cancellations and delays.
Just over 20 per cent of all ongoing hydrogen projects have been scrapped or paused, according to a survey from Westwood Insight, an energy market research and intelligence firm.
Westwood identified 23 projects in Europe that have been cancelled or stalled across 11 major European countries.
Combined, these cancelled projects represent a missed green energy capacity of 29 gigawatts, or 20 per cent of all ongoing EU hydrogen projects.
The three primary reasons for this were “high costs and economic challenges, failure to obtain funding and lack of demand.”
This comes despite lavish funding from the European Union and national governments.
According to an analysis from Bloomberg, green hydrogen is still far from competitive compared to fossil alternatives, and prices will remain high.
Swedish news magazine Affärs Världen noted that Norwegian company NEL, one of the world’s leading manufacturers of electrolysers for the production of green hydrogen, temporarily stopped production due to a lack of demand.
Since May last year, NEL’s stock has plummeted over 70 per cent on the Oslo Stock Exchange.
NEL is far from alone; many other companies are cancelling of downsizing projects, such as Repsol, Neste, Shell and Equinor, Uniper and BP.
When closing down their “Clean Hydrogen to Europe” in September, representatives of Shell and Equinor said “there was no market”, despite their Norwegian project aiming to transport hydrogen via pipelines to Germany, a country in high need of energy.
The European Union has unrealistic goals for renewable hydrogen energy, despite close to €20 billion in funding, the EU’s financial watchdog has said. https://t.co/X6L96XfPTW
— Brussels Signal (@brusselssignal) July 17, 2024
Bad news for hydrogen comes despite the European Commission’s strategy for a climate-neutral Europe, presented in 2020, where the EC praised hydrogen for being emission-free.
Hydrogen is intended to replace fossil fuels across Europe while also serving as a storage solution for energy generated from heavily subsidised renewable sources.
The EC called hydrogen “essential to support the EU’s commitment to reach carbon neutrality by 2050 and for the global effort to implement the Paris Agreement while working towards zero pollution.”
The Europe of tomorrow must be competitive and climate neutral.
That tomorrow is starting today.
We are giving a boost to our clean tech industry.
With two calls for proposals worth €4.6 billion for new tech, including EV batteries, and renewable hydrogen.
— Ursula von der Leyen (@vonderleyen) December 3, 2024
With the European Hydrogen Bank the EU offered €3 billion in subsidies to support renewable hydrogen production.
Before that, in 2021, with the Clean Hydrogen Partnership, a public-private partnership, received €1 billion in EU support for the period 2021-2027, to be matched by private investments.
Some Member States promised to provide up to €1.4 billion in public funding for the Important Project of Common European Interest (‘IPCEI’) project Hy2Move, working to support the hydrogen value chain.
Member states also promised €6.9 billion for Hy2Infra an IPCEI to support hydrogen infrastructure in 2024.
Eurocrats have expressed concern over the failure of private industry to ramp up their production and use of “green” hydrogen. https://t.co/92WhXifFVL
— Brussels Signal (@brusselssignal) June 4, 2024
ACER, the EU’s own energy regulator, said in a report from November 2024, that “Europe is likely to miss its 2030 renewable hydrogen targets”.
“Despite ambitious EU strategies, hydrogen projects face risks from uncertainties of future hydrogen demand and high costs”, ACER wrote.
According to the regulator, other problematic issues included uncertainties about infrastructure being built and a lack of integrated planning.
ACER also noted that the EU aimed to use 20 million tonnes of renewable hydrogen by 2030. Currently, it uses 7.2 million tons of hydrogen, but 99.7 per cent of it is fossil-based.
This is because renewable hydrogen produced via electrolysis is three to four times more expensive than hydrogen produced from natural gas, according to the European energy regulator, making it in effect one of the most expensive ways to reduce carbon emissions.
Unlike the evolution of wind farms or solar panels, the price of energy from hydrogen has increased and is expected to rise further in 2025.
Currently, hydrogen is primarily used as an industrial raw material in Europe, with limited use as an energy source.
In 2022, hydrogen accounted for less than 2 per cent of Europe’s energy consumption. Of this hydrogen, almost entirely produced by natural gas and primarily used to produce chemical products such as plastics and fertilisers.
Hydrogen production is dependent on large amounts of electricity, which is expensive in Europe.
According to Payal Kaur, an analyst at Bloomberg New Energy Finance (BNEF), green hydrogen could become competitive in China, India and Texas, thanks to favourable conditions for the expansion of renewable energy and lower production costs.
Portugal is heading for a probable snap election after Prime Minister Antonio Costa unexpectedly ended his eight-year tenure amid a probe into possible corruption involving lithium and hydrogen projects. https://t.co/7ghFi1xPT2
— Brussels Signal (@brusselssignal) November 8, 2023
In a reply to Brussels Signal, a spokesperson for the Commission indicated they had a different view on the issue.
“The Commission has put in place a comprehensive and integrated regulatory framework to support the development of a fully functioning hydrogen market, covering both the demand and supply sides, including production, transport and infrastructure.
“We have also provided funding and investment support, including under the Recovery and Resilience Facility and the European Hydrogen Bank, providing businesses with incentives to invest. However, to secure the necessary overall level of investment this will need to be complemented by funding from the private sector and national authorities.
“As a result, the European hydrogen market is gradually taking shape with industry making significant investments in new projects. There are around 250 renewable hydrogen projects in the EU, some of which in operation and others under construction. With the implementation of the renewable hydrogen production projects selected in the auctions under the European Hydrogen Bank, capacity is expected to more than double.
“However, our work is far from finished. We now have to accelerate the deployment and uptake of renewable and low-carbon hydrogen in Europe and further develop this emerging market. The Commission will continue to engage with stakeholders to turn our ambitions into reality. Already in our 2020 Hydrogen Strategy, we stated that ‘the hydrogen ecosystem in Europe is likely to develop through a gradual trajectory, at different speeds across sectors and possibly across regions and requiring different policy solutions’”.
