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FILE PHOTO: The Suiso Frontier, the world's first hydrogen carrier, built by Japan's Kawasaki Heavy Industries, is pictured upon its arrival from Kobe, Japan at the Port of Hastings in Victoria, Australia January 20, 2022. Courtesy HySTRA/Handout via REUTERS THIS IMAGE HAS BEEN SUPPLIED BY A THIRD PARTY. MANDATORY CREDIT./File Photo

FILE PHOTO: The Suiso Frontier, the world's first hydrogen carrier, built by Japan's Kawasaki Heavy Industries, is pictured upon its arrival from Kobe, Japan at the Port of Hastings in Victoria, Australia January 20, 2022. Courtesy HySTRA/Handout via REUTERS THIS IMAGE HAS BEEN SUPPLIED BY A THIRD PARTY. MANDATORY CREDIT./File Photo

Green Hydrogen Hype Fades as High Costs Force Projects to Retreat

Bloomberg
Total Views: 1347
October 3, 2024

(Bloomberg) —

Climate-friendly hydrogen was one of the most-hyped sectors in green energy. Now the reality of its high cost is taking its toll. 

In recent months, some of the biggest would-be developers of the fuel have canceled projects, axed orders and scaled back investment plans. The low-carbon fuel is simply too expensive to stimulate demand in many sectors of the economy.

On Thursday, Origin Energy Ltd. canceled a project to produce the clean-burning fuel in an industrial area of eastern Australia. 

“It has become clear that the hydrogen market is developing more slowly than anticipated, and there remain risks and both input cost and technology advancements to overcome,” Origin’s Chief Executive Officer Frank Calabria said in a statement. “The combination of these factors mean we are unable to see a current pathway to take a final investment decision on the project.”

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So-called green hydrogen is made by using renewable electricity to separate the hydrogen and oxygen atoms in water. The resulting product can replace fossil fuel-derived hydrogen currently used in the chemicals and oil refining industries and potentially for new applications like power storage, steel production and shipping fuel. 

Origin Energy is just the latest example of a company stepping back its plans. Earlier this week, Norway’s Nel ASA, which makes the machines that produce green hydrogen, said that Mississippi-based Hy Stor Energy canceled an order for 1 gigawatt of equipment. That would have been enough to build by far the biggest such project in the US.

Beyond the cancellations from publicly-listed companies, smaller players are likely axing many more projects without publicity, according to Michael Liebreich, chief executive officer of Liebreich Associates and managing partner of EcoPragma Capital. 

Still, Liebreich, who’s both an analyst and investor, said that could be a positive reset for the industry, allowing economically robust projects to go ahead. 

“A lot of people are just walking away and it’s healthy,” Liebreich said in an interview. “The more realism there is, the better, because we can focus time, capital and talent on things that will work rather than on things that won’t work.”

DateHydrogen Cancellation
Oct. 3Origin Energy cancels 55MW green hydrogen plant in Australia
Oct. 1Hy Stor Energy cancels 1GW electrolyzer order with Nel
Sept. 24Shell Plc cancels blue hydrogen project in Norway
Sept. 20Equinor ASA, RWE AG cancel hydrogen pipeline project
Aug. 15Orsted A/S cancels Swedish green hydrogen plant 
July 17Fortescue Ltd. puts on hold 2030 green hydrogen production goal

There are signs that hydrogen demand will grow this decade, but only a small part of that is being satisfied by clean fuel.

Production of clean hydrogen is set to jump more than 40% to reach 1 million tons in 2024, though that’s still only about 1% of current hydrogen demand globally, according to the International Energy Agency. Projects with a further 3.4 million tons of capacity have to reach a final investment decision, the IEA found. 

© 2024 Bloomberg L.P.

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