Green hydrogen once touted as a pivotal solution for achieving net-zero emissions, has hit a major roadblock in 2024. Numerous ambitious projects to produce this environmentally friendly fuel have been shelved due to unexpectedly high production costs.
Governments and leading energy corporations have heavily promoted green hydrogen as a cleaner alternative for a range of industries, including steel production, shipping, and even residential heating. However, the high cost of production has deterred developers, leading to the abandonment of several high-profile projects. As a result, the burgeoning sector is grappling to secure the substantial investments required to make a significant impact on carbon emissions.
“There’s been a reality check in terms of the costs that hydrogen projects entail,” stated Gniewomir Flis, an independent hydrogen analyst. “The industry has over-promised and under-delivered. It’s only natural that there is a swing back and a cooling of some of the excesses that were promised.”
Green hydrogen is produced by using renewable electricity to split water molecules. While it has been hailed as a versatile energy solution—often referred to as the “Swiss army knife of energy” by experts like Eric Toone of Breakthrough Energy Ventures—the process has proven to be more costly and complex than anticipated.
This year, BloombergNEF analysts raised their cost estimates for green hydrogen projects in the US and European Union by 55% compared to last year’s forecasts, due to intricate design and engineering challenges. In Europe, soaring power prices have further escalated production costs.
Consequently, producing hydrogen with clean energy currently costs four times more than using natural gas, as noted by BloombergNEF. This economic disparity has left many projects without committed buyers, halting their progress. Mads Nipper, CEO of Orsted A/S, highlighted this issue when canceling a $175 million Swedish plant intended to produce shipping fuel from hydrogen, citing the lack of long-term contracts at viable prices.
Additional projects that have been abandoned include a hydrogen-ammonia export plant in Tasmania and multiple early-stage developments planned by UK oil major BP Plc.
Despite these setbacks, the industry remains hopeful. Continuous innovation and investment could eventually bring down costs, making green hydrogen a more feasible and widespread solution for a sustainable future.
