This month, we explore some of these key challenges and examine the measures in place to ensure continued progress.<\/p>\n
While uncertainty in the hydrogen sector is not new, it is becoming increasingly evident that despite ambitious production targets and mandates for renewable hydrogen use, industry players remain hesitant or unable to commit. At last month\u2019s Hydrogen Technology Expo Europe in Hamburg, Westwood spoke with stakeholders across the value chain, where several recurring themes emerged. Key among these was inadequate funding and the challenge of securing long-term offtake agreements. Many offtakers are reluctant to be early adopters, wary of committing to contracts where current prices are expected to decrease over time.<\/p>\n
Uniper has been publicly vocal about these challenges. Christian Stuckmann, Vice President of Hydrogen Business Development, emphasised[1]<\/a> the difficulty in finding creditworthy buyers who can guarantee the long-term cash flow necessary to sustain projects. Stuckmann also highlighted the need for stronger regulatory support, particularly around pricing structures, to provide greater certainty for both developers and offtakers. Echoing sentiments heard at the Hydrogen Technology Expo, the industry is pointing to entities like H2Global\u2019s Hintco, which serves as a market maker to bridge the gap between producers and buyers, as a model that could help stimulate industry growth.<\/p>\n Uniper\u2019s CEO, Michael Lewis, highlighted[2]<\/a> similar challenges, pointing out that current subsidies fall short of supporting the company\u2019s hydrogen ambitions. He cited the significant price disparity between grey hydrogen and renewable or low-carbon hydrogen \u2013 a gap that government intervention could help narrow.<\/p>\n Equinor also highlighted challenges posed by regulatory requirements such as the EU\u2019s Renewable Energy Directive III (REDIII), which mandates 42% renewable hydrogen in industrial applications by 2030. This regulation presents a dilemma for CCS-enabled projects, as buyers are reluctant to commit to long-term contracts now, uncertain about whether and at what price they will source renewable hydrogen in the future.<\/p>\n These challenges are not only stalling project development but are also delaying essential infrastructure.<\/p>\n October started with a wave of setbacks for hydrogen and sustainable fuel projects, with three major cancellations in the first two weeks alone. McPhy announced in a 02 October press release that their 24MW electrolytic project, which was expected to reach FID by year-end, was abandoned. The primary reason cited was the last-minute withdrawal of the offtaker, highlighting the critical role offtake agreements play in creating greater project certainty[3]<\/a>.<\/p>\n Shortly after, Benbros Energy withdrew[4]<\/a> from the \u20ac720mn European Hydrogen Bank (EHB) pilot auction, despite having secured \u20ac26mn in funding for its 60MW El Alamillo H2 project in April. The decision came amid a lack of known offtake, which may have made the funding insufficient to justify continued investment into the project\u2019s development. This withdrawal stresses the difficulties for the sector. Even with government support, that is likely only the first step in realising a successful project.<\/p>\n Uniper\u2019s 200MW e-SAF SkyFuelH2 facility in Sweden also came to an end, pointing to similar challenges as the aforementioned projects including challenging market conditions, rising costs, uncertainty and timing of demand for sustainable fuels.<\/p>\n In addition to project cancellations, developers have been strategically scaling back their hydrogen initiatives. Last month, \u00d8rsted withdrew from the Green Fuels for Denmark consortium who were planning to develop a 1.3GW electrolytic e-methanol and SAF project at Avedore Power Station in Copenhagen, despite receiving IPCEI funding at the end of 2022. \u00d8rsted has chosen to focus more closely on its core wind business, exiting from the Idomlund Power-to-X project with Skovgaard Energy in September and its FlagshipONE e-methanol project in August.<\/p>\n BP\u2019s 3Q results presentation further underscored this trend. The company announced plans to narrow its hydrogen portfolio, intending to develop only five to 10 hydrogen projects by 2030, having cancelled 18 projects to date. Part of a larger cost-saving strategy, BP\u2019s scaled-back hydrogen ambitions are part of a wider reduction in its clean energy project portfolio.<\/p>\n Essential infrastructure was also impacted in October, with Energinet postponing its hydrogen pipeline connecting Denmark and Germany from 2028 to 2031, citing varying project maturities, increasing complexity, and extended planning and environmental review processes.<\/p>\n In early October, the UK government announced \u00a321.7bn in funding over 25 years to support two major carbon capture clusters in northern England, including large CCS-enabled hydrogen projects such as EET Hydrogen\u2019s Hynet North West and BP\u2019s H2Teesside. At the end of the month, the government also reaffirmed support for 11 electrolytic hydrogen projects selected in the HAR1 auction from last December, signalling ongoing commitment to hydrogen despite the challenges faced so far.<\/p>\n In Germany, the Federal Network Agency approved a 9,040km hydrogen core network, set to be operational by 2032, with initial pipelines coming online as early as next year. Connecting hydrogen production centres, storage and end-users, the \u20ac18.9bn network will repurpose 60% of natural gas pipelines and is supported by state guarantees and an amortisation scheme to balance early-stage low revenues. The initiative aims to advance Germany\u2019s decarbonisation, create jobs and support industrial growth, with capped user fees to keep early adoption affordable.<\/p>\n The European Commission also awarded \u20ac4.8bn in grants to 85 net-zero projects across 18 countries, focusing on energy-intensive industries, renewable energy, hydrogen production, carbon management and sustainable mobility. Expected to reduce CO2 emissions by 476Mt by 2030, this largest Innovation Fund allocation to date brings total support to \u20ac12bn, advancing the EU\u2019s Net-Zero Industry Act goals. Among the hydrogen projects funded by the EU Innovation Fund: Statkraft\u2019s 200MW H2HubEmden production facility, H2BE\u2019s 1GW CCS-enabled hydrogen project in Ghent, and European Energy\u2019s 50MW Kasso PtX green methanol production facility.<\/p>\n While the hydrogen industry faces significant financial, regulatory and market challenges, government support persists. However, stronger regulatory frameworks and mechanisms to address price and demand uncertainty will be needed. Without these, the sector risks falling short of its ambitious goals, leading to further cancellations and setbacks as already seen last month. Addressing these issues will be essential if hydrogen is to fulfil its potential as a key piece of Europe\u2019s clean energy future.<\/a>[\/vc_column_text][\/vc_column][\/vc_row][vc_row type=”in_container” full_screen_row_position=”middle” column_margin=”default” column_direction=”default” column_direction_tablet=”default” column_direction_phone=”default” scene_position=”center” text_color=”dark” text_align=”left” row_border_radius=”none” row_border_radius_applies=”bg” overflow=”visible” overlay_strength=”0.3″ gradient_direction=”left_to_right” shape_divider_position=”bottom” bg_image_animation=”none”][vc_column column_padding=”no-extra-padding” column_padding_tablet=”inherit” column_padding_phone=”inherit” column_padding_position=”all” column_element_direction_desktop=”default” column_element_spacing=”default” desktop_text_alignment=”default” tablet_text_alignment=”default” phone_text_alignment=”default” background_color_opacity=”1″ background_hover_color_opacity=”1″ column_backdrop_filter=”none” column_shadow=”none” column_border_radius=”none” column_link_target=”_self” column_position=”default” gradient_direction=”left_to_right” overlay_strength=”0.3″ width=”1\/1″ tablet_width_inherit=”default” animation_type=”default” bg_image_animation=”none” border_type=”simple” column_border_width=”none” column_border_style=”solid”][nectar_animated_title heading_tag=”h6″ style=”color-strip-reveal” color=”Accent-Color” text=”Key European Project Watch”][vc_column_text]Key project announcements and developments in October[\/vc_column_text][vc_table][align-left]Project,[align-left]Update|[align-left]Kintore%20Hydrogen,[align-left]Statera%20Energy%20has%20submitted%20a%20Planning%20Permission%20in%20Principle%20application%20for%20its%20Kintore%20Hydrogen%20project%2C%20an%20electrolytic%20hydrogen%20facility%20near%20Kintore%2C%20Aberdeenshire.%20Phase%201%20of%20the%20project%20is%20expected%20to%20have%20a%20capacity%20of%20500MW%20coming%20online%20in%202028%20with%20an%20expansion%20in%20phase%202%20to%203GW%20by%202030.|[align-left]HyBit,[align-left]Plug%20Power%20has%20delivered%2010MW%20of%20PEM%20electrolysers%20to%20the%20HyBit%20hydrogen%20project%20in%20Bremen%2C%20Germany.%20The%20project%2C%20located%20at%20SWB’s%20Mittelsb%C3%BCren%20power%20plant%2C%20is%20set%20to%20produce%20hydrogen%20for%20use%20in%20ArcellorMittal’s%20steelworks%20in%20Bremen.%20The%2010MW’s%20of%20PEM%20electrolysers%20are%20made%20up%20of%20two%205MW%20units.%20Another%20electrolyser%20facility%20is%20expected%20to%20be%20constructed%20on%20the%20same%20site%20by%202028%20with%20a%20capacity%20of%2050MW%2C%20however%2C%20the%20hydrogen%20from%20this%20facility%20is%20expected%20to%20be%20made%20available%20for%20other%20customers%2C%20not%20the%20neighbouring%20steel%20mill.|[align-left]French-Belgium%20hydrogen%20pipeline,[align-left]GRTgaz%20and%20Fluxys%20have%20launched%20a%20market%20call%20to%20assess%20the%20demand%20and%20economic%20feasibility%20of%20a%20150km%20open-access%20hydrogen%20pipeline%20connecting%20Dunkirk%2C%20France%20with%20Ghent%20and%20Antwerp%2C%20Belgium.%20This%20cross-border%20infrastructure%20aims%20to%20supply%20low-carbon%20and%20RFNBO%20hydrogen%20to%20heavy%20industries%20like%20steel%2C%20refining%20and%20chemicals%2C%20supporting%20decarbonisation%20efforts%20in%20these%20industrial%20hubs.%20With%20GRTgaz’s%20DHUNE%20project%20in%20Dunkirk%20and%20Fluxys’%20infrastructure%20in%20Belgium%20progressing%20for%20completion%20by%202026%2C%20the%20pipeline%20responds%20to%20growing%20market%20demand%20for%20hydrogen%20and%20aligns%20with%20European%20carbon%20neutrality%20goals.%20Recognised%20as%20a%20Project%20of%20Common%20Interest%20by%20the%20European%20Commission%2C%20the%20call%20for%20market%20interest%20runs%20until%2029%20November%202024.|[align-left]Power2X%20SAF%20project,[align-left]Dutch%20developer%20Power2X%20and%20Rotterdam-based%20storage%20tank%20operator%20Advario%20have%20announced%20a%20sustainable%20aviation%20fuel%20project%20in%20Rotterdam%20capable%20of%20producing%20more%20than%20250%2C000t%20a%20year%20of%20SAF%20from%20hydrogen.%20The%20EU%20has%20mandated%20that%20flights%20departing%20EU%20airports%20must%20use%20fuel%20that%20contains%201.2%25%20of%20aviation%20fuel%20produced%20from%20renewable%20hydrogen%2C%20with%20Power2X%20anticipating%20that%20this%20project%20can%20meet%20at%20least%2040%25%20of%20the%20European%20requirement%20for%20renewable%20hydrogen%20based%20SAF.%20A%20date%20for%20FID%20has%20not%20been%20announced.|[align-left]Lhyfe%20Le%20Cheylas,[align-left]Lhyfe%20has%20launched%20the%20construction%20of%20its%20largest%20electrolytic%20hydrogen%20production%20site%20in%20France%20at%20a%20former%20steelworks%20site%20in%20Le%20Cheylas%2C%20Auvergne-Rh%C3%B4ne-Alpes.%20The%20facility%20will%20have%20a%2010MW%20electrolysis%20capacity%2C%20producing%20up%20to%204t%20of%20hydrogen%20per%20day%20by%202026.%20The%20hydrogen%20produced%20will%20decarbonise%20local%20heavy%20transport%20and%20industry%2C%20including%20replacing%20grey%20hydrogen%20in%20sectors%20like%20metallurgy%20and%20microelectronics.%20Lhyfe%20has%20a%2010-year%20agreement%20with%20HYmpulsion%20to%20supply%20regional%20hydrogen%20stations%2C%20contributing%20to%20clean%20mobility%20and%20low-carbon%20industry%20goals%20in%20the%20region.|[align-left]European%20Energy%20Esbjerg,[align-left]European%20Energy%20has%20inaugurated%20their%20first%20electrolytic%20hydrogen%20production%20facility%20in%20M%C3%A5de%2C%20Esbjerg.%20Construction%20of%20the%20facility%20was%20completed%20in%20June%202024%20with%20Stiesdal%20providing%20the%20first%20alkaline%20electrolyser%20with%20two%20more%20to%20be%20added%20by%202025.%20Centrica%20will%20serve%20as%20the%20facility’s%20balancing%20and%20optimisation%20partner%2C%20ensuring%20that%20energy%20usage%20and%20hydrogen%20production%20are%20efficiently%20managed.%20An%20offtake%20contract%20has%20been%20signed%20with%20the%20Port%20of%20Esbjerg%20and%20an%20unnamed%20%22world-class%20industrial%20gases%20company%22.%20Excess%20heat%20will%20be%20supplied%20to%20the%20local%20heating%20utility%20in%20Esbjerg.[\/vc_table][\/vc_column][\/vc_row][vc_row type=”in_container” full_screen_row_position=”middle” column_margin=”default” column_direction=”default” column_direction_tablet=”default” column_direction_phone=”default” scene_position=”center” text_color=”dark” text_align=”left” row_border_radius=”none” row_border_radius_applies=”bg” overflow=”visible” overlay_strength=”0.3″ gradient_direction=”left_to_right” shape_divider_position=”bottom” bg_image_animation=”none”][vc_column column_padding=”no-extra-padding” column_padding_tablet=”inherit” column_padding_phone=”inherit” column_padding_position=”all” column_element_direction_desktop=”default” column_element_spacing=”default” desktop_text_alignment=”default” tablet_text_alignment=”default” phone_text_alignment=”default” background_color_opacity=”1″ background_hover_color_opacity=”1″ column_backdrop_filter=”none” column_shadow=”none” column_border_radius=”none” column_link_target=”_self” column_position=”default” gradient_direction=”left_to_right” overlay_strength=”0.3″ width=”1\/1″ tablet_width_inherit=”default” animation_type=”default” bg_image_animation=”none” border_type=”simple” column_border_width=”none” column_border_style=”solid”][vc_column_text][1]<\/a> World Hydrogen Week conference, Copenhagen October 2024Major project cancellations<\/strong><\/h4>\n
Portfolio optimisation and timelines<\/strong><\/h4>\n
Signs of continued support<\/strong><\/h4>\n
\n[2]<\/a> Frankfurter Allgemeine Zeitung 11\/10\/2024
\n[3]<\/a> Westwood Hydrogen\u2019s Project Certainty<\/em> feature provides a comprehensive assessment of pre-sanctioned hydrogen supply projects, evaluating their likelihood of reaching FID based on key criteria across the project value chain. The presence of offtake agreements is a key component of this evaluation.
\n[4]<\/a> European Commission announcement 07\/10\/2024[\/vc_column_text][\/vc_column][\/vc_row][vc_row type=”in_container” full_screen_row_position=”middle” column_margin=”default” column_direction=”default” column_direction_tablet=”default” column_direction_phone=”default” scene_position=”center” text_color=”dark” text_align=”left” row_border_radius=”none” row_border_radius_applies=”bg” overflow=”visible” overlay_strength=”0.3″ gradient_direction=”left_to_right” shape_divider_position=”bottom” bg_image_animation=”none”][vc_column column_padding=”no-extra-padding” column_padding_tablet=”inherit” column_padding_phone=”inherit” column_padding_position=”all” column_element_direction_desktop=”default” column_element_spacing=”default” desktop_text_alignment=”default” tablet_text_alignment=”default” phone_text_alignment=”default” background_color_opacity=”1″ background_hover_color_opacity=”1″ column_backdrop_filter=”none” column_shadow=”none” column_border_radius=”none” column_link_target=”_self” column_position=”default” gradient_direction=”left_to_right” overlay_strength=”0.3″ width=”1\/1″ tablet_width_inherit=”default” animation_type=”default” bg_image_animation=”none” border_type=”simple” column_border_width=”none” column_border_style=”solid”][vc_column_text]If you have any project updates that you would like to share with Westwood’s Hydrogen team, please contact Jun using the contact details below.<\/p>\n