In 2022, the Australian mining and energy company Fortescue signed a deal with E.On, a German energy network and infrastructure operator, to supply up to five million tons of low-emission to Europe annually.
“The race for large-scale production and transportation of green hydrogen has taken off,” said , then German minister for economic affairs and climate action, of the deal. Adding that it would be the start of a “future without fossil fuels.”
Because it can power everything from trucks to long-distance trains. As well as provide stock for chemicals and fertilizers and act as a potential solution for heavily polluting industries like steel and iron production that traditionally rely on -wrecking coal power, it has been at the center of plenty of hype.
But three years after reaching agreement, the German-Australian deal is dead. E.On has since retreated from investment in large-scale green infrastructure and has slashed import targets.
“International hydrogen imports, hydrogen production, and midstream activities will be deprioritized,” E.On spokesperson Alexander Ihl told DW.
And it’s not the only sign of a mismatch between ambition and reality. The EU was planning to produce 10 million tons and import another 10 million tons of renewable hydrogen per annum by 2030. But Jun Sasamura, hydrogen manager at energy research company Westwood Global Energy, said in a statement that only 17% of the bloc’s planned projects will be realized by decade’s end.
“The gap between ambition and reality in Europe’s hydrogen sector is widening,” he said.
The broader retreat from green hydrogen was typified in late July, when oil and gas giant BP cancelled its $36 billion (€31 billion) investment in a renewable energy and green hydrogen project in Western Australia.
“This decision reflects BP’s recent strategy reset, which will see BP grow its upstream oil and gas business, focus its downstream business, and invest with increasing discipline into the transition,” a BP spokesperson said in a statement.
So what went wrong?
Hydrogen, the most abundant element in the universe, is a colorless, odorless and nontoxic gas consisting of a single proton and a single electron. It is also highly combustible, with each kilo containing about 2.4 times as much as natural gas. Hence its manifold uses.
Currently, around 95% is produced using fossil fuels like coal and natural gas. This is known as black, brown or grey hydrogen.
The green variation, as the name suggests, is made with renewables. But there has always been a catch. Because it takes so much green or to produce, it is very expensive to generate at scale.
“Most of the cost of green hydrogen comes from the cost of electricity, and while the cost of green electricity has been falling fast, it has to fall a lot further before hydrogen is cost-competitive with other fuels,” noted Alison Reeve, program director, energy and climate change at Australia-based think tank, the Grattan Institute.
Part of the problem is a reliance on dwindling government subsidies and support to build enough renewable energy to power the technology, she explained. Competition from cheaper alternatives like natural gas is further depressing demand.
This means the “speculative projects” that drive an industry in its infancy are being abandoned, Reeve told DW.
One example is Luxembourg-based steel conglomerate ArcelorMittal. The company recently withdrew from a plan to make its two German steelworks carbon-neutral by 2050 using , and even handed back €1.3 billion ($1.5 billion) in subsidies due to a blow-out in costs.
“There’s no question that scaling green hydrogen, particularly as an export product, presents real challenges,” Dino Otranto, Fortescue Metals and Operations CEO, told DW. “We are operating within a system with limited infrastructure, policy uncertainty and a regulatory environment that is still evolving.”
“Until we invest in low-cost, large-scale electricity infrastructure, we won’t unlock the full potential of hydrogen,” he added.
Does green hydrogen have a future?
Fortescue, one of the world’s biggest miners of iron ore used to create steel, is now focusing its renewable hydrogen business on green iron and ammonia — a fertilizer created by mixing hydrogen and nitrogen.
“Green hydrogen remains the most viable pathway to produce green iron at scale,” said Otranto, adding that no other technologies can deliver “the emissions reductions we need.”
But Alison Reeve says green hydrogen will likely only ever occupy a “niche” in the clean energy mix.
“There are some advances in ore smelting using electricity directly, rather than turning it into hydrogen first,” she noted.
And in terms of long-distance transport, batteries are becoming a viable option, as are several different fuels for long-distance shipping such as e-methanol.
“So the role of hydrogen is not going to be the ‘everything, everywhere, all at once’ fuel,” she said.
Edited by: Tamsin Walker
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