Hydrogen Projects Delayed, Cancelled as ‘Hype’ Meets Reality

Hydrogen “hype” is coming down to earth, with a major export deal stalling out in Atlantic Canada while a highly-touted investment goes on hold in the West.

Earlier this month, the Globe and Mail reported that plans to ship renewably-produced “green” hydrogen from the East Coast to Germany had been delayed by at least a year, possibly longer, due to “a supply-demand mismatch and the largest wave of global inflation in decades.” Shipments were supposed to begin next year. But out of 10 “promising production projects” in the Atlantic provinces, “none have secured a final investment decision yet,” the Globe wrote, citing Jens Honnen, the energy policy adviser leading implementation of the German-Canadian energy partnership on behalf of the German government.

“The aim is still to have the first shipments happen in the mid-2020s, probably around 2026, 2027 or 2028,” Honnen said.

Less than a week later, Australian mining giant Fortescue Ltd. announced it had withdrawn a green hydrogen project in Prince George, British Columbia from environmental review. “Australian billionaire Andrew Forrest, the founder and executive chairman of Fortescue, has run into challenges globally in trying to diversify the company, whose businesses include iron ore mining, and transform it into a clean energy powerhouse,” the Globe wrote.

“Fortescue recently completed an evaluation of our global project portfolio, with an aim to prioritize the projects in locations with favourable green energy policies and affordable and reliable renewable energy,” wrote Fortescue’s North American president Andrew Vesey, in a September 26 letter later released by the B.C. Environmental Assessment Office.

“We have focused our energy project portfolio to include a pipeline of commercially viable projects to carry us forward and meet future demand, while acting in the best interests of our shareholders,” he added. “With that, we have decided to put on hold our Project Coyote in Prince George until we are able to secure more favourable power pricing and availability.”

Prior to those announcements, the complications and challenges associated with the projects had begun to pile up. In B.C., climate campaigners warned the Prince George project would require a daunting 900 megawatts of electricity to produce the hydrogen through electrolysis and another 100 MW to convert it to ammonia.

“To put that in perspective,” the Globe and Mail wrote, “the C$16-billion Site C hydroelectric dam in northeastern B.C. will add 1,100 megawatts of capacity when fully completed in 2025,” decades after it was first proposed.

In Nova Scotia, meanwhile, local residents who say they support wind energy development to meet local electricity needs and reduce the province’s greenhouse gas emissions have been speaking out against Canada’s biggest wind farm to date, a 404-turbine, 64,000-hectare project proposed by Halifax-based EverWind Fuels, intended to power its proposed green hydrogen production facility in Point Tupper.

“It needs to happen to help us get off coal, but these massive projects have nothing to do with that,” Marsha Plant, a co-founder of Protect Guysborough, told The Energy Mix in July.

“Let’s be clear, Nova Scotia needs more renewable energy,” stated the Green Nova Scotia First website. “But wind turbines for hydrogen/ammonia export are not the answer. Hydrogen and ammonia production requires vast resources including land, water, and energy, and will not help reduce Nova Scotia’s greenhouse gas emissions.”

Too Much Hydrogen

In August, EverWind signed an offtake agreement with its partners in Germany, state-owned utility Uniper and private gas and electricity provider E.On, to supply 500,000 tonnes of green ammonia per year. That was after chemical engineer and Hydrogen Science Coalition member Paul Martin questioned whether the project would be cost-competitive against the thousands of hydrogen production projects being proposed around the world.

“Many other locations (i.e. western Australia, north or west Africa, Chile, etc.) will be able to make ammonia far more cheaply, with a carbon intensity even lower than that achievable by these wind-only projects, because they have access to better quality wind plus solar resources,” he told The Mix in July. “These will allow the same investment in hydrogen and ammonia production equipment to generate twice as much hydrogen and hence more ammonia on the same site, for the same investment of capital.”

By contrast, “a few dedicated wind energy projects would produce a lot of power to permit decarbonization of Nova Scotia’s grid, without the need for capital subsidy toward hydrogen production,” he added.

The same cost considerations were at the heart of Fortescue’s decision in Prince George.

“What really sets Fortescue apart is we know the system; we know the play, because we are a huge operator ourselves,” Mark Hutchinson, CEO of Fortescue Future Industries, told investors and analysts on a call in June. “Fortescue is steadfast in our commitment to green hydrogen,” he added, and sees green hydrogen as “what the world ultimately needs” over the longer term.

“However, our financial discipline always comes first. We will never do projects that are not economically viable. As the green hydrogen market develops around the world, it is really clear that the cost of green power, which is obviously the way you start with green hydrogen, has to be in the US$30 range [per megawatt-hour] to make projects viable.”

Where prices fall above that threshold, he said Fortescue would move to help drive them down by “producing electrons” in places like West Australia and Queensland. Hutchinson’s office declined an interview request to elaborate.

‘Series of Headwinds’

Canada is not the only place where green hydrogen development is running into headwinds. In the United States, a year after the Biden administration announced a US$7-billion plan to jump-start clean hydrogen projects across the country, there’s mounting concern that the work is falling behind.

“The goal of this startup money? To help the hubs attract tens of billions more in private sector investment to pay for construction costs,” Canary Media wrote this week.

“There’s still little publicly available information to indicate whether these ‘clean hydrogen hubs’ are likely to attract the needed private sector investment, however. Just as opaque are their potential community and climate impacts,” the news story states. “Environmental groups, community advocates, and energy experts have grown concerned that the projects are off track — and increasingly dismayed that the [U.S. Department of Energy] and the hub projects are not giving them the transparency needed to confirm or deny these worries.”

A week earlier, Canary Media reported delays in launching a green hydrogen hub in southern Mississippi, where Jackson-based Hy Stor Energy had proposed “gigawatts’ worth of wind, solar, and geothermal capacity” to produce “zero-carbon renewable” hydrogen, store it in underground salt caverns, and supply it exclusively to a local green steel plant owned by Swedish steelmaker SSAB. Hy Stor cancelled a deal to buy more than a gigawatt of electrolyzer capacity to convert the incoming electricity to hydrogen.

“The green hydrogen market has faced a series of headwinds that have resulted in it taking longer than anticipated to bring our lead project to fruition,” Eric Reidel, managing director of Connor, Clark & Lunn Infrastructure, Hy Stor’s controlling shareholder, told Canary Media in a statement. “Because of this, it did not make sense for us to make the upcoming capacity reservation payments that would have been due.”

Meanwhile, HeatMap is reporting the collapse of a hydrogen production plant in the Buffalo-Rochester area, once expected to be the largest in the northeastern U.S.

The difficulties also extend to “blue” hydrogen, the version derived from natural/methane gas, a process that critics say could produce 50% more global warming than just burning fossil fuels. Last month, multinational oil and gas company Shell announced it was cancelling what it called a “low-carbon” blue hydrogen plant on Norway’s west coast, citing insufficient market demand, just days after Norwegian state oil company Equinor scuttled plans to export blue hydrogen to Germany, citing high costs and low demand.

Touting Hydrogen to Delay Electrification

The delays and setbacks may come as little surprise to analysts and advocates who’ve long questioned whether hydrogen is the best way to meet the dozens of different energy service needs that its strongest proponents like to pitch—or whether it’s suitable at all for many of those uses. In 2021, Bloomberg New Energy Finance founder Michael Liebreich said fossil fuel companies are happy to hype “uncompetitive” uses of hydrogen in cars and home heating if it means delaying the shift to electric vehicles and heat pumps that are practical and affordable.

Around that time, Liebreich published a hydrogen “ladder” that showed a seven-point scale for potential hydrogen applications, from “unavoidable” uses like fertilizer and some industrial applications to “uncompetitive” notions like light aviation, home heating, hydrogen buses, subway cars, and two- and three-wheelers.

“If you’re an oil and gas company, in a way, talking about hydrogen is kind of a two-way bet because if it works, then you’re embedded in the hydrogen industry—but if it doesn’t work, you’ve delayed the transition to the thing you don’t make, which is electricity,” Liebreich told Recharge News at the time. “At worst it creates confusion, which is great [for them]. And these companies have an interest in this [electrification] stuff not moving too fast, I’m afraid—for all their good words.”

In early 2023, Liebreich was sharply critical after the British Columbia Investment Management Corporation (BCI) and Sydney, Australia-based Macquarie Asset Management bought a 60% share in Britain’s gas transmission network, National Gas, which had announced plans to use hydrogen for home heating. BCI manages the retirement savings of 715,000 British Columbians.

“If the price you paid was driven by hydrogen for space heating, then this will end up as one for the history books—and not in a good way,” Liebreich on LinkedIn.

“Unless, of course, it’s a cynical bet that the UK’s Net Zero 2050 plan will be delayed or derailed (with the help of lashings of lobbying), and the asset can be milked indefinitely,” he added. “But only a cynic would think it could be that, and luckily I’m not a cynic.”

The root of the problem, Martin explained at the time, is that hydrogen is too small and volatile a molecule to be safely or effectively transmitted, distributed, or used with existing gas pipelines, turbines, boilers, cooktops, or burner jets. That reality would translate into huge retrofit costs, and likely serious energy efficiency losses in homes, if hydrogen were used for all the purposes its biggest backers have been suggesting.

So when utilities pitch hydrogen heating as an option, they’re likely talking about 20% blends of hydrogen added to standard fossil gas, leading to at best a 7% reduction in greenhouse gas emissions.

Even if the product is “green” hydrogen from solar panels or wind turbines—as opposed to the “blue” variety that depends on deeply uncertain carbon capture and storage technology to reduce emissions—it will still be more expensive and deliver less energy value than using the electricity directly, Martin said.

“If you deploy those energy production assets efficiently by means of heat pumps and the electrical distribution grid, you get a multiplier, because you’re using electricity to pump heat from a cold place to a warm place and getting three units of energy for every unit you put in,” he said. “If you go with hydrogen, a fractional energy return for every unit of energy invested is the best you’re ever going to get.”

So “every time you involve hydrogen,” he added, “you get not small losses, but large, substantial losses.”