Westwood: Over a fifth of all European hydrogen projects stalled or cancelled

December 18, 2024, by Aida Čučuk

Westwood Global Energy, an energy market research and consultancy firm, has identified 23 projects in the European pipeline that have been classed as cancelled or stalled across 11 major European countries that make up the majority of the hydrogen opportunity.

The total capacity impacted by these projects is 29.2 GW (LHV) – the equivalent of 20.3% of the pipeline when considering all project statuses (current, cancelled and stalled), Westwood reported, adding that across these countries, the amount of capacity “lost” varies greatly, with the Netherlands unaffected through to Norway, which has lost more capacity than it has remaining in its pipeline, 11.8 GW (LHV) and 6.7 GW (LHV) respectively.

Westwood has explored three primary reasons for cancellations or delays given by projects: high costs and economic challenges, failure to obtain funding and lack of demand.

High costs and economic challenges

The research company has attributed high costs and economic challenges to 32% of projects (and 40% of capacity), with Norway being the most impacted country: losing 10 GW of potential capacity from Equinor’s cancelled CCS-enabled and electrolytic Clean Hydrogen to Europe projects. As disclosed, these projects required a pipeline to be constructed to Germany, which was subsequently cancelled due to the cost of not only the pipeline but also the CCS-enabled hydrogen facility.

According to Westwood, developers have highlighted that if significant funding is not obtained alongside cost reductions across the supply chain to counteract the higher costs, more developments will be halted.

Failure to obtain funding

Reportedly, the failure to obtain funding is a further reason for 18% of projects (and 29% of capacity) to stall or be cancelled.

Across the UK and Germany this has inhibited over 8 GW of projects developing, one of which is the 1.8 GW (LHV) DepHYnus project that was unable to win funding in the Hydrogen Allocation Round (HAR) within the UK, Westwood said, adding that this is one of multiple symptoms of the HAR round, with developers finding the process long and confusing and the CfD mechanism being much more complex than its offshore wind counterpart. Additionally, some developers selected in the HAR processes have pulled out, citing the challenges around timelines, Westwood noted.

Lack of demand

The inability to secure demand is said to be a key reason projects are unable to secure any finance. As per Westwood, 11% of projects (and 9% of capacity) was lost because of this.

There is a lack of support for offtakers to commit to early, high-price and long-term agreements, suggesting the current strategy is not robust enough, Westwood claimed.

Hydrogen ambitions at crossroads

Hydrogen is considered a key component of Europe’s decarbonization and net zero ambitions, with individual countries setting ambitious capacity and demand targets. Many projects have been announced, with a current pipeline capacity of 111.5 GW (LHV) as assessed by Westwood.

Funding and subsidy mechanisms at regional and country levels were introduced, including the Important Projects of Common Interest (IPCEI) and the EU Innovation Fund with €18.9 billion and €4.8 billion allocated respectively. Some countries have also developed domestic support mechanisms, such as the UK’s CfD-based Hydrogen Allocation Round (HAR) and Germany’s funding scheme H2Global.

However, according to Westwood, Europe’s hydrogen ambitions remain at a crossroads, with a mix of ambitious targets and various funding schemes on one side and mounting project cancellations and delays on the other.

“While strides have been made in setting the stage for a hydrogen-supported energy transition, the delay and cancellation of 29.2GW (LHV) – 20.3% – in project capacity highlights the fragile state of the sector. High costs, insufficient demand and funding uncertainties remain formidable barriers, exposing gaps in current strategies with some countries struggling significantly more than others,” the research company concluded.

“If Europe is to meet its electrolyser capacity goals and realise hydrogen’s potential, a new approach is essential, balancing ambitious targets with realistic cost structures, robust market incentives (for supply and demand), and clear funding mechanisms. Hydrogen can play a significant role in the future, but without addressing its present challenges, it risks stalling before it truly takes off.”

To read more about hydrogen in Europe, click here.