Hydrogen’s Hype Is Dead — And That’s Good News
- The wave of canceled hydrogen megaprojects signals maturity, not failure.
- Successful projects like Engie’s Yuri electrolyzer in Australia, the mosaHYc pipeline in Europe, and Germany’s Lubmin ammonia-to-hydrogen terminal highlight a shift toward practical, scalable solutions in hard-to-abate sectors.
- Policy is becoming more pragmatic, with the EU and national governments funding infrastructure and cost-effective pathways.
Let’s start with the punchline: a wave of canceled hydrogen megaprojects is not a disaster, it’s a sign of success. The sector is maturing fast, shedding the glam tours and stick-to-the-basics players who couldn’t deliver, and leaving room for quietly effective pioneers.
The hype bubble burst (and rightly so)
Between 2021 and today, low-carbon hydrogen demand is still tiny—just under 1 million tonnes in 2023 out of a total global hydrogen demand of 97 million tonnes, and mostly still fossil-based. Meanwhile, the Hydrogen Insights 2024 report notes a seven-fold increase in global capacity passing Final Investment Decision (FID) over four years, but it’s still modest: about 20 GW of electrolyzers globally.
In Europe, 3 GW of electrolysis capacity has passed FID, projected to produce around 415,000 tonnes of renewable hydrogen annually. Blue hydrogen, produced using SMR plus carbon capture, has only seen about 400,000 tonnes per year reach FID, while over 1.4 million tonnes per year of planned blue hydrogen projects have been cancelled. That’s the smell of bad economics: big ideas that didn’t survive the spreadsheet.
But this is good news. Because the projects that are going ahead are better thought out, more grounded in reality, and genuinely contribute to decarbonization where it matters.
Real hydrogen: projects that work
Take Engie’s Yuri project in Pilbara, Western Australia, which passed FID in September 2022. The first phase involves a 10 MW electrolyzer powered by 18 MW of solar and supported by an 8 MW battery. It will produce around 640 tonnes of renewable hydrogen per year, supplying Yara’s ammonia production. It’s not flashy, but it works. The offtake is clear, the industrial demand is real, and construction is already underway
In Europe, Engie has also greenlit its share of the mosaHYc pipeline project, a €110 million cross-border hydrogen network between France and Germany. Engie’s section passed FID in April 2024, with construction planned for 2025. The project is a key part of a broader 700-kilometer hydrogen transport network planned by 2030.
Looking ahead, the H2Med/Barmar corridor, linking Barcelona and Marseille, is aiming to transport up to 2 million tonnes of hydrogen annually by 2030, about 10 percent of projected European hydrogen demand. The joint venture behind it, led by Enagas, Natran (an Engie affiliate), and Terega, is preparing for FID in 2028 and is already receiving EU funding.
Meanwhile, Hoegh Evi’s ammonia-to-hydrogen terminal in Lubmin, Germany, is targeting FID by the end of 2025. The plan is to crack imported ammonia into hydrogen for the German market, offering prices of $3 to $3.50 per kilogram by 2027, well below today’s European cost of $8 to $10 per kilogram.
Why these projects matter
The failed mega-projects often made no economic sense. They were banking on massive scale, unproven technology, or unclear offtake. Some couldn’t even identify who would use the hydrogen they planned to produce. In contrast, the projects now moving forward are tied to existing industrial processes, ammonia, methanol, refining, steelmaking, where hydrogen is already used and where lower-carbon alternatives are urgently needed.
This is where low-carbon hydrogen belongs: in the hard-to-abate sectors that account for a disproportionately large chunk of global emissions. These sectors have few other options and are often concentrated in industrial hubs where infrastructure already exists or can be easily upgraded and extended.
In these applications, green hydrogen from electrolysis makes sense when powered by cheap renewables. Blue hydrogen, whether from SMR with carbon capture or methane pyrolysis, makes sense where carbon intensity is lower and economics are favorable. For example, blue hydrogen production in Europe ranges between €3.76 and €4.41 per kilogram, significantly cheaper than green hydrogen in most parts of the continent, which can cost €6 to €8 per kilogram depending on electricity input.
These aren’t headline-grabbing numbers, but they are practical. And they’re what the industry needs.
Fewer projects, better projects
Not every hydrogen project deserves to be built. That’s true of any sector, but the hydrogen gold rush of the early 2020s encouraged a lot of magical thinking. What we’re seeing now is a course correction. Projects with no real chance of securing offtake or capital are quietly disappearing. In their place are better-designed, financially sound projects targeted at real industrial use.
That’s not a sign of failure. It’s a sign of progress.
There’s still plenty of ambition. Commodity Insights reports that Europe alone has over 1.35 million tonnes per year of renewable hydrogen projects and over 2.4 million tonnes per year of blue hydrogen in advanced stages of development. But those fiures are now based on sober analysis, not hype.
Policy support is maturing too
This wave of realism is being helped along by smarter policy. The European Hydrogen Bank, for example, is steering funds toward projects that can deliver both emissions reductions and energy system value. The EU is also funding key infrastructure like the Barmar pipeline, and national governments, like Germany’s, are backing import infrastructure with billions in public loans. Laying a foundation for other projects to connect on.
Take the German KfW-backed funding of Hoegh’s Lubmin terminal. Instead of insisting on domestic hydrogen production at any cost, Berlin is choosing a cost-effective path that gets hydrogen to market sooner via ammonia carriers. It’s a pragmatic move that shows policymakers are finally starting to understand where hydrogen can actually help, and where it can’t.
A smaller, better hydrogen economy
Yes, the hydrogen economy will likely be smaller than some of the wild projections made five years ago. But that’s not a problem. It’s a feature.
A smaller hydrogen sector that actually works, one that displaces fossil hydrogen, reduces emissions in heavy industry, and relies on sound engineering, is infinitely better than a sprawling mess of doomed megaprojects. This sector doesn’t need a thousand grand plans. It needs a few dozen excellent ones.
Let the bad ideas die. Let the hype cool off. What’s left is something real.
By Leon Stille for Oilprice.com
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