UK-based energy major Shell abandons Norway’s hydrogen projects due to lack of demand. “We haven’t seen the market for blue hydrogen materialize and decided not to progress the project,” a Shell spokesperson has told Reuters.
Last week, the Norwegian state-owned multinational energy company announced that it will not move forward with plans to build a pipeline to carry hydrogen from Norway to Germany with partner RWE, citing a lack of customers as well as an inadequate regulatory framework. Equinor was to build hydrogen plants that would enable Norway to send up to 10 gigawatts per annum of blue hydrogen to Germany.
A grand plan announced by the Norwegian and German governments in January 2023 to build a hydrogen pipeline between the two countries, through which Norway would send up to 10 gigawatts per annum of blue hydrogen to Germany, has been scrapped due to high costs and a lack of demand. The plan had been for the pipeline to initially transport natural gas, before switching to blue hydrogen, and eventually green hydrogen.
Unfortunately, the hydrogen sector is struggling mainly due to high costs. According to Bloomberg New Energy Finance, just 12% of hydrogen plants have customers with offtake agreements. “No sane project developer is going to start producing hydrogen without having a buyer for it, and no sane banker is going to lend money to a project developer without reasonable confidence that someone’s going to buy the hydrogen,” BNEF analyst Martin Tengler notes.
The production of hydrogen is an industrial activity that requires permitting and transportation to get to its customers. And there isn’t yet a market for it. “What you’re really trying to do is replace one molecule with another molecule, but you need a lot of infrastructure to do that, and the costs are still to be revealed. You have to scale up to get there. The incentives are there, but it takes time. You realize shale took 25 years to be proved up. Last year, the world used more coal and more oil than it’s ever used before. So change is happening, but it doesn’t happen as quickly as people think it will,” Daniel Yergin said.
/Reuters, Bloomberg, Yergin/