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Hello from London, where the knock-on effect of Russia’s war against Ukraine is still ricocheting around the region.

On Friday, Britain’s energy regulator is expected to announce a 9 per cent increase in household energy bills, following a rise in wholesale gas prices in part due to uncertainties around Russian gas pipeline supplies to Europe.

It means typical bills are still several hundred pounds a year higher than before the energy crisis fuelled by Russia’s full-scale invasion in February 2022.

It comes as Russian attacks on Ukraine’s gas storage sites are deterring traders from storing gas there, as reported by colleague Shotaro Tani last week.

Writing for the Financial Times this week, Kadri Simson, the EU’s commissioner for energy, warns that attacks on civilian energy infrastructure in Ukraine have escalated, and this winter is likely to “test the resilience of the Ukrainian people in a way not seen on our continent since the second world war”.

In this week’s newsletter I look at the emerging green hydrogen industry — and whether realism is finally starting to take over from hype.

Enjoy reading — Rachel

Programming note: Energy Source will be off this Thursday, returning Tuesday, August 27.

Green hydrogen: patchy progress

Hydrogen is having a complicated time. The gas, widely used in oil refineries and chemical plants, is touted as a crucial fuel for the energy transition, as it emits no carbon dioxide when burnt. But it is currently produced almost entirely from fossil fuels, mainly natural gas, spewing out hundreds of millions of tonnes of carbon dioxide each year.

Producing it at scale in a lower carbon way requires vast investment in equipment to strip and capture those emissions, or in electrolysis plants that extract hydrogen from water. The latter process (which produces “green hydrogen”) could help make use of excess wind or solar power in future electricity systems dominated by renewables, and avoid emissions from natural gas drilling.

However, getting projects off the ground is proving more difficult than hoped. Several high-profile attempts to produce green hydrogen at scale have floundered in recent months, with manufacturers struggling to overcome the “chicken and egg” conundrum the industry faces as high costs and uncertain demand hold projects back.

Australian iron ore giant Fortescue in July dropped its self-imposed 2030 timeline to produce 15mn tonnes of green hydrogen a year, while both Engie, the French-state backed utility, and Statkraft, Norway’s state-owned renewable electricity company, have also delayed plans for new green hydrogen capacity. 

Ørsted, the Danish offshore wind developer, last week pulled the plug on a factory it had been building in Sweden to make e-methanol, a fuel produced by combining green hydrogen and carbon dioxide, warning that the market was developing more slowly than expected. 

And Thyssenkrupp Nucera, the Frankfurt-listed maker of electrolysers used to make green hydrogen, warned last week that its “growth momentum” was being held back by market uncertainty.

Emma Woodward, European hydrogen market lead at Aurora Energy Research, said there’s an “overall sense that it is a lot harder to put these investment cases [for new hydrogen plants] together than companies may have been expecting 2-3 years ago”. 

Several elements must come together to get projects off the ground, she noted, such as long-term electricity supplies, hydrogen sales agreements, funding and government support. In the US, developers have been held back by uncertainty over criteria for tax credits. 

‘Cause for optimism’

The setbacks have been softened by a flurry of projects in Europe receiving the green light over the past six months, such as Shell’s 100-megawatt Refhyne II plant just south of Cologne, Germany, which will help supply the oil major’s chemicals plant and refinery on the site.

German utility EWE has given the go-ahead to a 280MW plant in Emden, northern Germany, to supply up to 26,000 tonnes of green hydrogen each year to factories in the region. In Aberdeen, Scotland, BP and the local government have approved a green hydrogen plant to supply up to 300 tonnes a year for buses and other vehicles.

In all, green hydrogen projects with a total capacity of 483MW took final investment decisions in Europe in July, according to analysts at Wood Mackenzie.

“Progress had been quite sluggish in Europe, but we do think there’s cause for optimism,” Greig Boulstridge, research analyst at Wood Mackenzie, told Energy Source, noting that further catalysts for growth — such as new government support — are on the way.

Woodward echoed that view. “I am not negative [on the sector] because last month we saw this raft of final investment decisions being made across Europe,” she said. “So while there are people pulling back, there are people that have managed to make this work.”

Woodward and others argue the market has started to become more realistic, with hype dying down over the role hydrogen could play in the energy system. That could help developers focus on getting viable projects off the ground.

Murray Auchincloss, chief executive of BP, said during an earnings call last month that the group was “focusing hydrogen down”. He added: “We had chased 30 different opportunities in the past. We are now thinking about what we can actually construct and get going.”

Power Points

  • A top US oil group is expanding in Russia despite Moscow’s war in Ukraine.

  • Tata Sons has shown interest in buying some of India’s debt-laden, state-owned power distribution companies.

  • Plunging iron ore prices have cumulatively wiped about $100bn in market capitalisation off the world’s largest mining houses.


Energy Source is written and edited by Jamie Smyth, Myles McCormick, Amanda Chu, Tom Wilson and Malcolm Moore, with support from the FT’s global team of reporters. Reach us at energy.source@ft.com and follow us on X at @FTEnergy. Catch up on past editions of the newsletter here.

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