Ørsted’s Abandoned Project, Equinor’s Pivot, and Hannover’s Failure: Is Green Hydrogen Faltering, or Are Suppliers Mistiming the Market?

On August 15, Danish renewables developer Ørsted announced it had cancelled its green Hydrogen (H2)-to-methanol shipping fuel project in Sweden, 2 years after announcing its Final Investment Decision (FID). Ørsted cited inadequate demand, emphasizing the difficulty of securing off-take agreements for green fuels.

Similarly, earlier this year, Equinor and SSE Renewables scrapped plans to use North Sea electricity—generated by the world’s largest offshore wind farm—to produce green H2. Instead, new capacity will be funneled into grids, where demand for renewable electricity is extensive and profitable.

Local projects have also struggled. In March, the City of Hannover’s electrolyzer project collapsed during its planning stages, citing insufficient and non-committal demand for H2 from the local mobility sector.

These announcements have fueled doubts as to whether industries will ever develop an appetite for green H2. Could the future fuel of industry fail to find a market?

In short, no. Ørsted, Equinor, and Hannover’s struggles are exceptions to an otherwise energetic upward trend. Electrolyzer costs are falling, efficiencies are improving, and plants are expanding. New national and regional projects are announced weekly. Subsidies have increased, exemplified by the European Hydrogen Bank’s recent round of funding and India’s US$24 million investment in H2 hubs. Regulations, such as Europe’s Renewable Energy Directive II (RED II) rules, are imminent, and will create conditions for a robust clean H2 ecosystem which, by 2050, could outstrip the current market by a factor of five.

However, these failures do reveal a fundamental challenge for green H2 suppliers: predicting demand timelines, and accordingly, timing projects, is difficult. On the surface, demand seems stubborn and opaque, hopelessly complicated by regulatory obstacles, financial risks, and transportation costs. Predicting when use cases will mature appears daunting. The consequential uncertainty disincentivizes investors, and, as we have seen, has led to suppliers mistiming the market.

To predict demand, suppliers must be acutely aware of the green Levelized Cost of Hydrogen (LCOH), which represents average production costs, and how this figure impacts various use cases at different levels. Ørsted, Equinor, and Hannover’s projects each mistimed these price points, and therefore, misjudged the readiness of industries to adopt green H2 at each juncture.

• Ørsted’s FlagshipONE project was to produce 55,000 metric tons per year of e-methanol shipping fuel, beginning delivery in 2025. This was premature. By 2025, green LCOHs will remain too high for e-fuels to be cost viable, as rapid cost reductions from electrolyzer improvements and improved H2 economies of scale will not yet have occurred.
  • As ABI Research’s recent report The Economic Viability of Green Hydrogen for Industry and Enterprises (AN-6267) explains, these fuels will not become competitive until the mid-2030s, at which point the LCOH will have fallen, and regulations taken effect. By 2040, robust demand should be established. By moving to start production in 2025, Ørsted significantly undershot the market.
• Equinor’s decision reflects a tradeoff common among large prospective green H2 producers: those with extensive renewable energy capacity must choose between allocating electricity to green H2 production or selling it to grids. Again, the prevailing green LCOH will inform the decision; once it is low enough to stimulate demand from existing hydrogen consumers, it will be economically viable for Equinor to enter the market. Until then, major energy providers are unlikely to fully commit to H2 production—especially when demand is high in other sectors.
• The Hannover project identified mobility providers that operate buses across the city as the key off-takers. However, adapting city buses requires H2 fuel cells, a technology that struggles to compete with electric alternatives in terms of range, cost, reliability, and applicability. Alongside efficiency improvements, the green LCOH would need to fall significantly for fuel cells to compete with batteries in transit applications. Even by 2050, green H2 fuel cells may struggle to displace electrified alternatives, which are steadily improving and becoming cheaper. Therefore, while green H2 could be an important contributor to mobility sectors, the City of Hannover moved far too early.

These misadventures do not indicate that green H2 is faltering. Instead, they emphasize that cost is the crucial factor in shaping demand, and that successful projects depend on how accurately these costs can be predicted. For detailed forecasting, a timeline of when green LCOHs will be reached, and a guide to where—and at what time—demand in specific markets will develop, access our recent report, The Economic Viability of Green Hydrogen for Industry and Enterprises (AN-6267).