Clean Hydrogen Projects Achieve FID: How?

After years of small-scale pilot projects dominating the Final Investment Decision (FID) for low-carbon hydrogen in Europe, a number of large-scale green hydrogen projects have now achieved FID in just a few weeks in Germany and the Netherlands. Early assessments show several common areas among recent successes: The projects largely have access to significant state and EU funding, and are strategically positioned to replace grey hydrogen in oil refineries and meet EU quotas and mandates for hydrogen in industry, shipping and aviation. Identifying these common features is crucial, given that the success rate of concept-stage hydrogen projects achieving FID in Europe has been well below 5% so far, compared to a success rate of 50% in China, and given the high cost barriers, particularly for green hydrogen (see graph).

Common ground

Oil giant Shell, for example, has given the green light to a 100-megawatt proton-exchange membrane electrolyzer project at its Rheinland Energy and Chemicals Park near Cologne, in southwestern Germany. Refhyne II is expected to be up and running in 2027 and produce about 16,000 tons of green hydrogen per year for use at Shell’s refinery. A Shell spokeswoman told Energy Intelligence that “the project is expected to meet about 10% of the hydrogen demand used at Shell’s Rheinland facility, replacing some of the grey hydrogen currently used with renewable hydrogen.” Shell said that in addition to EU Horizon funding, the project benefits from EU mandates and quotas for mandatory use of hydrogen in industry, transport and shipping. It also exceeds the 12% internal rate of return threshold for its Renewables and Energy Solutions business unit, a level the company set in 2023.

German utility EWE has accepted an FID for a 330 MW four-stage, full-chain hydrogen project in northwestern Germany. The project includes two electrolyzer schemes in Emden and Bremen, the latter a 50 MW project that will supply green hydrogen for local green steel production. In addition, a gas storage site will be converted into a hydrogen storage site and a transport pipeline will be built. The four schemes have qualified as important projects of “common European interest” in the hydrogen infrastructure category, with federal and state support providing €500 million ($541.7 million) of the €800 million total cost. An EWE spokesman told Energy Intelligence that the project is ideally located near wind facilities, gas storage facilities and the country’s planned hydrogen core network. EWE has concluded offtake agreements with green steel producers ArcelorMittal and Georgsmarienhutte, the spokesman added.

French company TotalEnergies and German utility RWE have entered into an FID for the 795 MW Dutch OranjeWind offshore wind project. OranjeWind could be operational in 2028 and includes electrolyzers to produce green hydrogen. “TotalEnergies will use its share of the renewable energy production from this project to power 350 MW of electrolyzer projects. These will produce around 40,000 tonnes of green hydrogen per year to decarbonize TotalEnergies’ refineries in northern Europe” by replacing some of the volume of grey hydrogen, the statement noted.

Children’s sector

During last week’s second-quarter earnings presentation, Total Chief Executive Patrick Pouyanne said low-carbon hydrogen was “still a nascent” industry in Europe. Pouyanne said Total was still evaluating different ways to source green hydrogen for its refineries in Europe, either through a speeding agreement, investing in power generation assets and electrolyzers, or simply buying green molecules. Pouyanne said it was too early to pick a winning strategy. Ultimately, Total said it would choose green hydrogen deals that would allow it to create value, avoid carbon pricing at its refineries and meet renewable fuel requirements under European law, Pouyanne added.

Shell filed an FID in July 2022 for Europe’s largest green hydrogen project, the 200 MW Holland Hydrogen 1, which is expected to be operational in 2025. It will use electricity from offshore wind farms to produce green hydrogen, which in turn will replace some of the grey hydrogen at the refinery at Shell Energy and Chemicals Park in Rotterdam. According to the 2022 documentation, the Dutch government has committed €150 million in state aid to the project. Holland Hydrogen 1 enjoys priority permitting status and financial benefits.