The €127 billion green hydrogen bubble that BP helped burst
Industry newsDespite strong government backing and significant private sector interest, at least seven big hydrogen production projects have been delayed, scaled back, or cancelled in the last year. Chief among them was BP Plc’s decision last week to exit a €31 billion facility in the Pilbara region of Western Australia, which had targeted starting production this decade.
Around the world, project withdrawals have accelerated as developers struggle to secure customers willing to pay a premium for the fuel. Costs remain persistently high, unlike the sharp price drops seen in solar and wind that have boosted their competitiveness.
There are more green hydrogen projects under development in Australia than in any other country, with a A$225 billion (€127 billion) pipeline worth of proposed projects, according to the government. But only three relatively minor plants are actually operational in the country, while most others remain in preliminary planning stages.
In recent years, many of the largest energy companies have tempered plans for green hydrogen as a way to better scale up renewable electricity. Plans to produce about 1.67 million tonnes of clean hydrogen had been shelved as of the end of June. Meanwhile, just 1.9% of planned projects have secured financing or started construction.
Europe, which could become one of the world’s largest consumers of green hydrogen in its push to achieve climate neutrality by mid-century, has grappled to overcome high costs, forcing some projects to be abandoned despite government support.
Growth of the technology in the US is also now in doubt after Trump’s One Big Beautiful Bill significantly limited tax credits to produce the fuel. A year ago, credits were expected to help lead to about 1.2 million tonnes of annual green hydrogen production by 2030, BNEF said.
In Australia, the challenges come despite strong government support and some of the world’s best natural conditions to produce hydrogen using renewables. The government has committed at least A$4 billion to support the green hydrogen industry to bridge the cost gap between production and market prices. However, access to most of this funding depends on developers proving commercial viability upfront — a challenge as long-term buyers remain scarce.
The Australian Renewable Energy Agency is responsible for administering the government’s Hydrogen Headstart programme and has so far provided more than A$370 million to 65 renewable hydrogen projects.
Fortescue Ltd. and Woodside Energy Ltd. said this month they would withdraw from green hydrogen plans in Australia and the US.
Some green hydrogen projects are still moving forward, despite the cost challenges. In Europe, climate policies are encouraging deals, such as the one between Germany’s RWE AG and TotalEnergies SE to supply hydrogen to an oil refinery. Those contracts will help to underpin new production.
Elsewhere, China and India are pushing ahead in a race to produce some of the world’s cheapest green hydrogen. Even so, the clean fuel remains far more expensive than fossil fuels, according to BloombergNEF. For now, demand is mainly concentrated in sectors already using hydrogen, such as oil refining and fertiliser production.
China also benefits from a mature domestic supply chain of electrolysers — the machines that convert water into hydrogen and oxygen — that has helped reduce project costs. In contrast, Australia depends on European-made production units, which cost multiples of the Chinese ones.