Why are hydrogen projects stalling? – multiple factors have slowed down the energy transition
I’m tired of reading news about how electricity-intensive investments, such as hydrogen plant projects, are not progressing – without any explanation.
“Industrial investments are starting more slowly than predicted, but the underlying reasons are discussed less. The energy transition has not been cancelled!” says Sweco’s industrial energy expert Erkki Härö.
Underlying reasons.
I emphasize that launching a new market segment is always difficult. The situation is not helped by the fact that this decade has seen COVID, wars, and a challenging customs situation.
There are other factors creating uncertainty:
1. If fossil fuel prices do not rise, renewable energy solutions are not competitive.
2. As countries increase defense spending, the EU must abandon some of its energy transition goals.
3. New technologies carry more risks than those used for decades.
4. The end-product market is global, making it hard to predict things like legislation related to aviation fuels.
“Each of these challenges could be tackled individually, but solving the whole picture is more difficult,” Härö continues.
Normal development path.
Although hydrogen investments have not started as expected, the development path is actually typical:
- All innovations initially face huge enthusiasm, and everyone wants to ride the wave.
- Realities cause many to lose their initial excitement.
- A new rise begins toward a more stable and sustainable development level.
Climate change.
I emphasize that change will happen because it must happen. The climate has already changed, and reducing global CO₂ emissions is the only option.
“It requires bold political decision-making despite the risks,” Härö clarifies.
The hydrogen revolution will happen sooner or later. The transition is just occurring on a different timeline than we expected
Enabling the energy transition – the three critical areas for development
Investments requiring renewable electricity, such as hydrogen plant projects, will only progress if two other energy sector areas develop.
These interconnected areas are:
1. Electricity production, e.g., wind power and solar power projects.
2. Electricity consumption, such as data centers and hydrogen/P2X projects.
3. Energy networks, including the construction of electricity and hydrogen grids.
“Right now, the investment cycle is not rolling because each actor must weigh the decisions and timelines of others,” Härö notes.
When discussing data center and hydrogen investments, we should remember benefits beyond employment. These projects also enable other major industrial and infrastructure investments.
Investment timelines.
Different timelines of energy investments must be aligned:
- Building a hydrogen plant takes 4–5 years, but constructing a hydrogen pipeline between countries can take 5–10 years.
- Building a solar power plant takes 3–5 years, but constructing a new power line can take 7 years.
“Production projects will really take off once the infrastructure construction timeline is confirmed,” Härö continues.
Permitting.
Infrastructure construction takes longer than plant projects due to the permitting process. For example, if 1000 kilometers of hydrogen pipeline are needed, the route includes:
- Numerous landowners with whom land use agreements must be made.
- Various ecosystems whose impacts must be assessed.
“That’s why it’s good news that the Finnish government aims to streamline the permitting processes for energy lines.”
Electricity sufficiency – Should we be concerned?
One concern is the sufficiency of electricity. The fear is unfounded.
“As long as Finland invests in renewable electricity consumption, production will follow.”
Wind and solar power production will be sufficient for everyone if production is sufficiently decentralized across the country.
“Somewhere in Finland, it’s almost always windy enough. That’s the future outlook we should focus on instead of spreading negativity.”
Erkki Härö
Energy Expert, P2X
erkki.haro@sweco.fi