Hydrogen Economy

Mandated Expense – Can Europe Afford Its Current Pathway?
May 14, 2024
This Week:
Very Green but Very Expensive – European Green hydrogen
Next Week:
Why are governments still funding electrolyzer expansions?

The Hydrogen Economy #46

Mandated Expense – Can Europe Afford Its Current Pathway?

Key Points

  • Most of the European hydrogen projects that we cover need high premium pricing, which they are getting through grants, subsidies, and fuel value mechanisms that allow fuel makers to pay the necessary high prices.
  • But this is expensive, and someone must pay – in a worst case below we estimate a hydrogen subsidy growing to 1.3% of current EU GDP by 2040 – things are expensive in Europe and even higher costs will limit GDP growth.
  • Carbon pricing in Europe also factors into hydrogen economics, blue and green, and with weaker carbon pricing, because of industrial cutbacks, some of the projects in the chart below will need even more subsidies.
  • We remain convinced that the electrolyzer market could face chronic oversupply for years, yet governments keep funding expansion – this will not lead to lower costs it will lead to bankruptcy – more next week.
  • Meanwhile, ammonia pricing is trending down globally, and this will make some of the blue and green projects more challenging as company directors and lenders pay more attention to current pricing than forecasts.

Exhibit 1: European hydrogen projects YTD. The lowest cost (blue) project does not qualify for most fuel subsidies.

Source: Corporate Reports and C-MACC Analysis

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