Europe: High Costs and Too Much Focus

Key Points

The Europeans risk bankrupting themselves if they keep pushing ahead with largely uneconomic hydrogen projects, almost all showing no promise of achieving the economics required to survive.
As the subsidy and price pass-through ask rises, we do not expect local governments to react by spending even more public money; instead, we expect an easing of rules to allow a role for less perfect but lower-cost options.
The Shell renewable fuels backdown may have some project cost basis, but the larger driver is likely customer reluctance to pay up for much more expensive products – despite subsidies – this could change for SAF.
We evaluate why China can accelerate electrolyzer development, while European and US makers may get orders and capacity reservations but not much action. Orders for Europe may stall if Shell is a precedent.
Otherwise, we review only a handful of projects – Germany, the UK, and Australia, with only Australia looking plausible, we note the pressure on grey ammonia prices and recap our weekend work on data center power.

Exhibit 1: This is an analysis of cash costs and does not include capital costs of hydrogen or new power sources.