Breaking down the hydrogen hype

Welcome to Energy Evolution, a podcast by S&P Global Energy where we dive deep into the energy stories shaping our world today. I'm your host Aiklavia Gupta in this episode, we're diving into the intriguing world of Green Hydrogen. A sector that perfectly encapsulates the energy transition, a sector which is full of promise, but has also been fraught with some challenges, especially in 2025. As we explore the current landscape, we'll discuss the fierce headwinds facing Green Hydrogen, including high-profile project cancellations and regulatory hurdles, but it's not all doom and gloom. Despite these challenges, many in the industry are still finding creative ways to navigate this complex market. And in this episode, we are lucky to speak with key figures in the hydrogen sector, including Christian Stukman from Uniper, and Andy Beard from Shell, who will provide some fascinating insider insights into how they are surviving and thriving in this landscape. But before we go to these conversations, we'll first hear from James Burgers, a senior reporter in the energy transition team at S&P Global Energy, who focuses on the hydrogen market. So, James, welcome back to the energy evolution podcast. Great to have you here, and obviously you've been pretty much at the forefront of some of the big headlines that we've seen. So maybe to set the stage, can you give us an overview of some of the developments that you've seen in 2025 in hydrogen and what is working and what isn't? Absolutely, and thanks great to be back on the show. I think it's a timely point to take stock of the green hydrogen market. I think you put it perfectly. 2025 was built as a pivotal year for green hydrogen in Europe, moving from some of the early promise from the project announcements on policy frameworks into implementation. That was what we were supposed to see in 2025. Now, things are not going on quite as expected. We're still seeing policy delays, project cancellations has been a lot of high profile headlines in that space. And we're going to get into some of the reasons behind that in a moment. So while we're definitely seeing a reduced role for hydrogen in the energy transition in renewable space, it's still seen across the board as a critical part of any net zero transition. Now, particularly for areas in which it's hard to electrify where you can't directly decarbonize through electrification. So that's things like heavy industry, feed stocks, heavy transport. Now, looking at some of the reasons for the slowdown in Europe, now we've seen major project withdrawals from the European hydrogen bank. Now, that's the flagship EU bit of subsidy support to get some of these projects going. They released a second hydrogen bank round early this year, awarding over 2.3 gigawatts of capacity. However, just recently, most of that capacity withdrew before signing grant agreements. Now, the reasons for that are multiple, then they go to infrastructure delays, to national policy delays in implementing some of these frameworks. And in some of the complexities, the cost rises and the difficulties in securing offtake. Now, that's only part of the story. It's not all doom and gloom, but that has been a significant feature of green hydrogen in Europe this year. However, we've still also seen a lot of projects take final investment decisions, companies get over the line and start construction. What we've seen for sure this year is a consolidation of the sector. Thanks, James. And to segue from that, obviously there are, as you mentioned, quite a few projects that have reached FID. What's enabling these projects to go ahead and they're obviously some that are not. So, you know, what is it that makes these projects stick? That's the combination of getting the right policy support, being able to spread the costs over the value chain in these sectors, and making the end product affordable for customers and end users. So, we're seeing projects going ahead where national governments have backed up policy support with clear frameworks. We see particular advances in sectors such as refining and some areas of green steel where the cost of the end consumer is negligible. So, while the cost of green steel might be a substantial premium on top of steel, the cost to someone buying a car with green steel components is a fraction of the price. So, I think those are some of the key elements. We know there are some question marks around exemption and strict rules for green hydrogen projects. But how is the market watching hard for some of these policy developments? Sure. Well, there's been a protracted debate going on for some years around the European Commission's rules for green hydrogen. Now, one of the first conferences that we have put on after the global pandemic on hydrogen was in 2022. There was a huge amount of debate about green hydrogen rules which had just been finalised and suddenly the parliament through a spanner in the works and questioned them. Now, that debate rumbled on for a number of months and it was took the best part of a year or more to finalise those. Now, the European Commission proposed quite strict rules around what should counter a green hydrogen. Now, these were for good reasons that they wanted hydrogen production to come from additional renewable capacity, new renewable capacity. So, it's not to cannibalise other decarbonisation efforts and they wanted hourly matching for that renewable power generation and hydrogen production. Those rules were coming into effect from 2028 for additionality, that's the new capacity and from 2030 for hourly matching. Now, that was finalised but because of the delays we've seen, now if you're taking final investment decision now, you're going to be coming on stream after 2028. So, now developers are thinking we're still first movers in this space where early projects and we're going to be lumped with these higher costs. Now, industry experts put the cost, additional cost of production at around two euros per kilogram and that's in the context of maybe an eight euro per kilogram cost. So, it's a substantial share of that production cost. And so, that's why we're now seeing quite strong lobbying from some industry bodies around potentially extending exemptions from these strict rules and that's one of the questions we're going to touch on. Thank you, James. That's very interesting because it is obviously covering at a time where we're seeing the Commission water down some of its green and climate policies. So, it'll be interesting to see if they stay consistent on green hydrogen. And one thing to add on offtake, now we've got these very straight rules about hydrogen production and in the second part of the EU Renewable Energy Directive, red three, the updated directive, they mandate rules for the customer side, the demand side for hydrogen. So, that includes a 1% target for hydrogen in transport fuels from 2030 and a 42% share in industry for renewable hydrogen. So, that's 42% of hydrogen used in industry should be from renewable sources. Now, refining comes under the transport target, whereas other off-takers, other industrial sectors such as fertilized production come under that industrial target. Now, there's quite clear rules around the transport target in national legislation coming into effect, but it's much less clear, much less certain for this industry target. Now, James, you have obviously been speaking to a lot of the companies active in this market, especially those whose projects are moving ahead. So, do you want to tell us a little bit about who we're going to feature today? So, I spoke to Christian Sukman, who's head of hydrogen business development at Uniper. Now, Uniper, like a lot of other utilities and large energy companies has cut back its energy transition spending. In the face of slower than expected market development in hydrogen and various headwinds in the wider renewable space. But it has several hydrogen projects in the works, including a 30 megawatt plant under construction in Germany, with first operations expected soon. Great, let's go straight to that conversation. Could you set the scene and give us a brief introduction to what role Uniper has in hydrogen and where you see the market going? Uniper is an energy utility, mainly active in the countries of Germany, Netherlands, UK, and also in Sweden. Traditionally, Uniper has a utility, owns, and operates power plants. And so, we'd like to extend that business model to hydrogen, which means that we want to develop our own assets in such markets that are going to produce a green hydrogen or a blue hydrogen hydrogen of all colors, basically. We're agnostic in that sense, and our business purpose is to offer low carbon and green hydrogen molecules to our customers. Great, I wonder if we could talk a bit about the main barriers and obstacles to the low carbon hydrogen project space in Europe. Yeah, absolutely. I mean, the countries we're active in, all of them have their own legislation and regulatory challenges. But there are certain things that are common across all markets and that is the fundamental lack of a simple straightforward business model. And that is something that we learned over the past five years, once we've established a quite sizable team for hydrogen across those four countries, that this is quite a challenge. And the challenge is that after we've started engineering our first projects, we learned that there is a cost of hydrogen, which is higher than initially anticipated, and also much higher than initially, publicated by certain consultants and studies, because we've started to look into the full system costs of producing hydrogen, including the balance of plant, including Greek connections. So this is something that we've then used in our customer acquisition, discussions. We have educated customers about how we intend to supply them, customers have educated us in respect to how they expect to be supplied. And well, actually, we found that there are certain things where we need to start bringing down the costs and get better. And I think that's something learning curve that we've embarked on already. But on the other hand, there is still quite an issue for the customers that we are targeting, the ones that are going to use the hydrogen, how to do that on economically viable basis. So how to hook up customers, how to get a long-term off-take contract, which is a prerequisite for a company like Uniper to take a final investment decision. And regarding the projects that Uniper is developing at the moment, what stage are those projects at, which are the most advanced? Yeah, well, the most advanced project that we currently have is called Butlerstedt. But Butlerstedt, this is in the center of Germany. It's a 30 megawatt green hydrogen project already on the construction and the target is to supply the closely located refinery of total energies with RFMBO compliant green hydrogen. So that is post-FID. There are other projects in our portfolio, such as in the port of Rotterdam, such as on the Humbers-Hausbank and in the north of Germany and at other places where we have projects under development that are pre-FID. But I think it's fair to say that we're not quite there yet, and we have also become very strict and careful when it comes to a Debex spending. So putting more money at risk into the development of projects while those business models that I mentioned in the previous question are still not solidly available. But I think that's really interesting that you've got projects that are in construction going ahead with off-take lined up at the same time. Some of these other ones haven't got those pieces in place, so I think it's a really well place to shed some light on the subject of what makes them work and what doesn't. Yeah, of course. I mean, infrastructure was one of the most important chicken and egg issues to be overcome. And the project that has taken the final investment decision in 2023 already was very luckily located and close proximity to the refinery of total energies. So the challenge to supply and deliver hydrogen from our asset to the place of consumption that wasn't the biggest one, so that was an advantage. But you don't always find those conditions for all your projects. So what we've focused on in our strategy is to place the electrolyzer, so the assets that are going to consume renewable electricity at coastal locations, why that? Because this is where you have normally a lot of availability of renewable electricity. So if you look in our projects in the port of Rotterdam or in the north of Germany or on the south bank. So they've got access to grit. They have access to renewable electricity. And so actually there are all located in places where from a perspective of grit balance, from system integrity, they even provide the grit service. They are not adding to an imbalance of power supply in regions where there is already a shortage of power supply such as in the central or southern German areas. Scaling up means you get yourself in a position where you're able to bring down your unit cost of hydrogen. So you're going to make it cheaper by building larger assets. So I think those are two. And then in Germany we had the fortune that the hydrogen start grid was FID a year ago. This is already working progress. And this is an important and inevitable actually for us to then evacuate our molecules from the locations we produce them to the places where the hydrogen is needed. And another element we've touched on in terms of barriers and headwinds has been some of the policy delays and implementation. And I say just recently there's been a bit of talking industry about reopening the EU rules regarding additionality and hourly matching for green hydrogen production. In the industry have been calling for those rules to be either revised or revisited or perhaps delayed. Is that something you at Uniper would like to see or you see as a potential issue? See, this is a quite a delicate matter because on the one hand side of those strict rules the EU commission came up with for a reason. But of course it's pretty much clear in the industry that they lead to quite high cost of around about 1 euro or 52 euros per kilogram. It's a cost that could be avoided when you produce hydrogen domestically within the EU. So from that standpoint of course we want everything that allows hydrogen to be produced domestically at a lower cost we want that to be enabled. And from that perspective it's yes to your question. It's helping producers such as Uniper to bring down costs. It's helping to reduce the money gap which ultimately either the customer has to pay or governments have to pay by way of subsidies. So you help a lot to advance hydrogen by relaxing those rules. If you now start changing rules that is putting a lot of damage to projects that have been developed on the assumption to have a competitive advantage. So if you want to incentivize private investments and private money in the decarbonization of industries as governments and as the EU commission you can afford to permanently change the rules. On the other hand two euros as a possible cost reduction potential that is too big to forego it. So I think we need to look into that and we need to change it sooner. You mentioned costs of a round in the region of two euros per kilogram from regulation. And there's other schemes and incentives from the EU and national governments offering subsidies for green hydrogen production. So how do you see the European Hydrogen Bank funding scheme? Is the funding regime fit for purpose and is it helping to deliver projects or would you like to see changes in how that's administered as well? Well there is a yes and a no again on the one hand side all the project that have taken FID so far are enjoying subsidies, public funding and one formal or another. So there is clearly a need for a public support financial support to bridge that money gap. It's also fair to say I think that all those funding mechanisms be the hydrogen bank or H2 global or innovation fund or Ipsay and Europe. All of them have started with a certain design but none of those tools has been perfect from day one. So they need to be improved and they need to be reformed when it comes to hydrogen bank. We also participate in that process and certain requirements such as issuing a bit bond for a substantial amount of money. This is another challenge for a company that has observed the regulatory and market developments over a period of five years now. I mean Unipro is not alone in the market where those developers have invested the significance amounts of money and budget into project developments. All on the belief that regulation will be put in place in a timely manner so that you can take those developments to FID and ultimately start your business case and bring it into a casual, positive period. And so I think we all learned and we all got a bit more reluctant and we take it with care, the development budgets we put into project. And if you look into the requirement to post a bit bond with very strict requirements that is something where you would have to have a lot of trust in your government to implement the regulation in a sustainable way so that demand unfolds. And we'll really lead to you being able to sell your product at a cost covering price. Some of the projects that have been delayed or cancelled or had to pull out of funding have cited exactly some of those issues. So moving onto the outlook for the sector, how do you see the outlook for the hydrogen market in Europe out to 2030 and beyond? Yeah, that's a tough question. We have stepped away a little from making long-term views on hydrogen. We have moved to a strategy or a management which is rather signpost based. So we want law to be enacted. We want the governments to create facts. If that happened and if that unlocks demand, which means that off-takers are going to take a seat at the negotiation table for a long-term off-take, then we are ready to make the next step in our project developments. But we're not going to do that any longer on the view that the market is going to take certain volumes by 2030, 2035 or thereafter. This is just too uncertain and also the possibility of regulatory changes even after they've been enacted. This is too material for us. There's too much money and too much investment at risk in order to do your project implementation of your business strategy on this basis. Touching on an off-take again, how do you go about negotiating securing those long-term off-takes that you require to develop a project with customers who are perhaps more used to dealing on a spot basis or a shorter-term model? Yeah, I'm very happy that you touch on that point because it's often disregarded when it comes to funding schemes. Actually, the long-term perspective of this industry and our investment decisions is often ignored and only pure static cost comparisons are made. So we call it the levelized cost of hydrogen where there is a certain cost gap to be bridged by way of subsidies. But that's not doing the jobs. A lot of our off-takers, they have two very major requirements to the way they want the hydrogen to be supplied. One is, it's supposed to be baseload. So the intermitency from the production over renewables, the wind and PV or a mix of bowls, that is something that the customer doesn't appreciate. And number two is, they're used to a much shorter-term and spot-based way of procuring alternative fossil fuels such as natural gas for steamy-thane reformation. So this is something that we have to overcome or otherwise tools have to be implemented that are going to take this risk out of the supply chain, one of which is this double-sided auction mechanism by the way. So there is H2 Global and has been founded a couple of years ago where they're actually performing upstream auctions for suppliers. Then you get your off-take contract with H2 Global and then there are on the downstream side auctions for customers that then are able to commit to shorter-term periods and smaller volumes like the chunks that have been procured on the upstream part. So I mean, I think that is quite an effective and pragmatic tool that could help to overcome the long-term issue. And is there anything else that UC is needed to get the industry going in Europe in terms of policy, regulation, infrastructure? Yeah, I think there should be more focus on the simplification. So the rules that we currently look at under the delegated, for instance, are complex. Also, if you are fortunate and have been awarded a funding grant, you're not done. There is lots of documentation you have to provide and normally you have to work with a changing timeline with a changing project school that is all documentation you need to provide to the funding bodies. So I think what we need is a strategy that shows a clear path towards a market economy. So where industry players, they get a framework rules within which they can develop projects and start operating their business without having to file and apply for funding each time you want to do a project. The other point is the challenge that we as an industry need to accept is that the costs are still too high. We need to work on getting the cost down and that is a deliverable from the industry clearly. Great. Well, Christian, thank you very much again for joining us and coming on the show. Okay. Christian mentioned the refining sector there as an area where hydrogen projects are going ahead in Europe. I spoke to Shell's president for hydrogen and it bid about what's enabling the company to develop a series of large scale projects in Europe having taken FID and starting construction. Welcome to energy evolution. I'd like to start by talking about what's made it possible for Shell to take some of these final investment decisions on hydrogen projects. What's driven these forward when we have seen so many cancellations and delays across the region in other areas? Yeah, so I think Shell really is an early pioneer of kind of large scale hydrogen production and the integration of low carbon hydrate. And we believe that low carbon hydrate is going to play a critical role in tackling hard to pay to a hard to electrify sectors. So we've been trying to create a portfolio that matches the ambition of where we see low carbon hydrogen in the long run, but also acknowledging where the market is today. And there are a number of barriers in the way of adoption. So we've been trying to find those early proof points, those early use cases to overcome those hurdles and unfortunately those hurdles are numerous. You know, it's the high price of carbon given the maturity of the technology, the infrastructure being missing, fragmentation regulation and in some cases missing end users. And at tomorrow has not there because of potentially novelty and risk of the adoption, but also a number of people are just locked in to existing grey hydrogen contracts that they need to expire to basically be able to invest in low carbon. Especially when you look in Europe, a lot of momentum has been created. A fit for 55 was a great step, the identification and bringing them binding RFMBO sub targets, renewable energy directive also helped. But we also remain a bit of a critical moment in the industry where some of that momentum has been undermined by the lack of transposition of these regulations. And at the moment we've only got five countries that have actually transposed into law out of the 27 countries. So there's still more to do. We've been doing a lot of work around research and development, trialing the technology and moving from R&D scale to pilot scale to commercial scale. And that's given us the confidence in the technology. Luckily, if you look at the use cases, we've got a CH1, which is a 200 megawatts electrolyzer in Rotterdam, and we have 100 megawatts, which is a PEM electrolyzer in Ryland, another one of our refinery or energy and chemical parks. These locations are critical to us because they already have infrastructure. In the case of Germany, that infrastructure is fully there. That's electrical infrastructure, pipelines or compressors. It's all ready to basically insert an electrolyzer. And for a CH1, it's similar. We have a hydrogen network around our furnace refinery and energy and chemical park. And Huznay is basically building a pipeline that connects our electrolyzer to our refinery. And we'll be that anchor talent to get things going. So that infrastructure has allowed us to match the supply with the last missing piece of the puzzle, which is demand. And we're able to move forward because we are our own customer. And this allows us to pack out grey hydro and have an environmental impact. And an example is a CH1, that carbon reduction is the equivalent of around a fleet of 30,000 vehicles. So it is having the impact. So by having that captive demand, we're also allowed or able to manage the cost of compliance or easily because we can spread that cost over the full value chain by being integrated company. So that's how it comes together, but all of that is underpinned by regulation. And if you look at where we've put investments, these are countries that have transposed and have put incentives or hydro. And I would especially call out Germany, which has put quite a lot of incentives for early moves. And you mentioned as well that the refineries are the anchor off-takers for these projects, and that will consume a large amount of hydrogen. Do you have plans to extend hydrogen supply beyond your own consumption? So I think in short, the answer is yes. Our third party demand will be critical and able for growing the industry. It's going to be a critical feedstock for mobility applications, even for fuel use, and it will be used in many supply chains. So we want to use our own experience, one to help bring down the price point, make it more affordable for customers, but also to highlight scaled, give people the confidence to switch over to hydrogen applications. And this will be critical for steel manufacturers that will need to make sure that they have a stable and reliable supply chain, because no industrial process wants to deal with its mittens. And looking at the policy side, you mentioned some key pieces of European and national legislation that are driving it forward. And also there's a bit of a fragmented picture in Europe, which doesn't always make it easy for companies to know which regulations to meet. I wonder if I could ask a bit more about some of the pieces of policy that are supporting your decision making. When you look at the brand newable energy directive, I think this is the clearest and probably strongest incentive we have. As a integrated player, we have a certain amount of captures marked that we need to decarbonize the renewable energy directive already sets out targets to reduce the fuel intensity or the carbon intensity of the fuel. So what we are supporting and what we're osing is that we do look at lead markets. Have you look at mobility over time, the refinery route is a critical enabler for this early adoption, because it allows a quicker implementation of low carbon hydrogen into the fuel mix. It doesn't require a big infrastructure rollout direct use. And it doesn't require, let's say, technical risk, some of the more advanced synthetic things. So it's a great enabler to bring the cost curve down and to actually prove the technology, which then allows you to scale up all of the other applications over time. The refineries are becoming a key driver of low carbon hydrogen demand, and this is really helping the industry in forward and overcome some of the uncertainty faced by missing infrastructure or customers being a bit reluctant to switch their full supply chain over to a less mature fuel. There's been a lot of talk in the industry recently about revising revisiting some of these European Union rules governing green hydrogen production, particularly around hourly matching and additionality of renewables. Now is that something you at Shell would like to see, having already taken FID on the basis of existing rules, or is it best left as it is? I think for us, if the view is always especially in this early stage, pragmatism should beat affection when it comes to regulation. The industry needs to develop, it needs to scale. So we fully support the RFMBO sub targets, I think that sets some stability and clarity of where the trajectory needs to go. We want to see that extended, to really make sure we have line of sight these targets will mate. But with greater flexibility, we can really reduce the cost, the current requirements for all of the additionality and matching. We believe this adds to euros a kilogram. So we see the hydrant bank publishing around eight euros a kilo so that can be lower to six without any changes technology without any changes to subsidies. I think we want to reemphasize one stability and regulation, we want clarity, we want consistency, but we also want some pragmatism to make this industry a game moment. And how do you see the outlook for the hydrogen market in Europe out to 2030 and beyond? We've seen a lot of cancellations and delays. Are you optimistic? How do you see it developing? So often people talk about hydrogen with an element pessimism, or when you actually look at the numbers and you look at the pace of the way the industry is actually evolving, it actually matches quite closely to roll out of the fast rollout of other renewables like solar or wind. We're talking potentially 10 million tons, which would be roughly 10% of the market today by 2030, which is considering we started only a few years ago. That's quite good. So we see the European market moving and we see credible progress in terms of innovation. We see FIDs happening. It is below ambition that the pace is actually still highlighting that this has a lot of momentum. So I think as long as we can kind of get that regulatory certainty, we'll continue to see the market evolve as well. And the cost curves come down as we start to learn and iterate through delivering these projects. Fantastic. Thanks very much. And just finally before we finish, is there anything else you wanted to mention that we haven't talked about that's worth touching on? I would just say there's definitely a room for cautious optimism in this market. Yes, there's still barriers in the way, but people are showing commitment and we're seeing positive regulatory signals moving in. And I think these early proof points for companies like Shell really proven a steal in the ground will give confidence that this isn't industry that can grow and scale and will be there to address the hard to electrify sectors and really make a significant contribution towards decarbonising both industry and mobility. Okay, listeners, that's all for this episode. Thank you very much for listening and I hope you found it interesting. Now I'd like to send a special shout out to the rest of our energy evolution team, including Karen, Willen Brackett, Dan Tester, Kamala Nashert and Christopher Courts, and also a big thank you to our agency partner, the 199 and the Commodity Insights Digital Content Team. Also, please don't forget to subscribe to energy evolution on your favourite podcast platform. And if you have any ideas for podcast themes or guests, please send us an email at [email protected]. Until next time, thank you for listening in. (upbeat music)