The technology for green hydrogen production is facing increasing financial challenges, parallel to the struggles of renewable sources such as solar and wind, heavily reliant on government subsidies. Currently employed in oil refining and fertilizer industries, this technology has seen a 65% increase in production costs in the last year, as highlighted by a McKinsey study for the Hydrogen Council.
Rising costs are attributed to the expense of capital, increases in certain raw material prices, and challenges in offshore wind investments, leading companies like Siemens Energy to the brink of bankruptcy and causing the abandonment of numerous projects by both public and private investors. The price of electrolyzers needed to obtain hydrogen from water has risen to around $2000 per kW/h, with a 10% increase and peaks of 40% since 2021.
Contrary to the 2021 predictions by the Boston Consulting Group, estimating the cost of hydrogen produced through this process at 3 euros/kg two years later, new cost-benefit assessments indicate a range between 5 and 8 euros/kg. Studies from Bocconi University suggest even higher figures, ranging from 9 to 14 euros/kg.
The European Union aims to produce 10 million tons of green hydrogen by 2030, but according to the International Energy Agency (IEA), in 2022, less than 100 thousand tons were produced worldwide.
Many companies, following the trend of offshore wind, are thus abandoning economically unsustainable projects, putting in serious jeopardy all the (perhaps ambitious) goals of ecological transition that Europe continues to ideologically champion, without accepting critical evaluations that are now emerging from various parts of the world.
And what about investments in gigafactories for electric vehicles?
In Turkey, Koc Holding recently revoked an agreement with Ford and the South Korean manufacturer LG Energy Solution for the construction of a large battery factory for electric vehicles. The decision was influenced by the current slow adoption of electric vehicles.
Koc emphasized that, considering the current adoption rate, investments in batteries are not appropriate.
The decision reflects a broader caution in the battery sector, with signals of slowing orders. This occurs in a context where other major players, such as Continental and Goodyear, are announcing factory cuts and closures, highlighting the challenges in the automotive sector related to the transition to electric vehicles.
The situation raises doubts about the demand for electric vehicles and the economic sustainability of battery-related activities. Turkey is not the only one facing such a situation, with projects like Britishvolt in the UK that have floundered.
In conclusion, market realities and company decisions are leading to a reassessment of investments not only in the electric vehicle sector but in the entire energy transition policy. We hope that Europe, before it’s too late for us, wakes up!
