Orsted walks away from green hydrogen project citing high costs

(Bloomberg) — Germany’s Heide oil refinery and its partner Orsted A/S have shelved plans for a green hydrogen plant due to increased investment costs and associated economic risks.

This is at least the second such project Orsted has dropped in recent months, after deciding not to proceed with an electrolyzer at the Humber refinery in the U.K. The Danish company recently announced a $4 billion writedown in connection with abandoned wind projects.

“A project must be economically viable, and this was unfortunately not the case in this instance,” Joerg Kubitza, managing director of Orsted in Germany, said in a statement about the Heide project. “There is no doubt that hydrogen will play an important part in decarbonizing German industry - but the associated costs must be reasonable and a market needs to be established.”

Klesch Group, which owns the Heide refinery in north Germany, has been critical of the European Union’s proposals on green hydrogen certification. It will continue to decarbonize the Heide facility, it said in a statement. 

Hydrogen is used in the production of diesel and is dubbed green when it’s made using water and renewable electricity. That’s about four times the cost of making it from fossil fuels, according to recent Bloomberg NEF estimates. 

Shell Plc’s Wesseling in Germany was the first European refinery to start operating a small green hydrogen plant but has yet to commit to its expansion. Repsol SA recent started a plant at Bilbao in Spain and OMV AG is close to completing an electrolyzer at Schwechat in Vienna. Those projects supply a fraction of each refinery’s needs.