Practical realities of delivering large-scale hydrogen production projects

Summary

In the pursuit of decarbonisation and of a sustainable energy future, hydrogen has firmly been in the spotlight.

The promises of hydrogen have been widely publicised in recent years. However, despite significant global investment and ambitious projects, the journey from vision to reality has proven perilous, leaving many casualties behind..

As we approach the first half of 2025 the landscape that the emerging hydrogen industry has to navigate is more complex than ever. Technological innovation, economic viability, and safety considerations intertwine with a very volatile financial and geopolitical situation. This complexity is perfectly illustrated by a recent tale of two projects. In the Netherlands, Air Liquide is moving forward with a major 200 MW green hydrogen facility in the Port of Rotterdam, a project buoyed by a clear customer base in a dense industrial hub. In stark contrast, Australia’s massive, gigawatt-scale Central Queensland Hydrogen (CQ-H2) project was recently cancelled, citing rising costs and a lack of firm customer commitments.

This is not an isolated story. On a global scale the situation is not much different. The IEA estimates that less than 4% of announced hydrogen projects have actually reached a final investment decision. Based on a study by Ricardo, 99% of planned hydrogen capacity in the six most promising exporting countries is still only in the technical feasibility stage.

A recent report by Westwood Global Energy revealed that over a fifth (20.3%) of planned hydrogen projects in Europe have stalled or have been cancelled, representing a total capacity of 29.2 GW (LHV). These failures are attributed to high costs and economic challenges (affecting 32% of projects by number and 40% by capacity), failure to secure funding (18% of projects, 29% of capacity), and the inability to secure sufficient demand (11% of projects, 9% of capacity).

This data offers valuable insight and highlights the need for a different approach to developing and executing hydrogen projects that balances ambitious targets with realistic economics and, most importantly, robust risk management.

On a more positive note, earlier this year, the UK government announced a few important steps forward:

The shortlist of 27 electrolytic hydrogen production projects that will proceed to the next stage of the second Hydrogen Allocation Round (HAR2). These projects represent a significant step towards the UK’s ambition of achieving up to 5 GW of low-carbon hydrogen production capacity by 2030, as described in the UK Hydrogen Strategy. The shortlisted initiatives, which span a wide range of applications of hydrogen, aim to deliver a combined capacity of approximately 765 MW and have the potential to unlock over £1 billion in private sector investment by 2029.
Ten of the eleven projects selected for the UK’s first Hydrogen Allocation Round (HAR1) have signed contracts with the Low Carbon Contracts Company (LCCC). These projects, totaling 124 MW of production capacity, are now moving into the construction phase.

In the latest “Hydrogen update to the market” the UK government confirms its commitment and announces a few strategic documents and initiatives to boost the hydrogen sector. A few are worth monitoring in the months ahead:

Climate Change Levy – Electrolytic hydrogen: at the Spring Statement 2025, the UK government committed to remove Climate Change Levy costs from the electricity used to produce hydrogen. This will contribute to lower the costs and boost the production of hydrogen. The consultation on the legal route to action this commitment has now closed and the responses are being analysed.
Maritime Decarbonisation strategy: from 2026 the UK will introduce domestic fuel regulation to increase the uptake of zero and near-zero greenhouse gas fuels, including hydrogen and hydrogen-derived fuel for the maritime sector.
Hydrogen to Power Business Model: it will be launched in 2026 and it aims to de-risk investment in hydrogen technology by mitigating deployment barriers.

An updated UK Hydrogen Strategy will be released this autumn. It will outline priorities, the implementation plan for the coming decades, and updates on the transportation and storage strategy for an integrated energy system.

These developments in the UK highlight both the ambition and the ongoing challenges in scaling up hydrogen production. The shortlist and the contract signing are a very positive signal and a significant step forward. However the targeted capacity for HAR2 of 875 MW was not fully met. This emphasises the considerable challenges involved in turning these projects into reality. While the adjustment to the climate change levy and the launch of the hydrogen power business model will somewhat reduce the financial risks, each of these projects will have to navigate similar risks that have stalled projects elsewhere. It is therefore paramount that a comprehensive and integrated Risk Management approach to identifying, assessing, mitigating, and monitoring risks will be crucial for their success and for the UK’s Hydrogen Strategy.

A robust Integrated Risk Management Framework for hydrogen production projects should embody these key elements:

Comprehensive Risk Identification: The planning, construction, and operation of such complex projects is a long term endeavor with complex stakeholder maps for each step along the value chain. Risks can manifest themselves along every step of this long and intricate value chain. It is therefore very important to systematically identify all potential risks that could impact the project’s objectives. This is inevitably a collaborative effort involving all stakeholders spanning project owners, developers, authorities, and financial backers.
Multi-Dimensional Risk Assessment: Once identified, risks need to be assessed based on their likelihood of occurrence and the severity of their potential impact on the project. It is important to recognise that risks are rarely isolated and that a clear set of project parameters (i.e. cost, schedule, safety, environmental performance, etc.) is needed to assess the impact of these interconnected risks. For example, a delay in obtaining a necessary permit isa regulatory risk. This delay could then lead to increase in costs due to penalties or additional accrual of interests, creating an economic and financial risk. Ultimately, this can result in a reduction of margins favouring competitors and leading to a loss of market opportunity. Both quantitative and qualitative methods are required to assess and prioritise risks based on their overall impact.
Integrated Risk Response Planning: Thomas Edison is quoted for saying “Good fortune is what happens when opportunity meets planning.” Once a risk is identified and assessed, a well-defined response plan is needed for each risk to give the project the best chance to succeed. These plans can include risk avoidance (e.g., choosing a more mature technology), risk mitigation (e.g., implementing redundant systems), risk transfer (e.g., through insurance or contractual agreements), or risk acceptance (with contingency plans in place). In this step, it is crucial to recognise the integrated nature of risks. It is vital to ensure that risk response in one area does not inadvertently create a new or exacerbate other risks. For instance, choosing a less expensive but unproven technology to mitigate cost risk, could create new technical risks and aggravate other operational risks.
Robust Governance and Communication: Effective Risk Management requires clear roles and responsibilities at all levels of the organisation delivering the project. It is not possible to overstate how a dedicated risk management function with strong leadership backing is essential to drive the process. It is very easy for any organisation, let alone a complex one, to take the focus off risk management. Leadership needs to be fully committed and able to allocate the necessary resources to risk management activities. Transparent and timely communication of risk information among all stakeholders is equally critical for informed decision-making and proactive response.
Continuous Monitoring and Review: The risk landscape for any complex project is very dynamic. For hydrogen production projects in particular, this landscape is influenced by rapid technological advancements, evolving market conditions, and a volatile geopolitical landscape driving regulatory instability. Therefore, Risk Management is not a one-time event in the history of the project, it is a steady process of constantly looking for the emergence of new risks, monitoring the identified ones, reviewing the effectiveness of risk response plans, and adapting the response plans to new realities. It is also important that the Risk Management framework is reviewed and audited regularly to ensure it remains relevant and effective throughout the project lifecycle.
Stakeholder Engagement and Social License to Operate: As mentioned before, Hydrogen projects, like any other complex industrial project have complex and large stakeholder maps. It is important to recognise and communicate appropriately with all the stakeholders. It is of particular importance to recognise the effects that the project can have on local communities and the environment. Failing to adequately engage with stakeholders, address their concerns, and obtain a social license to operate can lead to opposition, reputational damage, delays, and ultimately project failure. A proactive approach to stakeholder engagement is therefore essential for project success and needs to be part of the Risk Management Framework, incorporating social and environmental risks into the overall risk assessment, and developing mitigation strategies that are sensitive to community needs and environmental sustainability.

The long string of failed projects over the last decade serve as a stark reminder that underestimating or inadequately managing the inherent risks is not an option in the Hydrogen industry. Hydrogen projects exist in a high-risk environment defined by high capital costs, long timelines, strained global supply chains, and technological and market uncertainties. The success of projects like Air Liquide’s in the Netherlands, and the challenge for the UK’s HAR1 and 2 cohorts, hinges on mastering this environment. Without a comprehensive and integrated approach to risk management, the ambitious goals for hydrogen deployment risk remaining just that – ambitious goals, never fully realised. Learning from past failures and diligently addressing the multifaceted risks involved will be essential for crossing the innovation “valley of death” and realising the full potential of hydrogen as a key enabler of a sustainable energy future in the UK and globally.

How Airbus Protect Can Support Your Business on Risk Management for Hydrogen Production Projects:

By leveraging Airbus Protect’s aerospace heritage, complemented by cross-industry expertise and comprehensive service offerings, businesses developing hydrogen production projects can significantly enhance their integrated risk management capabilities. This increases the likelihood of project success and ensures the safety and sustainability of their operations. Ultimately, this contributes to a more secure and decarbonised energy future for the UK and Europe.

At Airbus Protect, risk management is our passion. We have extensive experience in managing complex technological and safety-critical projects. Our 1700+ experts can support your business to implement effective risk management solutions tailored for your project’s needs. Cybersecurity, safety, and sustainability are critical dimensions of risk in the hydrogen sector and our experts can assist your business in the following ways:

Comprehensive Risk Assessment: Drawing upon proven methodologies, Airbus Protect can help identify, analyse, and evaluate the full spectrum of risks associated with hydrogen production projects. These include technical, operational, safety, environmental, economic, regulatory, and social risks. Our extensive expertise in complex systems allows our consultants to understand the interconnections of these risks and cascading effects. Among our services, our consultants can perform OT security risk assessments to identify vulnerabilities in operational technology systems crucial for hydrogen production and distribution. They can also perform product security risk assessments for hydrogen-related technologies.
Cybersecurity Governance, Risk, and Compliance: As hydrogen infrastructure develops, it will be inherently digitalised and interconnected. Cybersecurity risks can have a crippling impact on businesses. Airbus Protect is a leader in the field and can be your trusted partner to establish robust cybersecurity governance strategies, conduct IT and OT security audits, and ensure compliance with relevant regulations like NIS2. Our experts can help you understand your threat landscape, anticipate risks, and implement measures to enhance your cyber resilience.
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Safety Management Systems: Leveraging our aerospace heritage, for Airbus Protect safety is non-negotiable. Our consultants have decades of experience in developing and enhancing safety management systems in high-risk industries. We can provide expertise in safety compliance and certification, helping your business establish and maintain the highest safety standards throughout the project lifecycle, from design and construction to operation and maintenance. Airbus Protect can also assist with specific hydrogen mobility safety considerations, which will add value for projects aiming to decarbonise transportation in Europe and in the UK.
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Sustainability Risk Assessment: Beyond safety, the sustainability of hydrogen production involves assessing environmental impacts across the entire value chain. Airbus Protect can support businesses in evaluating and mitigating environmental risks and implement climate adaptation strategies. This ensures that projects align with sustainability goals and regulations, which is crucial for maintaining the support of the local community, the public at large, and government both local and national.
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Supply Chain Security: Hydrogen projects involve complex and geographically dispersed supply chains. Airbus Protect can support your project with supply chain security audit assessments. This helps identify and mitigate risks associated with suppliers, ensuring the integrity and resilience of the entire value chain, from electrolyser components to transportation infrastructure.
Regulatory Compliance and Permitting Support: Navigating the complex and evolving regulatory landscape for hydrogen in the UK can be challenging, especially for novel, large-scale projects. Airbus Protect can provide guidance and support in understanding and complying with relevant regulations.
Training and Competency Building: Effective risk management requires skilled personnel. Airbus Protect offers training programmes in security, safety, and certification to equip project teams with the necessary knowledge and skills to identify, assess, and manage risks effectively.
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