Tucked inside a 32-page earnings report, oil and gas giant BP revealed it was killing 18 early-stage hydrogen projects, a move that could have a chilling effect on the nascent hydrogen industry.
The decision, along with the sale of the company’s U.S. on-shore wind power operations, will save BP $200 million annually and help boost its bottom line. The hydrogen industry, which has relied on oil and gas companies both financially and through lobbying efforts, is preparing for a grimmer outcome.
BP has been a supporter of hydrogen. The company’s venture capital arm has invested in several green hydrogen startups, including Electric Hydrogen and Advanced Ionics. Earlier this year, BP said it would develop “more than 10” hydrogen projects in the U.S., Europe, and Australia.
Now, BP is scaling back those plans, saying it’ll develop between five and ten projects. The company is keeping quiet about which ones will receive the green light.
Hydrogen has the potential to reduce carbon pollution significantly in a range of industries, including petrochemical refining, steelmaking, and long-haul shipping. But infrastructure for hydrogen, especially green hydrogen, which is produced using renewable electricity, remains underbuilt. That’s in part because green hydrogen is the most expensive form of the gas to produce, and because transporting hydrogen is costly relative to fossil fuels.
The hydrogen industry has looked to oil and gas companies as one of the best routes to growth. Many already make hydrogen at their refineries from natural gas, making them logical customers for startups developing electrolyzers, which can produce hydrogen using water and electricity. Plus, oil and gas companies have decades of experience developing large infrastructure projects of the sort that will be required if hydrogen is to make a dent in industrial emissions.
At the same time, oil and gas companies rely on the fossil fuels business for profits, which provides significant incentive to move slowly toward alternatives. BP’s decision to scale back its hydrogen ambitions likely won’t be the sector’s last.