Sustainable aviation fuel project ends as green hydrogen costs are too high

The list of hydrogen projects cancelled in Europe has grown in recent weeks, most recently with a sustainable aviation fuel project. According to Uniper, the planned project in Sweden was halted due to adverse conditions and the market situation. SkyFuelH2 aimed to meet up to a tenth of Swedish demand for aviation fuel with sustainable fuel produced from green hydrogen.

The multinational energy company Uniper, headquartered in Düsseldorf, Germany, announced last week that it was halting its SkyFuelH2 project in Sweden. According to international news outlet S&P Global, the company cited adverse market conditions and high costs as the main reasons. Ongoing regulatory uncertainty also played a part in the project’s cancellation; without a resolution, the project would not have been economically viable.

In recent weeks, SkyFuelH2 has become another in a series of hydrogen projects in Europe that have been halted or delayed. The complications are not limited to projects focused on green hydrogen. In recent weeks, two projects to export blue hydrogen from Norway to Germany have also been halted. In the case of SkyFuelH2, rising green hydrogen production costs also played a role, as did higher capital expenditure on electrolysers.

“Persistent uncertainty surrounding regulatory frameworks intended to support increased demand for sustainable aviation fuel means that the project is no longer commercially viable,” the company said in an emailed statement, according to S&P Global.

The planned project in the Swedish town of Sollefteå was set to benefit from good access to renewable electricity and rail infrastructure. Overall, it had the potential to meet around 10% of total demand for aviation fuel in Sweden. However, the company says climate and commercial sustainability must go hand in hand.

The cost of producing green hydrogen remains extremely high. According to estimates by S&P Global Commodity Insights based on current electricity prices and taking capital expenditure into account, costs are around 7 euros per kilogram, or roughly 200 EUR/MWh.