Risk assessment framework for green hydrogen megaprojects: Balancing climate goals with project viability
Craig McGregor, B.D. Young, Diane Hildebrandt
Abstract
• Europe’s 2030 hydrogen targets require €240B investment and 250x scale-up in plant size. • Historical data shows 141% cost overruns common in pioneer energy projects • New framework integrates megaproject risks with GHG-reduction assessment. • Green ammonia for fertilisers offers highest CO 2 reduction potential. • Risk distribution between developed/developing nations needs careful consideration. Green hydrogen presents a promising solution for decarbonisation, but its widespread adoption faces significant challenges. To meet Europe’s 2030 targets, a 250-fold increase in electrolyser capacity is required, necessitating an investment of €170-240 billion. This involves constructing 20–40 pioneering megaprojects, each with a 1–5 GW capacity. Historically, pioneering energy projects have seen capital costs double or triple from initial estimates, with over 50% failing to meet production goals at startup due to new technology introductions, site-specific characteristics, and project complexity. Additionally, megaprojects, costing more than €1 billion, frequently succumb to the “iron law,” which states they are often over budget, take longer than anticipated, and yield fewer benefits than expected, mainly because key players consistently underestimate costs and risks. Pursuing multiple pioneering megaprojects simultaneously restricts opportunities for iterative learning, which raises risks related to untested technologies and infrastructure demands. This vision paper introduces a novel risk assessment framework that combines insights from pioneering and megaprojects with technology readiness evaluations and comparative CO 2 reduction analyses to tackle these challenges. The framework aims to guide investment decisions and risk mitigation strategies, such as staged scaling and limiting the introduction of new technology. The analysis highlights that using green ammonia for fertiliser production can reduce CO2 emissions by 51 tons of CO 2 per ton of hydrogen, significantly outperforming hydrogen use in transportation and heating. This structured approach considers risks and environmental benefits while promoting equitable risk distribution between developed and developing nations.