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Green Hydrogen H2 News

Neom green hydrogen project’s cost increases due to inflation

Anela DoksoBy Anela Dokso07/02/20232 Mins Read
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According to a financial update from co-developer Air Products, the Neom green hydrogen mega-budget project’s has increased by 70% to $8.5 billion. This project will tap significant amounts of green electricity capacity.

The US industrial gases company, which is developing the project in the desert of northwest Saudi Arabia with partners ACWA Power, the Saudi renewables developer, and Neom, claimed that inflation, spare parts, upfront fees for land, and $1 billion in interest on loans have all contributed to the $3.5 billion budget increase.

The latter is the state-owned firm building the incredibly ambitious city of the same name, which will mostly consist of a 170 km long, 1 million person megastructure with glass facades.

Construction on the green hydrogen project, which would use 2.2GW of electrolysers and 4GW of wind, solar, and battery storage to produce 1.2 million tonnes of green ammonia annually, is making “great progress,” but the project’s total capital needs have increased from the initial $5bn budget announced in 2020 to a staggering $8.5bn.

In order to explain the $3.5 billion price increase, Air Products divides it into three categories: inflation, upfront fees, interest during construction, additional joint venture costs, spare parts, and land. The remaining $1.2 billion is attributed to “additional scope to make project more self-sufficient and lower operating costs.” According to a discussion Air Products had with analysts, this refers to services that the project partners are now seeking to offer for themselves, such as transmission lines and other infrastructure costs.

When asked by analysts about the pricing of the ammonia from the Neom project, he said that it had remained the same and added that the ammonia would be sold in 2020 at the agreed-upon price.

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