Investors Reevaluate Commitment to Green Hydrogen: A Cautionary Shift
Brussels, Friday, 17 January 2025.
Investors are retreating from green hydrogen investments due to misinformation, economic challenges, and regulatory uncertainties. This withdrawal led to a massive drop in new project announcements, impacting the clean energy landscape significantly.
Market Decline and Investment Pullback
I’ve been tracking the green hydrogen market closely, and the numbers are startling. The sector has experienced a dramatic downturn, with the S&P Kensho Global Hydrogen Economy Index falling back to mid-2020 levels [1]. What’s particularly concerning is the massive 80 percent reduction in new green hydrogen project announcements compared to 2023 [1]. Companies like Green Hydrogen Systems and Plug Power have seen their share prices plummet by over 50% [1]. McKinsey’s recent adjustment, cutting their 2030 US green hydrogen forecast by 70%, signals a significant shift in market expectations [1].
Economic Realities and Cost Barriers
The economics of green hydrogen present a challenging picture. Current production costs range between $6-12 per kilogram, while BNEF forecasts future costs at approximately $5.09 per kilogram [1]. Compare this to grey hydrogen, which dominates 99% of global production at just $1.5 per kilogram [1]. I’ve analyzed the subsidy requirements, and they’re staggering - achieving all announced green hydrogen projects by 2030 would require US$1.3 trillion in subsidies [2]. As chemical engineer Paul Martin points out, ‘You’re taking a high value energy source – electricity – and downgrading it into a form that isn’t easy to transport or distribute’ [1].
Implementation Gaps and Policy Challenges
The reality check is sobering: only 7% of green hydrogen capacity announced in 2023 became operational [2]. Despite over 60 countries releasing hydrogen strategies [2], we’re seeing numerous projects being delayed or scrapped. The recent EU-GCC Green Hydrogen Workshop in Abu Dhabi [3] highlighted these challenges, though some positive developments emerged. For instance, the UK government recently signed funding agreements for three hydrogen projects in December 2024 [5], showing that while overall investment may be declining, targeted initiatives continue.
Future Outlook and Strategic Shifts
Looking ahead to the rest of 2025, there’s cautious optimism. Anna Hancock from Pollination Group suggests we might see some realignment with policy supports keeping high-quality projects moving forward [1]. However, as Odenweller and Ueckerdt warn, policymakers must prepare for ‘prolonged green hydrogen scarcity, low competitiveness, and high policy costs’ [2]. The focus is shifting toward more realistic applications, particularly in sectors where electrification isn’t feasible [2].