The green hydrogen drive is losing momentum as start-ups face rising costs and uncertain demand while energy majors back out of multi-billion-dollar projects as they return to their core oil and gas business.
Low-emissions hydrogen, including the “green” variety produced with electrolysis using renewable energy, remains a small portion of global hydrogen use, which currently is mostly of the type using fossil fuels to make.
Despite the promises of zero emissions in green hydrogen use and the environmentally-friendly way of producing green hydrogen, the market has faced up to the fact that the low-carbon type of hydrogen made from renewables remains very expensive and needs a lot of subsidies, incentives, and government support to exist.
The promise of green hydrogen is enormous—low-carbon fuels that can help decarbonize heavy industries, including refining and chemicals.
But the reality on the ground is quite different. Green hydrogen remains too expensive to warrant multi-billion-dollar investments when demand is not there. Demand is being created by policymakers and governments, which isn’t a good sign of market demand.
“Policy measures are still insufficient to create the level of demand needed to scale up production to meet government expectations,” the International Energy Agency (IEA), which has pushed for energy transition for years now, acknowledged in its latest report on hydrogen in October last year.
“Stronger government action will be needed to stimulate demand for low-emissions hydrogen as an essential requirement to underpin investments on the supply side,” the agency said.
The IEA itself admitted that green energy demand simply isn’t there—and it will not be, unless governments prop up the industry.
World demand for hydrogen rose by 2.5% to 97 million tons in 2023, with demand concentrated in refining and chemicals, and mostly covered by hydrogen produced from unabated fossil fuels, the IEA said in its annual hydrogen review.
Yet, “several projects have faced delays and cancellations, which are putting at risk a significant part of the project pipeline,” the agency said.
According to the IEA, the main reasons for the slow uptake of low-carbon hydrogen “include unclear demand signals, financing hurdles, delays to incentives, regulatory uncertainties, licensing and permitting issues and operational challenges.”
The agency said this in October 2024, shortly after Shell and Equinor had ditched plans for low-hydrogen production and transportation in northern Europe, due to a lack of demand.
This canceled project was the first of many that followed as the pace of abandoned projects accelerated in 2025.
Australia, Europe, and the United States have all seen halted or canceled green hydrogen projects. Major energy firms have backed out of huge joint venture plans, too.
In the United States, President Trump’s “One Big Beautiful Bill Act” accelerated the deadline for phasing out tax credits, adding to the regulatory headwinds to green hydrogen projects, which had been struggling with economic feasibility and commercialization anyway.
This has led to several projects being scrapped or halted.
Australia’s energy and metals group Fortescue is now reconsidering the timeframes of its planned Arizona Hydrogen venture to produce liquid green hydrogen in the United States. Initially, the project was expected to begin production by the middle of 2026. It’s uncertain now when it would launch, if at all.
In Australia, Stanwell has discontinued its involvement in the Central Queensland Hydrogen Project (CQ-H2) and other hydrogen development activities. The multi-billion-dollar CQ-H2 project was worth $9.1 billion (AUS$14 billion) and had planned to start exporting green hydrogen to Japan and Singapore by 2029.
Australia, one of the world’s top LNG exporters, last year said it would develop a domestic green hydrogen industry and export clean hydrogen in a bid to become a global hydrogen leader.
Another big hit to Australia’s green hydrogen ambitions came last week, when oil and gas supermajor BP withdrew from operatorship and its majority stake in Australian Renewable Energy Hub (AREH), one of the world’s top renewable energy projects that could generate 26 GW of combined solar and wind power and would cost $36 billion (AUS$55 billion).
“They were particularly looking to produce hydrogen, and that really was the weakness of the project,” Ray Wills, University of Western Australia adjunct professor and director of Future Smart Strategies, told Australia’s ABC News.
By Tsvetana Paraskova for Oilprice.com
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