- Investment momentum shifts away from Europe’s green hydrogen framework toward low carbon alternatives.
- Several Middle East export projects expected to be cancelled or scaled back as demand weakens.
- India and ammonia cracking projects emerge as critical tests for commercial viability.
The global hydrogen sector is heading into a decisive year, with 2026 set to expose the gap between policy ambition and market reality. According to new analysis from Wood Mackenzie, investment is increasingly moving away from Europe’s tightly regulated green hydrogen framework, while faltering demand is expected to trigger further project cancellations in the Middle East.
In its Hydrogen: Five things to look for in 2026 report, Wood Mackenzie identifies five developments that will shape the industry’s near term trajectory. These include progress on non RFNBO hydrogen projects, the fate of India’s ammonia auctions, a retreat in Middle East supply, final investment decisions for ammonia crackers, and the likely abandonment of EU RED III industrial hydrogen targets.
Non RFNBO projects gain momentum
Wood Mackenzie expects at least three large scale non RFNBO hydrogen projects supplying European buyers to reach final investment decision in 2026, with combined capacity exceeding 50 thousand tonnes per year.
Europe’s Renewable Fuels of Non Biological Origin rules have long been criticised for slowing the ramp up of hydrogen supply by adding significant cost and complexity. These requirements can increase production costs by around one to two US dollars per kilogram, limiting the number of viable projects.
Clarity provided by the Low Carbon Fuels Delegated Act published in November 2025 is expected to unlock investment in non RFNBO hydrogen, including blue hydrogen. Wood Mackenzie believes this shift will accelerate policy support through broader funding eligibility and new support mechanisms, even if formal changes to existing delegated acts remain unlikely in the short term.
India’s ammonia auctions under scrutiny
India’s domestic ammonia supply auction, targeting 725 thousand tonnes per year, has emerged as one of the most closely watched hydrogen related developments. Winning bids ranged from 550 to 700 US dollars per tonne, placing them in competition with blue ammonia from the United States and the Middle East.
Wood Mackenzie forecasts that around 439 thousand tonnes per year of capacity awarded to ACME, Onix Renewable, Suryam International and SCC Infrastructure will ultimately be commissioned. However, it expects a further 285 thousand tonnes per year to be withdrawn before supply agreements are finalised.
Projects backed by brownfield development strategies and access to existing ammonia infrastructure are considered best positioned. By contrast, greenfield developers face significant risk, as they would need to build very large plants to service relatively small contracted volumes, undermining project economics.
Middle East export ambitions slow
The Middle East’s role as a major hydrogen export hub is expected to weaken further in 2026. Since the final investment decision on the NEOM project in 2023, few large scale projects have advanced, largely due to policy delays and uncertain demand in Europe and Northeast Asia.
Wood Mackenzie anticipates that at least three major Middle Eastern hydrogen projects will be cancelled or significantly scaled back in the coming year. While future supply could still materialise, it will depend heavily on successful import auctions in Asia and clearer policy alignment in Europe. Without these signals, export oriented projects in the region are likely to remain stalled.
Ammonia crackers reach investment decisions
Industrial scale ammonia cracking projects are expected to begin reaching final investment decision in 2026 as technology readiness improves and demand fundamentals strengthen. Cracked ammonia is emerging as a practical route to supply hydrogen for steel making, refining and high temperature industrial heat, particularly in regions where domestic green hydrogen remains expensive.
Wood Mackenzie expects at least three large ammonia cracker projects, representing investment of around 600 million US dollars, to reach final investment decision. Two are likely to be located in Northwest Europe and one in Northeast Asia.
RED III industry targets lose traction
The report also predicts that EU Member States will quietly abandon the 42 percent industrial RFNBO target set for 2030 under RED III. By the end of 2025, only three countries had introduced industrial hydrogen quotas, and two of these were deemed insufficient. Germany, the largest industrial hydrogen consumer in Europe, has confirmed it will rely on subsidies rather than binding mandates.
With limited appetite for enforcement through infringement procedures, the European Commission is expected to tolerate this retreat. Without binding demand obligations, green hydrogen developers targeting industrial customers may be forced to reassess project economics and timelines.
Together, these trends suggest 2026 will be a defining year for hydrogen markets. Projects are expected to move forward where policy clarity and take-off demand align, while others stall or fall away. As Wood Mackenzie notes, the coming year will distinguish markets capable of supporting commercial scale hydrogen from those driven primarily by policy ambition rather than demand.
Link to the full report HERE
Author: Bryan Groenendaal
