Clean hydrogen faces challenges globally amid U.S. pullback
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Illustration: Gabriella Turrisi/Axios
A pair of new analyses together support a mix of realism and optimism on the future of clean hydrogen amid setbacks in the U.S. and abroad.
Why it matters: The gas could help decarbonize heavy industries like steel, power, transportation and more — but faces high costs and investor reluctance.
Driving the news: The Hydrogen Council and McKinsey & Co., in a new joint report, finds that "committed" investment in "clean hydrogen" now exceeds $110 billion across 510 projects, a steep increase since 2020.
- They tally 6 million metric tons annually of production capacity in these projects, of which 1 million is up and running.
- "Committed," BTW, means either final investment decisions, construction, commissioning, or already operating.
- But they acknowledge "turbulence," and that the industry is coming off a "hype cycle" of 2022-2023 with a leaner outlook.
"[A] pipeline clean up is underway — a natural attrition phase where the projects with the strongest business cases get selected, win regulatory support, and close financing, while projects that lacked commercial viability inevitably get cancelled," it states.
- Hurdles include interest rates, higher equipment costs, and "delayed implementation" of climate policies in some areas.
- The report tallies hydrogen made with renewables, or tech that curbs emissions from natural gas used as feedstocks.
What we're watching: The demand from industry users, which will dictate how much new clean hydrogen is ultimately produced.
- The report sees a total supply pipeline — a bigger but less-certain bucket than only "committed" projects — of 9-14 million tons annually by 2030.
- But just 3.6 million tons worth is subject to binding offtake deals, which are an important — but not the only — thing needed to get projects built.
The intrigue: Let's turn to new IEA analysis that also sizes up demand (or lack thereof) and finds a reduction in the pipeline size.
- "Tackling cost barriers and creating demand certainty is essential to accelerate sluggish hydrogen market development," it states.
- It finds FIDs are lagging far behind project announcements, tallying roughly 4 million tons having FIDs or already operating.
State of play: The U.S. policy landscape is getting tougher.
- The new GOP budget law phases out hydrogen tax credits more quickly, with eligible projects now required to start construction by the end of 2027.
- And future funding for the Energy Department's multibillion-dollar hydrogen "hubs," launched in the Biden era, is a mystery.
What we're watching: Policies worldwide. The IEA post — a preview of wider upcoming report — flags initiatives and subsidies in Europe and Korea that are supporting the sector.
