The hydrogen industry will look back on 2024 as a disappointing year in terms of its growth, with production projects and pipelines delayed or cancelled. However, the number of projects achieving FID is rising, and 2025 is expected to see the industry regain momentum in some, if not all, regions. Here, Hydrogen Economist highlights some of the factors likely to shape the industry in 2025.

US market

The development of green and low-carbon hydrogen in the US stands at a crossroads as the industry awaits the incoming Trump administration. Blue hydrogen, which already has greater traction in the US market than green, looks better placed to continue to grow under the next administration ing 2025. This is because ‘big oil’ is investing in blue hydrogen and ammonia production with CCS in the US at scale, while the global market for clean ammonia is starting to commoditise.

The development of green and low-carbon hydrogen in the US stands at a crossroads as the industry awaits the incoming Trump administration.

Green hydrogen, which stalled in 2024 amid uncertainty over the implement of the Inflation Reduction Act’s 45V tax credit, may have an uphill task proving its worth to a sceptical Trump administration. Finalised rules for the 45V tax credit were published by the US Treasury on 3 January.

However, government funds have already started to flow to some electrolytic hydrogen projects under the $8b regional clean hydrogen hub programme, which is backed by the Bipartisan Infrastructure Law. A potential streamlining of planning approvals and other administrative hurdles for infrastructure projects under Trump could help to accelerate both blue and green hydrogen projects.

Projects

The number of hydrogen projects reaching FID picked up slightly in 2024 but fell well short of the level some had predicted at the start of the year. Most projects reaching FID were attached to refineries, giving them the advantage of having a captive offtakers and the use of existing infrastructure. Standalone merchant projects aimed at the wider industrial offtake market face greater challenges as the gap between production costs and consumers’ willingness to pay remains wide, even with subsidies. That said, the number of FIDs in 2025 is expected to beat 2024 as developers and their financiers redouble their efforts to get the best projects over the line.

European politics

Stretched public finances and sluggish economies will test the resolve of European policymakers to keep backing clean hydrogen in 2025. At the EU level, funding for another wave of green projects looks secure. The EU launched it second European Hydrogen Bank auction in December with an increased budget of €1.2b ($1.26m). The funds are expected to be allocated by the autumn as the EU presses on with its strategy to develop a green hydrogen production base, despite rising energy costs and the hugely challenging prospect of building out cross-border hydrogen pipeline networks.

At the national level, the shifting political landscape will concern hydrogen project developers. Germany is expected to hold a federal election in February following the collapse of the ruling Social Democratic/Greens/ Free Democratic Party coalition. The next government, which polls suggest could include the centre-right Christian Democratic Union, could dial down support for hydrogen as it grapples with a struggling economy. Political instability in France continues, with the government’s readiness to support hydrogen and the wider transition likely to be tested as the country struggles with a large budget deficit and high levels of public debt.

Pipelines

The lack of hydrogen pipelines to join up supply and demand in many regions will arguably become the industry’s biggest headache in 2025. Governments around the world have targeted 2030 as the deadline for achieving hydrogen production and demand at scale, but the lack infrastructure will scupper this ambition even if the development of supply accelerates between now and the end of the decade. The Netherlands highlighted the issue in late 2024, when it conceded that one of its key pipelines to carry hydrogen and CO₂ has been delayed beyond 2030.

“The delay is unfortunate to say the least,” said Joost Hooghie, director of Dutch gas transmission system operator Gasunie’s Hydrogen Network Netherlands. “Businesses are not happy with the timeline as it stands. And neither are we. Industrial companies have prepared plans based on a 2030 horizon. But if the infrastructure is not there, they will have to delay making their production processes more sustainable.”

Earlier in the year, Norwegian state-owned energy firm Equinor and oil major Shell both withdrew from a project to study the viability of a pipeline to take blue hydrogen produced in Norway to Germany.

Power

Competition for green electricity ramped up in 2024 as the world woke up to the fact that data centres and AI are going to consume vast amounts of power. Green hydrogen project developers in crowded markets such as the US and Europe will need to lock in power-purchase agreements as quickly as possible as electricity demand and prices rise in 2025. US power demand is ticking up another percentage point every month, Murray Auchincloss, CEO of BP told the recent ADIPEC conference in Abu Dhabi. The power squeeze in the US and elsewhere will further highlight the advantages of the Middle East and Africa, with their abundant solar and wind resources.

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Author: Stuart Penson