Several developers of green hydrogen projects have proclaimed that “a reality check” has kicked in after the hype for big developments has failed to lead to execution due to escalating costs, unexpected complexities and delays to completion timelines.

“There was a bit of a reality check in 2024,” Stephan Gobert, Engie’s senior vice-president for hydrogen AMEA, told the Connecting Hydrogen MENA conference in Dubai. “Many projects have been shelved. They are either too early, [or] too big.”

Engie is one of the developers that has had to push back its targets, with the timeline for reaching 4GW in green hydrogen capacity postponed to 2035 from 2030. However, the French company will stick to its 2035 target, Gobert affirmed.

Engie, which will start with small-to-mid-scale projects before venturing into bigger developments, has conducted several FEED studies, but Gobert said it is important to attain certain “key learnings” before making a decision on whether to invest.

“Many projects have been shelved. They are either too early, or too big” Gobert, Engie

“As we reach the final step to take a decision, this is where you need the true price, the real efficiency of the equipment,” said Gobert. “It is only when you get the final signature on your EPC contract you get the reality of things.”

Developers may have contributed to “the big bubble” by overpromising and under-achieving when capex was still high and the appetite for subsidies low compared with the support renewables received decades ago, said Mohammad el-Ramahi, chief green hydrogen officer at UAE-based renewables firm Masdar.

“Maybe for the leaders and decision-makers that hype questioned the credibility of green hydrogen and made them [raise] question marks whether it is happening in the next decade or so,” Ramahi told the conference.

To make matters worse, low-carbon hydrogen developments are now competing with “an evolving beast called datacentres and AI”, because these projects need investments and land for renewable power, he added.

“Now the focus and attention of investment is on where the money is,” said Ramahi.

The past few years have also proven that only select projects and companies can succeed in developing green hydrogen projects, which have turned out to be more complex, more costly and more time-consuming than previously thought, said Driss Berraho, executive vice-president and head of global green hydrogen at Saudi Arabia’s ACWA Power.

The company is one of three entities involved in Saudi Arabia’s $8.4b NEOM Green Hydrogen project, which will produce 600t/d when it comes online in 2026.

“It takes a lot of industrial capabilities, knowhow and human capital to deal with projects that are so complex and so large,” Berraho told the conference.

The size of land needed to develop renewable power to produce 200,000t of green hydrogen can range anywhere from 300km² to 400km², he added.

“We need to focus on a few players and a few projects to be able to rationalise and bring to fruition actual projects in order to support these energy security challenges that now few countries in Europe are facing,” said Berraho. “Costs are escalating. Projects are taking more time. So, it is becoming a level playing field.”

Recipe for success

Countries need to have several ingredients to succeed in launching low-carbon hydrogen developments, including ample renewable resources, government vision, an asset base and the ability to fund “those very large-scale and very capital-intensive projects”, said Berraho.

“The capacity to execute those very large-scale complex projects is very big in… [the Middle East] region and is not found in many other parts of world,” he added. “China may be the outlier.”

China will be “an affordable player” in the low-carbon hydrogen industry thanks to local demand and its industrial capacity, while India is also “an important key player in this global race,” said Berraho. “Other countries want a role to play but simply do not have those capabilities and will be left behind.”

Those countries include some in Africa, such as Namibia, which have the renewable resources but do not possess “an asset base to decarbonise”, Nicolas Poirot, CEO for Africa, Middle East and India at industrial gases company Air Liquide, told the conference.

Poirot remains “realistically optimistic” about the development of hydrogen projects despite changes in geopolitics in 2025 and Europe now being “less seen as a pilot on energy transition”.

“You cannot just push a product into the market,” said Poirot. “All of us realise that we need to learn to play in different regions.”

“Now the focus and attention of investment is on where the money is” Ramahi, Masdar

When it comes to developing a low-carbon hydrogen project, conditions in China are different than in other parts of the world, he said.

In China, the hydrogen industry is “moving very fast” and does not need subsidies like other regions, such as Europe, he added. Several regions, including Europe, also suffer from the lack of clarity when it comes to regulations, which is delaying “the willingness to pay”, said Ramahi.

“We need to have better visibility on how we can relax some of the regulations and standardising across the world,” he said.

A level playing field for certification is another “much needed” aspect of the supply chain for the low-carbon hydrogen industry, said Nikunj Gupta, vice-president for new energies, technical and projects, at UAE-based ADNOC.

“A level playing field for a product is created when you have harmonised regulation globally that clearly defines what the carbon intensity of hydrogen is,” Gupta told the conference.

Blue transition

Countries, especially in Europe, which were initially focused mostly on green hydrogen, are now also looking at policies that support blue hydrogen as “a transition” product because costs for green hydrogen are higher than expected, he added.

Developers of low-carbon hydrogen projects are becoming colour-agnostic and have started to look at meeting domestic demand before venturing into export markets, especially amid various government changes globally, said Najla al-Jamali, chief executive for alternative energy at Oman’s OQ.

“As governments have changed, whether in the East or the West, regulations have changed making investment uncertainties, which means you have to maintain flexibility within your project development,” Jamali told the conference.

The changes in leadership around the world and the emerging focus on domestic markets will incentivise countries such as Oman to look at the local development of hydrogen projects that produce sustainable aviation fuel, methanol and other e-fuels rather than just exporting hydrogen as ammonia to global markets, she said.

“It allows then for the funding to flow better and allows time for those markets where you are looking to export also to mature,” Jamali added.

Developing local demand for clean hydrogen and its products within the Mideast

Gulf region can help industries and the UAE’s export of green aluminium to Germany’s BMW is one example, said Ramahi.

“That could help us in the region to create demand and help us to power-boost the growth trajectory for green hydrogen to make it more sustainable and more reliable,” he said.

Golden cheques

Support for low-carbon hydrogen suppliers is “much needed” and the launch of initiatives such as Japan’s contract-for-difference subsidy scheme is “a positive trend”, said Gupta.

While the word subsidy can be “sensitive”, support mechanisms for the development of infrastructure, storage and pipeline grids as part of a supply chain can help accelerate that growth of the low-carbon hydrogen industry, said Ramahi.

“That would really lift some of the burden for the developer to pay that cost, added on top of that the very expensive matrix to produce green hydrogen,” he added.

However, developers should not be waiting for “golden cheques” to launch low-carbon hydrogen projects, said Berraho.

“We believe that the green hydrogen or low-carbon hydrogen industry will have to deliver on cost in order to create the market and allow people to look at us seriously,” he said.

Providing subsidies is “not a sound way” for using public money, which is better dispersed to provide concessional finance to incentivise projects, he added.

“What the market needs is very much cost competitiveness, and we believe cost competitiveness will come from scale,” said Berraho.

But not all developers see large-scale developments as a panacea for the challenges facing low-carbon hydrogen projects.

“We are looking at phasing and going for smaller chunks to allow demand to catch up,” said Jamali. “You need to enable the flexibility in thinking in how to move forward. Collaboration is key and government consistency.”

Unique collaborations

All types of alliances are needed to help develop the low-carbon hydrogen industry, which is witnessing some unique collaborations, including Engie and Air Liquide’s partnership with Germany’s Siemens.

“It is not that very common in Europe for a French and a Germany company to partner,” said Poirot. “Even in the [Gulf Cooperation Council], partnering between countries would be a big step forward.”

Air Liquide has more than €1b ($1.08b) of hydrogen projects in Europe that will use a mix of technologies, with proton-exchange-membrane electrolysers sourced from Siemens and alkaline models from Asia, said Poirot.

The normalisation in the low-carbon hydrogen markets has created “strange partnerships”, such as Engie’s 1.2 mt/yr green ammonia project in Oman, where the French firm is partnering with offtakers who need to decarbonise their operations, said Gobert.

“We have these kinds of partnerships, which bring also more tangible ambitions and intentions from offtakers and buyers,” he said.

Companies in the Middle East and globally need to collaborate rather than compete to push forward the development of green hydrogen as “the fuel of the future”, said Ramahi.

“That means creating demand and cultivating the markets that look at hydrogen more in the interim basis until it becomes competitive,” he said.

Partnerships in the technological space are particularly important because “the adoption of multiple technologies and unbundling of different segments of green hydrogen production” will help lower costs and make the industry “more competitive”, he added.

All low-carbon hydrogen developers, including large firms and NOCs, need to partner with small and not just big companies, to help reach the technological scale needed for projects.

“We should bring small companies,” said Poirot. “We need startups and we need innovation.”

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Author: Dania Saadi