Multiple projects have been scrapped and valuations have nosedived, but the IEA says hydrogen is no passing fad

Ever since the dot.com crash of the early 2000s, investors have been on high alert for the formation of bubbles with the potential to burst. Clean hydrogen arguably entered bubble territory about three years ago, as the massive Neom green project in Saudi Arabia reached financial close at a hugely inflated investment value of just over $8b.

At that time, often sketchy plans for gigawatt-scale projects were springing up around the world, seemingly with little regard for capital or operational costs or, most importantly, the need for willing offtakers.

Governments cheered from the sidelines, setting ambitious expansion targets for 2030 and beyond, and offering bigger and bigger subsidies to the industry’s supply side.

Fast-forward to 2026 and some say the bubble has well and truly burst. The cancellation of multiple projects, the winding up of a leading hydrogen-specific growth fund, and a watered-down subsidy regime in the US all point to a sector in retreat. Along the supply chain, electrolyser manufacturers, which had expanded their capacity on the promise of a flood of new orders, have been forced to idle new production lines before they had even been fully run in.

No passing fad

However, the IEA, a long-standing fan of clean hydrogen, is not so sure that the bubble has burst. “The bubble may be weakening, but it is far from bursting—the sector is simply entering a more disciplined and sustainable phase,” it said in its Energy Technology Perspectives 2026 report, published in March.

“Hydrogen is no passing fad,” it added. “While financial corrections, project delays and cost gaps have cooled investor interest, deployment is accelerating, technology is scaling rapidly, and industrial demand is growing.”

Early investors nursing losses from their exposure to the sector will struggle with this assessment. Indeed, some of the IEA’s own analysis implies the bursting of a bubble: “Between 2019 and 2021, over $70b was added to the total value of listed hydrogen firms specialised in low-emissions production technology, about half of which only went public after 2019. Since then, their combined market capitalisation has collapsed by more than 80%, though the decline now appears to have levelled off.”

Most of the recent setbacks for developers and equipment suppliers stem from three sources, according to the IEA: the slow conversion of policy targets into workable frameworks; recognition that the slow ramp-up of deployment is preventing the fast reductions on production costs to enable wider adoption; and the sheer complexity of building industrial supply chains and customer confidence from scratch.

“Unlike solar, wind or batteries, the financial viability of hydrogen projects is tied up with uncertain fuel prices and multiple end-uses, making it a far more complicated business—a factor that investors may have underestimated,” the IEA said.

China to the rescue?

China is not immune to the challenges involved in scaling up clean hydrogen supply and demand, but it looks determined to succeed. It might just turn out to be the industry’s saviour, albeit potentially at the cost of some non-Chinese equipment makers. Recent growth in the manufacturer and deployment of electrolysers is “mostly the consequence of the push that China has given to electrolysis technology”, the IEA said.

The IEA has not given up on the idea of clean hydrogen globally replicating the astonishing growth achieved by solar and wind. Projects already at FID point to 26GW of total capacity by 2030. If projects with strong potential to be in operation by 2030 are also considered, the potential capacity rises to 65GW. “That pace is similar to the breakneck expansion seen as solar PV and offshore wind started to take off,” it said.