The Dimming Prospects of the US Hydrogen Industry

Not too long ago, the prospects of clean hydrogen were the talk of global energy circles. As nations worldwide set their sights on decarbonisation, many industry insiders were optimistic that hydrogen might emerge as the miracle fuel that could help clean up operations. While there remains some hope for a hydrogen revolution in certain parts of the world, such an outcome seems increasingly unlikely for the United States.

During the tenure of the Biden administration, US investors planned to allocate billions towards hydrogen projects, spurred on by financial incentives like the 2022 Inflation Reduction Act (IRA) and other similar initiatives. The primary focus was on green hydrogen, a cleaner alternative that many hard-to-decarbonise industries were keen to utilise. Produced through the electrolysis of water with renewable energy sources, green hydrogen presented a stark contrast to other forms of hydrogen that relied on natural gas.

Investors were seeking to establish wind and solar farms in key locations, such as the Gulf and the desert Southwest, and use the clean energy to power electrolysers to produce green hydrogen. The ambitious plan was to repurpose disused gas pipelines to transport green hydrogen across the US. This would not only support decarbonisation efforts across various industries from transport to manufacturing but also facilitate exports to Europe and other regions.

However, the grand visions for green hydrogen that emerged following the introduction of the IRA and the 2021 Bipartisan Infrastructure Law (BIL) have started to wane due to various obstacles to project development. The cost of producing green hydrogen has not decreased as much as investors had hoped, mainly because production has remained limited. In addition, the political uncertainty and funding cuts surrounding the energy transition sector under President Trump’s administration have raised further questions.

Significantly, in September 2024, Hy Stor Energy reneged on a contract to purchase over 1 GW of alkaline electrolysers from Norwegian cleantech company Nel. Meanwhile, in June this year, BP announced the suspension of a blue hydrogen project at its Whiting Refinery in Indiana. This has cast doubt on whether the US hydrogen industry’s expansion has merely stalled or if it will fail to materialise at all.

According to a 2024 green hydrogen analysis by the Information Technology and Innovation Foundation (ITIF), the large sums allocated for hydrogen hubs and production and investment tax credits in pursuit of a new hydrogen-driven clean energy economy might have been misguided. The study suggested that green hydrogen production was impractical with existing technology.

An updated ITIF assessment supports this conclusion. It indicates that we are still far from the commercial phase of green hydrogen deployment, with little interest in hydrogen fuel cell vehicles or hydrogen fuelling stations. The study suggests that while green hydrogen may be useful in the US one day, that day is still a long way off.

Despite the initial enthusiasm surrounding the development of a robust green hydrogen industry in the US, it now appears increasingly unlikely. Several barriers to clean hydrogen production, coupled with greater political and economic uncertainty around transition industries, have led to project delays and cancellations. While other countries continue to invest in green hydrogen, driving down prices and improving production processes, the US hydrogen industry’s development seems a distant prospect.