Why America's Green Hydrogen Dreams Are Stalling
Key Insights
The U.S. green hydrogen industry, once buoyed by the Inflation Reduction Act and Bipartisan Infrastructure Law, faces significant setbacks due to high production costs and political uncertainty.
Investors and companies, including BP and Hy Stor Energy, are delaying or canceling hydrogen projects, citing economic and technological challenges.
A 2024 ITIF analysis labels green hydrogen as 'a mirage,' highlighting slow progress in commercialization and lack of interest in hydrogen fuel applications.
Despite global advancements, the U.S. green hydrogen sector remains stalled, with future prospects uncertain amid ongoing barriers and shifting political priorities.
Just a couple of years ago, the U.S. green hydrogen industry was poised for rapid growth, fueled by the Biden administration's Inflation Reduction Act (IRA) and Bipartisan Infrastructure Law (BIL). These policies promised billions in incentives for clean hydrogen production, with a focus on green hydrogen—produced via electrolysis powered by renewable energy. Investors envisioned a network of wind and solar farms feeding electrolyzers, repurposed pipelines transporting hydrogen, and hard-to-abate industries decarbonizing with this versatile fuel. However, these ambitions have faltered amid rising costs, technological hurdles, and political uncertainty.
Despite the IRA's $3-per-kilo tax credit for clean hydrogen and the BIL's $7 billion allocation for hydrogen hubs, progress has stalled. The price of green hydrogen remains prohibitively high, and the anticipated surge in renewable energy capacity has not materialized as expected. The COVID-19 pandemic slowed project timelines, and much of the available clean electricity is now consumed directly rather than diverted to hydrogen production. Compounding these challenges, the Trump administration's recent funding cuts and policy reversals have cast further doubt on the sector's future.
Notable setbacks include Hy Stor Energy's withdrawal from a 1 GW electrolyzer deal with Norway's Nel and BP's indefinite pause on a blue hydrogen project in Indiana. BP's Whiting Refinery project was part of the federally funded Midwest Alliance for Clean Hydrogen (MACH2), underscoring the broader industry's struggles. A BP spokesperson emphasized the company's commitment to the region but cited economic competitiveness as a barrier to advancing low-carbon initiatives.
A damning 2024 report by the Information Technology and Innovation Foundation (ITIF) labeled green hydrogen as 'essentially a mirage,' citing impractical production methods and lackluster demand. The report noted minimal progress in hydrogen fuel cell vehicles, aviation applications, and other sectors, concluding that commercial-scale deployment remains distant. While other countries continue to invest in green hydrogen, the U.S. lags, with its industry's future now uncertain. Experts suggest that without significant technological breakthroughs or renewed political support, the green hydrogen revolution may remain out of reach for years to come.