For much of the past decade, hydrogen has been projected as the fuel that would reconcile economic growth with climate ambition. Oil majors, utilities and governments announced large-scale plans with the promise that it would decarbonise steel, shipping, chemicals and heavy transport sectors that electrification struggles to reach. Yet recent project cancellations and delays suggest that hydrogen’s moment of reckoning has arrived.
The retreat by several oil and gas companies from planned investments does not signal a rejection of decarbonisation. Instead, it exposes the structural mismatch between ambition and affordability. Green hydrogen, produced using renewable electricity, remains significantly more expensive than fossil fuel-based alternatives. Even with falling renewable energy costs, the combined expense of electrolysers, storage, transport and infrastructure has kept commercially fragile.
What has changed is not the climate imperative but the financial environment. Higher interest rates, inflationary pressures and tighter capital discipline have forced energy companies to prioritise projects with clearer returns. Hydrogen projects, many of which depend on long-term policy support and uncertain demand, are among the first to be reconsidered. Without guaranteed offtake agreements or strong carbon pricing, hydrogen struggles to compete in today’s market.
Another challenge lies in scale and timing. It was often promoted as a near-term solution, but its economics suggest a longer gestation period. Infrastructure networks, supply chains and regulatory frameworks are still evolving. In the absence of coordinated planning across governments and industries, isolated hydrogen projects face high risk and limited viability.
This slowdown, however, should not be mistaken for failure. Hydrogen remains essential for deep decarbonisation, particularly in industrial processes where alternatives are limited. The lesson is not to abandon hydrogen but to recalibrate expectations. Policymakers must focus on targeted deployment in sectors where hydrogen has the strongest economic logic, while investing in cost reduction, standards and market design.
Energy transitions are rarely linear. Just as renewable energy faced decades of scepticism before achieving scale, hydrogen’s path will involve pauses, corrections and renewed momentum. The current retreat may ultimately strengthen the sector by forcing more realistic planning—ensuring that when it does scale, it does so on firmer economic ground.