Recent headlines reporting project delays, cancellations and downward revisions of ambitions for the adoption of low-emissions hydrogen, have led many to question whether the industry has hit another “hype cycle” like those in the 1970s, 1990s, and early 2000s. However, a deeper analysis reveals a different story. Despite falling short of the ambitious targets from the early 2020s, the sector is achieving remarkable milestones that demonstrate clear progress.

The scale of electrolyser projects is growing fast. In 2021, the world's largest reached 30 MW. In 2025, a 500 MW project was commissioned in China, and Saudi Arabia's NEOM project is targeting 2 GW to be operative by 2027 – a 75-fold increase in just six years. Considering only projects that are operational, under construction or have reached a final investment decision, low-emissions hydrogen production can grow fivefold by 2030, reaching 4.2 million tonnes per year. Technology development is also accelerating at unprecedented speed, with more technologies advancing in readiness levels than in any previous year, particularly in steel, shipping, and aviation applications.

While challenges remain – including high production costs, demand and regulatory uncertainty, and infrastructure gaps – the positive developments significantly outweigh the setbacks. This is an encouraging sign for a sector that can play an important role in meeting government commitments to address climate change and strengthen energy security, at a moment when geopolitical tensions are rising.

While investment in low-emissions hydrogen production is gaining momentum, uncertain demand continues to pose a critical challenge to the industry's viability. Cumulative firm offtake agreements account for less than 2 Mtpa – merely 5% of the potential production that announced projects could achieve by 2030. Demand uncertainty could jeopardise the entire low-emissions hydrogen sector, as producers need reliable off-takers to justify large-scale investments.

The primary barrier to scale-up is the significant cost gap between low-emissions hydrogen and conventional fossil-based alternatives, in both traditional applications like refining, and emerging applications such as steel, shipping and aviation. However, strategic policy interventions could unlock substantial demand in the near term. Key opportunities include focusing on existing hydrogen uses where technology barriers are lower, leveraging public procurement power, and implementing holistic policy frameworks that incorporate offtake requirements.

International transport regulations hold promise, with frameworks from the International Maritime Organization potentially boosting shipping fuel demand. Traditional hydrogen applications represent immediate “low-hanging fruit”, while private sector initiatives can create lead markets among consumers willing to pay small premiums for sustainable products. The path forward will require co-ordinated action from policy makers, industry and consumers to transform hydrogen demand from uncertain potential into bankable reality.

Africa, Latin America and Southeast Asia all aim to position themselves as key players in the low-emissions hydrogen economy, leveraging abundant renewable energy potential and competitive labour costs. If all announced projects materialise, these regions could produce over 9 Mt of low-emissions hydrogen annually by 2030 – equal to around 25% of global announced production.

However, significant challenges threaten to delay these ambitious timelines. While 9% of announced hydrogen projects worldwide have secured committed investments, this figure is just 0.5% in emerging economies. Only 5% of projects in these regions show moderate potential for 2030 operation, with most expected much later.

Key barriers include heavy reliance on uncertain export markets (80% of these projects are export-oriented), slower renewable energy deployment, and financing challenges, given that capital costs can reach 15% -- three times higher than in advanced economies.

Success will require strategic focus on strengthening power grids, reducing capital costs through long-term offtake agreements, developing domestic hydrogen markets to anchor demand, and prioritising value-added exports like direct reduced iron over hydrogen molecules. This will call for co-ordinated action across policy, finance and infrastructure development.

As the hydrogen sector transitions from ambitious announcements to concrete implementation, governments worldwide are deploying diverse policy approaches tailored to their specific contexts and priorities. The European Union and United Kingdom lead with comprehensive value-chain strategies, while Japan is offering long-term certainty through 15-year contracts. The United States and Australia emphasise tax incentives and hub development, China is drawing on state-owned enterprises for industrial applications, and India is implementing the Strategic Interventions for Green Hydrogen Transition  Programme with fixed premiums and manufacturing grants.

Despite this policy momentum, which has already helped some large-scale projects to reach final investment decisions, implementation challenges persist. Policy delays and revisions create uncertainty for developers, and there are still some common barriers across all markets such as cost gaps with fossil fuel alternatives and complex co-ordination requirements among stakeholders.

The path forward will require balanced policies that can spur rapid action without compromising objectives. Short-term priorities include addressing cost gaps through grants and subsidies, creating demand via quotas and mandates, and exploring underutilised tools like public procurement. Hydrogen hubs offer promising opportunities to aggregate demand and reduce individual commitment risks, while standardised certification schemes will enable robust differentiation of low-emissions hydrogen across global markets.

China has emerged as the undisputed leader in electrolyser manufacturing and deployment, mirroring its remarkable success in solar PV and electric vehicles. With nearly 60% of global electrolyser manufacturing capacity, China has rapidly scaled up from early commercial deployment in 2021 to accounting for over half of global installed capacity by 2023.

The cost advantage is striking; China can produce renewable hydrogen that is 40-45% cheaper than in Europe or the United States, primarily due to lower electricity prices resulting from reduced capital expenditure and financing costs for renewables. As the world's largest hydrogen market, accounting for nearly one-third of global demand, China benefits from economies of scale, advanced manufacturing supply chains, and supportive government policies that have created substantial demand for electrolysers.

However, unlike solar PV and EVs, several factors exist that may limit China's global electrolyser expansion. These include the challenges associated with shipping bulky electrolysers globally, efficiency and compliance issues with international standards, and the fact that the electrolyser stack represents only 15-20% in the investment cost of an installed electrolyser. Additionally, the cost decline trajectory for electrolysers is expected to be more gradual than for mass-market clean energy technologies such as EVs, suggesting the competitive landscape ahead will be different.