Many US hydrogen project developers have paused or cancelled plans after finding costs were too high and government incentives were insufficient, even before President Donald Trump's return to the White House added uncertainty, Paris-listed contractor Technip Energies has said.
Developers rushed to hire contractors for project studies in 2022-23 in a wave of optimism after the US announced tax credits for hydrogen production, but many projects were shelved or suspended between the end of 2023 and mid-2024.
This came as companies realised the true cost of many items not limited to CO2 capture, hydrogen storage, and hydrogen liquefaction, Technip Energies' director Randy Kessler said.
Multiple developers hired Technip for feasibility studies and engineering designs so it witnessed the drop-off in project plans first hand, Kessler said.
Renewable hydrogen projects faced the most challenges, but gas-based projects with carbon capture and storage (CCS) "did not fare too well either", Kessler said. "Nearly all" renewable hydrogen projects were suspended when true capital and operating costs became known, especially compared with conventional 'grey' hydrogen, Kessler said.
"Economics generally prevail in the long run, and at 5-8 times the cost of grey H2 production, most big players and project developers found out the incentives did not cover the gap," he said.
Most of Technip Energies' clients pursuing CCS-enabled projects eventually asked for estimates for conventional grey hydrogen plants, with "pre-investment" to add CO2 capture units in the future, Kessler said.
Washington made matters worse for developers with "confusing" incentives and delays in finalising eligibility rules for the tax credits, which it only settled on in early 2025, just weeks before the change in administration.
"The people who made money were the consultants who told people what it all meant," Kessler said.
The late-2024 US election became both an "issue" and an "an excuse" for developers to explain the lack of progress, Kessler said. Many US firms complained that political uncertainty during the election period hampered their business decisions.
Politically powerful energy companies lobbying Washington for "appropriate levels of incentives to cover the gap" or relaxing tax credit rules to lower project costs would be the most likely way to revive the sector, Kessler said.
The US could consider setting mandates, but this is unlikely unless there is "more global buy-in", he said. Few regions, aside from the EU, have proposed mandates, and even there they have not been firmly implemented.
But US firms and industrial groups are focusing lobbying efforts on protecting the hydrogen tax credits rather than quibbling over the rules, US sources said. The return of Trump to the White House made the future of the tax credits less certain because of his preference for boosting US fossil fuel output over investing in clean energy.
Another contracting firm, Black & Veatch, recently said it was unsurprised to see many speculative projects fall by the wayside, and that the best route forward is better quality and modestly-sized projects with clear offtakers.
