When blue hydrogen paves the way, green hydrogen isn’t just a dream; it’s the destination.

Executive Summary

Carbon-free or green hydrogen has seen considerable investment and an even larger project pipeline in recent years. It remains a core part of the Energy Transition, given its expected role as a fuel that can help decarbonize some hard-to-abate sectors, such as green steel and fertilizers, and is also seen as a potential energy storage solution for the power sector. However, recent years have seen a slowdown in the energy transition, raising questions about the future of green hydrogen. An increasing number of projects envision hydrogen as an endpoint; however, in the near term, they will utilize more tangible fuels, such as natural gas or blue hydrogen (hydrogen produced from natural gas with carbon capture and storage). This raises questions about the future of green hydrogen. Furthermore, the new global trade environment, characterized by increased tariffs and other protectionist measures, has raised questions about the impact on green hydrogen, ammonia, and methanol. We address these issues in this paper.

• ✅ Use of blue hydrogen and natural gas is positive for the development of green hydrogen in the long term. Some projects will initially use gas or blue hydrogen, raising the question of whether they will ever transition to green hydrogen. However, we view these projects as a positive development for the green hydrogen industry. They enable projects to be built, creating either a hydrogen supply that can later be replaced with a green hydrogen supply or a demand that can later be replaced with a green hydrogen demand. Most importantly, the current certainty around the supply of natural gas and hydrogen has allowed these projects to go ahead today, where it would be much more challenging for many purely green hydrogen projects to go ahead, given the high green hydrogen costs.

• ✅ The project pipeline for hydrogen projects remains strong. While some projects will initially be blue hydrogen- or gas-fueled, with green hydrogen to follow later, the project pipeline remains robust. This is also true across many industries. Green steel development is strongest in Europe, the Middle East, and North Africa; however, activity is also present in other regions, including the United States and China. The pipeline for both green methanol and ammonia projects – including those initially utilizing blue hydrogen – is also robust. We have not seen meaningful changes to the pipeline in terms of cancellations, although an extensive pre-FID project list could prove more challenging than it was two to three years ago.

• ✅ Tariffs are unlikely to impact green hydrogen development substantially. The current tariff and trade war environment is highly uncertain, and we expect tariffs to ease over time. Even if they persisted in the long term, it is unlikely that they would have significant impacts on the prospects for green hydrogen. Green steel projects in the United States will primarily be for domestic consumption, making them unlikely to be impacted by tariffs. The US is a net exporter of methanol, so it would only be at risk of counter-tariffs. Of course, if tariffs and the current trade war cause a global recession, then all commodities are vulnerable, and this would slow green hydrogen development.

• ✅ The long-term time frame for green hydrogen is unclear, but the development of hydrogen as a globally traded market is likely. Projects that utilize blue hydrogen or natural gas en route to green hydrogen will help create global demand and supply for hydrogen. Then, as green hydrogen becomes cheaper – and there are clear pathways regarding how this will happen – it will be able to step in and replace other hydrogen supplies.

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