The Hydrogen Economy in 2025: Progress, Challenges, and the Road Ahead

The hydrogen economy has been hailed as a key pillar in the transition toward a decarbonized future. As we approach 2025, the sector has witnessed remarkable technological advancements and growing policy support. However, several critical challenges continue to impede its large-scale deployment and economic viability.

1. Technological and Infrastructure Bottlenecks

While hydrogen is a promising energy carrier, its large-scale deployment is hindered by key technological and infrastructure limitations:

• Electrolyzer capacity remains insufficient to meet projected demand. The EU’s goal of 40GW capacity by 2030 faces supply chain constraints, and production bottlenecks are slowing investment decisions.

• Hydrogen transportation and storage challenges persist. Hydrogen’s low density and high permeability require specialized pipelines or conversion into ammonia or other carriers, adding costs.

• Industrial hydrogen use is not yet widespread. The steel sector is a key early adopter, with projects like Stegra’s green steel plant in Sweden and ArcelorMittal's Hamburg pilot, but hydrogen adoption in hard-to-abate industries remains limited.

Moreover, in transportation, the challenges are mounting. Nikola Corporation, a hydrogen-truck manufacturer, is facing bankruptcy due to battery weight and efficiency issues, showing that hydrogen’s application in heavy transport still requires significant technological refinement.

2. Policy and Regional Hydrogen Strategies

China’s Hydrogen Advancements

China is accelerating its hydrogen strategy across multiple sectors:

• The Ministry of Industry and Information Technology (MIIT) recently introduced new guidelines for low-carbon hydrogen integration in industrial sectors such as steel, ammonia synthesis, methanol production, and refining.

• China is expanding its global footprint through a €2 billion investment in three green hydrogen projects in Spain, including a 5 GW electrolyzer plant.

• The country leads in hydrogen infrastructure, with 354 hydrogen refueling stations—40% of the world’s total—supporting its growing fleet of fuel cell vehicles.

Southeast Asia’s Growing Hydrogen Momentum

Southeast Asia is emerging as an important player in the hydrogen economy, with several key initiatives:

• Singapore is developing a National Hydrogen Strategy, focusing on hydrogen imports, ammonia fuels, and pilot projects in transport and power.

• Malaysia’s Sarawak region is leveraging hydropower to produce green hydrogen, with an eye on exports to Japan and South Korea.

• Indonesia’s Pertamina is working on blue and green hydrogen projects, collaborating with Japan and South Korea for infrastructure and ammonia co-firing.

• Thailand is exploring hydrogen adoption in refineries, power plants, and transportation, signing agreements with Japan and Australia.

• Vietnam is assessing offshore wind-based hydrogen production, partnering with European and Japanese firms.

• The Philippines is conducting feasibility studies on hydrogen as part of its long-term energy transition.

Despite regional progress, challenges remain: high production costs, infrastructure gaps, and regulatory uncertainty continue to slow large-scale adoption.

Policy Challenges: The Queensland Hydrogen Setback

Hydrogen project setbacks highlight the financial risks in this sector. The Queensland government recently canceled a $12.5 billion Central Queensland Hydrogen Project due to a lack of private investment and the government’s decision not to provide additional funding. The project was expected to be one of Australia’s largest green hydrogen export facilities, but cost overruns and a lack of clear offtake agreements led to its demise.

This cancellation underscores the broader policy challenges surrounding hydrogen investments, emphasizing the need for stronger financial incentives and risk mitigation frameworks to ensure large-scale hydrogen projects remain viable.

3. Hydrogen in Hard-to-Abate Sectors: A Long Road Ahead

One of hydrogen’s most promising applications is in hard-to-abate sectors, such as steel, chemicals, and aviation.

• The steel industry is seeing promising projects like Stegra’s green steel plant in Sweden and ArcelorMittal’s Hamburg plant, but scaling remains a challenge. ArcelorMittal mentioned ertainties in the European policy landscape, including slow progress in hydrogen infrastructure development and gaps in the Carbon Border Adjustment Mechanism (CBAM) as reasons for postponing major projects.

• Aviation’s hydrogen ambitions are shrinking. The expected contribution of hydrogen-powered planes to decarbonization by 2050 has dropped from 20% to just 6%, reflecting delays in technology deployment.

4. The Way Forward

Despite these challenges, the hydrogen economy is moving beyond hype to execution. Several key actions will determine its success in 2025 and beyond:

• Driving down costs through scale and innovation in electrolyzer manufacturing and hydrogen storage technologies.

• Developing robust hydrogen infrastructure, including pipelines, storage, and port facilities for global hydrogen trade.

• Implementing demand-side policies such as industrial mandates and long-term contracts to encourage offtake.

• Expanding global cooperation to ensure equitable access to hydrogen production and usage, particularly in emerging markets.

The next two years will be pivotal in shaping the future of hydrogen. Governments, industries, and investors must work together to overcome these barriers and unlock hydrogen’s full potential in the energy transition.