Challenges and Future Direction of Hydrogen Projects

Policy support in each country and region is shifting from research and development focused on the hydrogen production stage to social implementation support that emphasizes the utilization stage, with the EU, Germany, and Japan continuing to reinforce their efforts (Table 2). Support periods of 10 to 15 years have become the standard. As for China, large-scale government subsidies have not yet been introduced, but discussions on their necessity have begun.

In May 2022, the EU formulated the “REPowerEU” plan, setting an ambitious target of supplying 20 million tons of green hydrogen by 2030 (split evenly between domestic production and imports). Through the “hydrogen bank” mechanism, the EU is supporting hydrogen production within the region. However, many industry stakeholders believe that achieving the 2030 green hydrogen supply target will be difficult. In addition, European Commission officials have stated that the hydrogen strategy will be updated in 2026. In July 2023, Germany revised its National Hydrogen Strategy and set a goal of covering 50 to 70% of its hydrogen demand through imports. It is promoting the “H2 Global” project in collaboration with the Netherlands to support the import of green hydrogen. In May 2024, Japan enacted the Hydrogen Society Promotion Act and launched the world’s largest price-gap support program (3 trillion yen), which subsidizes the price difference between low-carbon hydrogen—defined as hydrogen with low CO₂ emissions during production—and existing fossil fuels.

In the United States, the Inflation Reduction Act enacted in August 2022 included tax credits for green hydrogen production, which were expected to significantly improve project profitability. However, under the One Big Beautiful Bill Act passed in July 2025, the deadline for starting eligible construction was brought forward, resulting in a reduction of support. In October 2025, the Trump administration announced the termination of USD 7.56 billion in funding for 223 decarbonization-related projects (details of the affected projects have not been disclosed). Among the seven “hydrogen hubs” (integrated regions for hydrogen production and utilization systems) that were supported under the Biden administration, funding totaling USD 2.2 billion for projects in Democratic strongholds, such as California and the Northwestern hub spanning Washington and Oregon, appears to have been canceled (according to a Bloomberg report).

In March 2022, China’s central government released the Medium-Term Plan for the Development of the Hydrogen Energy Industry, and local governments subsequently formulated hydrogen promotion plans to attract industry players. Against this backdrop, state-owned enterprises such as Sinopec and CNPC have launched large-scale hydrogen production projects. Recently, industry stakeholders have begun voicing concerns about the high cost of green hydrogen, and discussions on subsidy policies, such as price-gap support, are starting to emerge.

Table 2：Targets and key hydrogen support policies in the EU, Germany, and Japan

	EU	Germany	Japan
Hydrogen supply target (2030)	20 million tons (50% from within the region and 50% from imports)	2.85 to 3.9 million tons (50 to 70% from imports)	3 million tons
Cost target (2030)	n.a.	n.a.	30 yen/Nm3 (about 334 yen/kg)
Key support policy	Hydrogen bank mechanism Provide subsidies to cover the cost difference between green hydrogen and gray hydrogen (for 10 years; a total of €1.71 billion in financial support by the second bidding round).	H2 Global project Purchase imported green hydrogen at a fixed price for 10 years and subsidize the difference between the purchase and resale prices (a budget of €3.4 billion allocated by the second bidding round).	Price-gap support Provide subsidies to cover the price gap between low-carbon hydrogen and existing fossil fuels, based on domestic hydrogen production costs and overseas production plus maritime transport costs (for 15 years, totaling approximately 3 trillion yen).

According to the International Energy Agency, the number of technologies whose Technology Readiness Level (TRL) advanced over the past year was the highest in the last five years. However, when focusing on key technologies at the hydrogen production and utilization stages, there has been little significant progress in TRL (Figure 3, where upward arrows indicate advancements in technology development).

For hydrogen production, ALK (alkaline) and PEM (proton exchange membrane) electrolysis are currently at the market uptake stage, but they have not yet reached widespread adoption or mass deployment. SOEC (solid oxide electrolyser cell) and AEM (anion exchange membrane), which are expected to help reduce costs, remain at the demonstration stage. In the steel industry, various direct reduction technologies are under development, but they are still at the prototype or demonstration stage. Most recently, a sealed rotary kiln method using German technology has advanced to the demonstration phase. In transport, hydrogen fuel cell vehicles remain at the stage of awaiting adoption. Similarly, in electricity generation, hydrogen blending in gas turbines is also still at the pre-adoption stage.

In December 2024, BloombergNEF significantly revised its outlook on green hydrogen costs, adopting a more conservative view on cost reductions. Previously, its forecast projected that a cost of USD 2/kg could be achieved globally, including in countries such as China, the United States, Germany and Japan, by 2037^*2. Under the revised outlook, however, the USD 2/kg level is now expected to be attainable only in China and India by 2050.

*2

The USD 2/kg cost target for green hydrogen was set by the International Energy Agency and is based on estimates that incorporate projected cost reductions for hydrogen production equipment and renewable electricity. This level corresponds to the current cost range of gray and blue hydrogen.

Projects that are progressing smoothly do not focus solely on the supply side of hydrogen production; instead, they develop the demand side in parallel while securing (1) government support, (2) promising customers, and (3) investment funds to enhance project feasibility (Table 3). In particular, securing investment funds also implies conducting rigorous reality checks from the investors’ perspective. Furthermore, some projects adopt a strategy of starting at an appropriate small scale and then gradually expanding operations.

As shown in Table 3, advanced projects primarily target industries with large hydrogen demand. By contrast, projects aimed at sectors where hydrogen demand is still in its early stages, such as urban districts, buildings, transportation, and residential consumers, remain at the demonstration stage and have not yet reached commercial deployment (Table 4).

Table 3：Key points of advanced projects

Project name (Location)	Overview	Government suppor	Promising customers	Investment funds
Project name(Location) Stegra Green Steel (Sweden)	Emerging company Stegra plans to produce green hydrogen (capacity of 700 MW) and is constructing a hydrogen-based direct reduction steelmaking facility (annual capacity of 5 million tons), scheduled to start operations in 2026.	€250 million in support from the EU Innovation Fund.	Has already signed long-term customer contracts of 5 to 7 years with more than 20 companies, including BMW.	Raised €6.5 billion from investors and partner companies.
Project name(Location) Lingen Green Hydrogen (Germany)	German power company RWE is installing a green hydrogen production facility (300 MW capacity), scheduled to start operations in 2027, with plans to supply industrial customers via pipeline.	The pipeline is currently being developed by the German government.	TotalEnergies in France plans to purchase 30,000 tons annually for its refineries.	Funded by RWE’s own capital, with external financing for future expansion.
Project name(Location) HySynergy Green Hydrogen (Denmark)	Hydrogen-related EPC company Everfuel has started producing green hydrogen as its first project (20 MW capacity) and plans to expand to 300 MW in Phase 2.	Secured €30 million in government subsidies for Phase 2.	Supplying hydrogen to Crossbridge Energy’s refinery.	A hydrogen infrastructure fund management company is investing in the project.

Table 4：Examples of projects for urban districts, buildings, transportation, and residential consumers

Project name (Location)	Overview	Project activities
HEAVENN Hydrogen Valley (Netherlands)	Demonstrating a hydrogen supply chain for production, transportation, and utilization across six regions in Northern Netherlands, with 20% of the investment subsidized by the EU.	Installed a 4-MW water electrolysis system to produce green hydrogen Transporting hydrogen via pipelines and trailers Utilizing hydrogen in 350 residential hydrogen boilers and 129 passenger cars and trucks, with hydrogen stations being developed
Ulsan Hydrogen Pilot City (South Korea)	Demonstrating a city-wide hydrogen supply chain for production, transportation, and utilization, with half of the investment for Phase 2 subsidized by the national government.	Mainly utilizing by-product hydrogen generated in industrial parks Extending existing hydrogen pipelines to urban areas Supplying heat and electricity to 437 apartment households via hydrogen fuel cells, and developing hydrogen stations for buses and cars