Most so-called “hydrogen projects” are more like initiatives rather than real projects with a clear path to commercial operation. The fundamental issue is the lack of long-term supply agreements, which are essential for Final Investment Decisions (FID). Without an FID, no real project moves forward, yet significant public funds are already spent on feasibility studies, engineering works, planning, and infrastructure before any real commitment is made.
Subsidy Driven Bubble
This approach creates a subsidy-driven bubble where companies chase grants but delay actual investment because:
✅There’s no guaranteed off-take.
✅Hydrogen production remains expensive without clear demand.
✅Infrastructure (pipelines, storage) is not fully developed.
✅Investors hesitate due to uncertainty in policy, regulations, and pricing.
Why Aren’t Grants Tied to Long-Term Supply Agreements?
If governments granted funds based on secured, signed supply contracts, there would be a direct incentive for:
✅Off-takers to commit (knowing there’s financial support).
✅Producers to align supply with real demand.
✅ Investors to move forward with confidence.
This would push low-carbon hydrogen projects toward real commercial viability rather than endless feasibility studies, costs in engineering hours and pilot plants that never scale.
One reason governments avoid this is they fear market distortion, they argue that hydrogen should be developed in a “competitive” way rather than guaranteeing revenue. But ironically, by funding early-stage initiatives without securing off-takers, they’re already distorting the market just in an inefficient way.
Blue Hydrogen: Why It’s Overlooked Despite Its Feasibility
Green hydrogen gets most of the funding attention, but Europe’s grid issues and storage challenges make it difficult to scale without huge overcapacity and costly backup storage.
Blue hydrogen, which can be produced with existing natural gas infrastructure and CCS, could bridge the gap.
Yet:
❌It’s politically unpopular due to reliance on fossil fuels.
❌Funding mechanisms often exclude it (except in select cases like the Netherlands).
❌CCS is still costly and not widely deployed, so even blue hydrogen projects struggle to pass FID.
If grants were linked to long-term green and blue hydrogen supply contracts, the industry could scale much faster while renewables ramp up over time. But policymakers seem reluctant to acknowledge this trade-off.
Such an approach had a great force for commercial viability instead of hydrogen being just a subsidy-driven industry without real market adoption
In my view this could support faster FID and more realistic hydrogen project realisation with
✅more private capital flowing into hydrogen because revenue risk is reduced
✅Hydrogen producers would not sit on stranded assets waiting for off takers
✅the focus shifts from endless studies, engineering and pilot plants to scalable bankable projects
