Green hydrogen research and development has found itself in limbo, once again. Enthusiasm for the resource’s potential as a clean energy solution in hard-to-abate sectors like steelmaking, shipping, and transportation has waxed and waned over the last decade as the technology has made incremental progress but largely failed to meet expectations. While the war in Iran breathed some new life into the sector as a potential alternative to oil and gas, that new wave of optimism faces major economic headwinds.

Take the state of California. The biggest economy in the United States bet big on hydrogen as a major part of its transportation sector, but after 20 years of attempts, that dream is drifting further and further away from becoming a reality. Today, hydrogen costs a whopping four times more per mile than gasoline, even when taking into account rising gas prices driven by turmoil in the Strait of Hormuz. 

According to recent reporting from the LA Times, the number of hydrogen cars registered in California decreased for the first time in 2025 to reach approximately 14,000. And the number of hydrogen fueling stations also shrunk, from 65 in 2023 to 57 today, according to the California Energy Commission. And only two-thirds of those are even functional. 

Investors are scared. “With a couple of exceptions, vehicle manufacturers, fleet owners and transit agencies are hesitant to invest in hydrogen products when they don't know whether the fuel and filling stations will be there,” the LA Times reports. “The state is reluctant to fill the void left by federal funding after a series of bankruptcies and cancellations left only one truck maker and one bus maker selling hydrogen vehicles in North America.”

But the problem extends beyond simple economics. The vast majority of industrial hydrogen is gray hydrogen, produced using fossil fuels. Green hydrogen, which is produced using renewable energies, is therefore better for the environment in terms of life cycle emissions, but it uses precious clean energy resources that are often better and more efficiently used in direct applications. 

The result has been a major green hydrogen ambition and implementation gap that extends far beyond the borders of California. A study published last year in the prestigious scientific journal Nature Energy found that less than a tenth of planned green hydrogen projects were actually carried out in 2023. “Tracking 190 projects over 3 years, we identify a wide 2023 implementation gap with only 7% of global capacity announcements finished on schedule,” the scientists reported.

However, despite a global cooldown, green hydrogen is not totally dead in the water. We just need to rethink its application. A 2025 paper published in Nature Reviews shows that hydrogen still holds enormous potential to reduce greenhouse gas emissions in industry, long-duration energy storage and long-haul transport, none of which should be overlooked. However, it’s time to accept that green hydrogen has failed as a solution for fuel cell cars and space heating, as electric alternatives have proven to be more efficient and cost-competitive. 

“Clean hydrogen should be strategically deployed in areas where it seems likely to have greatest potential for cost and sustainability benefits compared with alternatives such as direct electrification with clean power sources,” the paper states. “In the short term, renewable electricity could achieve greater emissions abatement if used directly to displace fossil fuels in power generation, heating or transport, instead of being used for green hydrogen production. In the longer term, hydrogen could instead facilitate renewables uptake by integrating excess generation into power systems.”

Refocusing green hydrogen R&D is a matter of some urgency, as volatility in global fossil fuel markets has reignited interest in the sector and opened a precious window for reorienting investment and policy. China, the United States, and the European Union have all reflected a cautious re-embrace of hydrogen in their energy strategies in recent months. While hydrogen is no longer viewed as a silver bullet solution, it could – and should – be a critical part of a more diverse and resilient global energy landscape.

By Haley Zaremba for Oilprice.com

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