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The market for the clean-burning fuel remains nascent, costs are rising, and Congress just put a lucrative tax credit out of reach for many companies.
Aug. 11, 2025, 11:34 a.m. ET
The promise of an abundant and clean-burning alternative to oil and natural gas has captivated generations of politicians, executives and environmentalists.
As far back as 1977, when oil prices were a big concern in the United States, a Cadillac Seville fueled by hydrogen drove in President Jimmy Carter’s inaugural parade.
More recently, a signature law under President Joseph R. Biden Jr. offered generous tax credits to companies that made hydrogen in ways that release little or no carbon dioxide. That spurred a flood of investment announcements by many businesses.
But the hype around the fuel is fading fast — and not for the first time.
From Arizona to Oklahoma, companies are pulling the plug on clean hydrogen projects after Congress shortened the window for them to qualify for a Biden-era tax credit by five years. Projects now must be under construction by the end of 2027 to qualify, a hurdle that three-quarters of proposals most likely will not meet, according to Wood Mackenzie, an energy consulting firm.
Hydrogen is widely used to make fertilizer and to turn oil into gasoline, diesel and other fuels. It can also store energy, much like a battery, and be used to power cars or trucks, though it has long struggled to take off in those applications.
The appeal is clear: Using hydrogen produces water vapor instead of greenhouse gases. But the fuel is expensive, is hard to store and transport, and is made using lots of energy.
“The rationale behind it was that green hydrogen was going to be abundant and cheap,” said Matthieu Giard, head of the Americas for Air Liquide, a French industrial gas company. “It’s not really what we see today.”
Today, hydrogen is produced mostly from natural gas in a process that emits carbon dioxide, the leading cause of climate change. It can be made using electricity to split water molecules into hydrogen and oxygen. But many projects that aimed to do that have been canceled or are on the chopping block.
Hydrogen’s problems are myriad. Electricity demand is rising rapidly in the United States, as are costs. People are using electricity to power everything from cars to heat pumps. And tech companies are using vast amounts of power to train and run artificial intelligence systems.
That all means more competition for the energy required to extract hydrogen from water. In addition, it is getting harder and more expensive to install wind turbines and solar panels in the United States, making fewer such hydrogen projects financially viable.
“It’s tough times,” said Bernd Heid, a senior partner at McKinsey & Co. who leads the consulting firm’s hydrogen work. “This market will be flattish in the U.S. for quite some time.”
Two Australian companies, Woodside Energy and Fortescue, are among those that recently canceled low-emission hydrogen projects in the United States. Woodside cited cost increases and lower-than-expected demand as reasons to scrap a project near Oklahoma City.
Fortescue, a mining giant that bet big on hydrogen, pointed to changes in U.S. energy policy. Its $550 million project outside of Phoenix was supposed to open in 2026.
“The lack of certainty and a step back in green ambition has stopped the emerging green energy markets, making it hard for previously feasible projects to proceed,” Agustin Pichot, Fortescue’s chief executive of growth and energy, said on a July conference call with financial analysts.
Another type of hydrogen project in which companies use natural gas and then store most of the resulting carbon dioxide emissions underground could ultimately fare better in the United States, energy executives and analysts said.
Natural gas-based projects qualify for a different tax credit that gives companies more time to start construction. Gas is also plentiful in the United States, and the Trump administration is remaking federal energy policy to encourage its production and use.
“Every geography is going to play with its own strength and the strength of the U.S. clearly is access to fossil fuels, access to carbon sequestration sinks,” said Mr. Giard of Air Liquide.
Even the natural gas path remains daunting. As of last year, fewer than 15 percent of low-emission hydrogen projects announced in the United States since 2015 had reached the critical stage where companies decide to spend hundreds of millions or even billions of dollars to move forward, according to McKinsey.
Exxon Mobil, the largest U.S. oil company, is among those weighing whether to commit to making hydrogen with natural gas, while burying the carbon dioxide. The company has announced plans to build outside of Houston what would be one of the largest low-emission hydrogen plants in the world. But it has not made a final investment decision.
“We’re concerned about the development of a broader market, which is critical to transition from government incentives,” Darren Woods, Exxon’s chief executive, told analysts this month. “If we can’t see an eventual path to a market-driven business, we won’t move forward with the project.”
Rebecca F. Elliott covers energy for The Times with a focus on how the industry is changing in the push to curb climate-warming emissions.
