It found strategic changes accounted for 24% of cancelled projects, representing around 6 million tonnes per annum of hydrogen capacity, as firms return to core businesses and scale down more risky hydrogen investments.

For example, BP and Australia’s Origin Energy have suspended or cancelled multiple projects, citing the need to cut costs and prioritise core areas.

“This retrenchment is understandable given the nascent and complex nature of clean hydrogen – initial targets often outpaced more realistic business and transition models,” the energy research company states.

Lack of robust demand signals have also led to significant project attrition, accounting for 13% of the project cancellations.

Many developers, unable to advance projects without appropriate binding offtake agreements, have understandably suspended or cancelled initiatives, instead diverting resources to higher-return sectors. This particularly affects export-oriented projects in regions such as Australia or the Middle East.

For electrolytic hydrogen, securing renewable and clean power from the grid can also pose a challenge. Large-scale electrolysers are a huge demand load for the power grid, and the terms for power purchase agreements (PPA) might also be a mismatch with what developers can secure for their offtake deals.

While the high cost of clean hydrogen has indirectly contributed to the lack of demand and unfavourable returns, it can also be a direct factor for cancellations even with offtakes in place, especially as inflationary pressures alter previous cost estimates.

Permitting remains an ongoing challenge with close to 20 projects cancelled due to challenges in the permitting processes regarding environmental impact, land use, water supply, and desalination, among other reasons.

Based on the latest estimates from Rystad Energy’s hydrogen and derivative research, the nominal cost of hydrogen in many regions is unlikely to come down in the near term.

“As the hydrogen industry matures, such corrections are expected – especially in a nascent sector where reference points for cost estimations and inflation impacts are still few and far between,” it concludes.

“Continued progress will require robust government support, real market signals, and greater investment clarity to bridge the growing gap between policy ambition and commercial viability.”