Blue Hydrogen Projects Set to Dominate in 2025 Amid Policy Shifts in the US
Dec 17, 2024
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US Blue Hydrogen Poised for Leadership as Key Projects Approach Final Investment Decisions
The United States is on track to solidify its position as a global leader in blue hydrogen production in 2025, with at least three large-scale projects expected to reach final investment decisions (FID), according to a new analysis from Wood Mackenzie. The combined production capacity of these projects is forecast to exceed 1.5 million tonnes per annum, marking a critical step forward for the country’s low-carbon hydrogen industry.
In its “Hydrogen: 5 Things to Look for in 2025” report, the consultancy underscores the resilience of blue hydrogen projects, even as green hydrogen faces significant hurdles in the coming year due to anticipated policy changes and market challenges.
Blue Hydrogen Benefits from Policy Support and Tax Credits
Wood Mackenzie highlights that continued support for the 45Q tax credit will play a pivotal role in ensuring the financial viability of blue hydrogen projects. The 45Q incentives provide economic backing for carbon capture and storage (CCS), which is integral to blue hydrogen production, giving the US a strategic edge in both domestic supply and international exports.
With rising global demand for low-carbon hydrogen, particularly in Japan and Europe, the US is positioned to meet these market needs.
“Blue hydrogen is likely to dominate as the US maintains an advantage in cost-effective production and policy support,” the report noted.
Key projects expected to reach FID in 2025 include:
ExxonMobil’s Baytown Facility
Lake Charles Methanol II
Linde’s Beaumont Site
CF Industries’ Blue Point Complex
Wabash Valley Resources Hydrogen and El Dorado Ammonia Projects
Green Hydrogen Faces Headwinds Amid Market and Policy Uncertainty
While blue hydrogen flourishes, the outlook for green hydrogen remains uncertain. The report anticipates “significant headwinds” for green hydrogen projects, driven by:
Regulatory Uncertainty: Concerns over the incoming Trump administration’s commitment to decarbonization initiatives.
Policy Changes: Potential cuts to the Inflation Reduction Act (IRA), which could weaken climate-related financial incentives.
Market Competition: Other industries, such as data centers, competing for energy resources.
Infrastructure Delays: Long interconnection queues slowing project timelines.
Wood Mackenzie warns of an uptick in green hydrogen project cancellations, particularly in mobility, steel, and e-fuel sectors, due to shrinking near-term opportunities.
Murray Douglas, Vice-President and Head of Hydrogen Research at Wood Mackenzie, emphasized the risk of an IRA rollback during the firm’s Hydrogen Conference in London. He noted, “A Republican presidency introduces uncertainty for climate provisions, but blue hydrogen remains well-positioned to move forward, given its economic competitiveness and government incentives.”
US Hydrogen Sector to Navigate Policy Shifts in 2025
Following Trump’s projected victory in November 2024, there is growing speculation about an “all-of-the-above ” energy strategy that may retain selective IRA provisions while reducing broader decarbonization support. The possibility of new trade tariffs on imported goods could further reshape the US hydrogen landscape.
Despite these uncertainties, the US blue hydrogen sector is forecast to remain resilient, as developers focus on securing binding offtake agreements to unlock further investments.
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