In recent years, hydrogen was seen as a promising clean fuel that could help reduce the planet’s reliance on fossil fuels and cut down pollution. Companies in the U.S. and Europe eagerly dove into the hydrogen business, raising hopes that this “green fuel” could power everything from factories to ships. However, things haven’t turned out as expected. The share prices of hydrogen companies are now taking a big hit, and doubts about the future of hydrogen are starting to grow.

Hydrogen Stocks Plunge: What’s Going Wrong?

This year has been a rough ride for companies like Plug Power, Ballard Power Systems, and Green Hydrogen Systems, which have all seen their stock prices fall by over half. For instance, Plug Power, a big name in the hydrogen industry, opened a liquid green hydrogen plant in Georgia with high hopes but found the journey to be “painful,” according to their CEO. Other companies, like Nel, Bloom Energy, and ITM Power, also saw their stocks drop by about a third.

The problem? Hydrogen’s hype just hasn’t translated into the high demand everyone expected. There are still questions about how to make green hydrogen affordable and accessible on a big scale, and investors are starting to pull back, unsure about putting their money into something that’s losing its shine.

Hopes for Green Hydrogen

Hydrogen fuel comes in different types. When produced from renewable sources like wind or solar energy, it’s called “green hydrogen” and releases no harmful emissions when used. “Blue hydrogen,” on the other hand, is made using natural gas, but the carbon emissions from this process are captured and stored, making it somewhat cleaner than traditional fossil fuels. Because hydrogen burns clean, it’s considered a big hope for industries that need a lot of energy, like steel manufacturing or shipping, where other green energy options aren’t practical.

Initially, green hydrogen seemed like it could be a game-changer. It looked like it would help lower emissions and reduce pollution, and governments were eager to support it. Hydrogen companies expanded rapidly, and investors flooded in, hoping for a green future powered by hydrogen. The S&P Kensho Global Hydrogen Economy Index, which tracks clean hydrogen companies, saw a huge jump in value in late 2020 and early 2021.

But now, this index has dropped back to where it was in mid-2020, essentially wiping out all those gains made during the hydrogen boom. The reality has hit: it’s going to take longer and cost more than anticipated to make hydrogen a profitable, widely-used fuel.

McKinsey’s Reality Check

A major consulting firm, McKinsey, recently slashed its forecast for green hydrogen production in the U.S. by 70% for the year 2030. This change means McKinsey believes the U.S. will not meet the ambitious target set by the Biden administration, which aimed for 10 million tonnes of clean hydrogen by 2030. The numbers are disappointing, especially considering that the government was strongly backing the push for hydrogen.

Across the ocean, Europe is facing similar concerns. In July, the European Court of Auditors, which looks after how the EU spends its money, said Europe’s goal of producing 10 million tonnes of green hydrogen by 2030 is “unrealistic.” The Court warned that Europe might need a “reality check” on its hydrogen dreams, suggesting that expectations were too high and not based on what can realistically be achieved.

Why Investors Are Growing Skeptical

Investor interest in hydrogen is fading, with some experts even calling green hydrogen a “bad investment.” Mark Lacey, the head of thematic equities at the investment company Schroders, recently stated that green hydrogen isn’t an attractive investment right now. He explained that Schroders has “limited exposure” to hydrogen in its energy portfolios because they don’t see it as a reliable way to make money.

The reasons for this are several: making green hydrogen is costly, the technology isn’t widely available, and demand hasn’t grown as expected. Plus, government regulations and policies on hydrogen are still unclear in many places, making it even riskier for investors to commit their money.

Is Hydrogen Really the Future?

There’s no question that hydrogen has potential, especially when it comes to cutting down pollution from heavy industries. But the journey to a hydrogen-powered future is proving harder and longer than many hoped. Hydrogen needs to be cheap, reliable, and widely available if it’s going to replace fossil fuels on a large scale, and those things are not easy to achieve.

One big issue is that producing green hydrogen requires a lot of renewable energy, which itself isn’t always easy or cheap to come by. And while technologies are developing to capture and store carbon emissions from blue hydrogen, they are still costly and complicated.

Delays and Cancellations of Projects

To make things worse, a lot of hydrogen projects have been delayed or put on hold because of the high costs and low demand. For instance, many companies have had to push back their plans, waiting for better financial support or clearer regulations before moving forward. This has made it even harder for the hydrogen industry to make progress and prove its worth.

Many experts believe that hydrogen could still play an important role in the future of energy, but only if certain hurdles are overcome. Governments need to set clear rules and regulations, and companies must find ways to bring down costs and build better infrastructure for hydrogen production and distribution.