Why almost nobody is buying green hydrogen?

Hydrogen’s potential as a carbon-free fuel has provoked no end of excitement. From the deserts of Australia and Namibia to the wind-blasted straits of Patagonia, companies and governments worldwide plan to build almost 1,600 plants to make it. The gas can be produced cleanly by using wind- or solar-powered electricity in a process that splits the molecule from water. There’s only one problem: The vast majority of those projects don’t have a single customer stepping up to buy the fuel.

Among the handful with some kind of fuel purchase agreement, most have vague, nonbinding arrangements that can be quietly discarded if the potential buyers back out. As a result, many of the projects now touted with great fanfare by countries vying to become “the Saudi Arabia of hydrogen” will likely never get built. Just 12% of hydrogen plants considered low-carbon because they avoid natural gas or mitigate emissions have customers with agreements to use the fuel.

It’s easy to understand why hydrogen boosters see such potential. The molecule may be essential for the world to reach net-zero carbon emissions in the fight against climate change. When burned in a turbine or fed through a fuel cell, it generates energy without spewing greenhouse gases into the air. Almost all of it used today is stripped from natural gas, but producing it from water and renewables gives off no carbon at all.

Many analysts see no other way to decarbonize steel, maritime shipping and other industries that can’t easily run on electricity. BNEF predicts we’ll need to use 390 million tons of hydrogen per year worldwide in 2050 to eliminate carbon emissions from the global economy, more than four times the amount used today.

But it’s not a simple switch. Most of the businesses that could run on hydrogen would need expensive new equipment to use it, a leap they’re reluctant to make. Hydrogen produced using clean energy costs four times as much as hydrogen made from natural gas, according to BNEF. And it’s hard to build the infrastructure to supply hydrogen—not just plants to make it but pipelines to move it—when the demand may not materialize for years.

Countries with the potential to generate abundant renewable power, such as Chile with wind and Australia and Egypt with solar, have announced grand goals to make the fuel, often for export. More than 360 plants have been announced in China alone, according to BNEF.

The European Union has set a target of producing 10 million metric tons of carbon-free hydrogen by 2030 while importing an equal amount. In the US, President Joe Biden has devoted $8 billion to creating “hydrogen hubs,” clusters of businesses making and using the fuel.

In the US the industry and the Biden administration continue to haggle over the requirements for claiming hydrogen tax credits under federal law. Projects intended for export, meanwhile, face additional hurdles. Unlike natural gas or oil, a global system for shipping hydrogen doesn’t yet exist. Transporting hydrogen requires supercooling it, compressing it or carrying it in another, more manageable form such as ammonia, which combines hydrogen with nitrogen.