A hydrogen-born infant has the potential to mature into a colossal entity.
In the pursuit of a climate-neutral future, green hydrogen is emerging as a promising solution. This colourless, odourless gas, with the chemical formula H2, is the most abundant element in the universe and, when produced using renewable energy, it's known as green hydrogen.
Green hydrogen investments are supported by strong political initiatives and advances in electrolyzer technology and infrastructure worldwide. The hydrogen sector, still in its infancy, experiences high volatility due to its small market capitalization, but the growth potential is immense.
The United States, for instance, has substantial political backing via the Inflation Reduction Act of 2022, which established a 10-year production tax credit including a $3.00/kg subsidy for green hydrogen. The Infrastructure Investment and Jobs Act allocated $9.5 billion to green hydrogen. However, some planned investments, such as Woodside’s green hydrogen facility in Oklahoma, were put 'on hold' as of mid-2025, and other initiatives, like New York's $290 million fuel production facility, were cancelled in late 2024. Despite these setbacks, demonstration projects are advancing, for example, Siemens tested an industrial turbine powered by 100% green hydrogen in late 2023, signaling technological progress.
Europe, under the ‘Fit for 55’ package, has a comprehensive hydrogen policy framework with binding hydrogen uptake targets for 2030 and recent delegated acts setting lifecycle emission methodologies to certify renewable and low-carbon hydrogen. This regulatory clarity aims to accelerate clean hydrogen scale-up and improve investment certainty across the bloc.
China, as part of its Belt and Road Initiative, increased green energy investments significantly in 2025, including breakthroughs in solar PV, EV batteries, and hydrogen projects. The Asia-Pacific region overall sees rapid growth in electrolyzer manufacturing and infrastructure investment. China, Japan, and South Korea lead these efforts, with ambitions for large-scale electrolyzer deployment and hydrogen vehicle refueling infrastructure, reinforcing the region's expected dominance in green hydrogen.
However, conversion of plans into realized projects is slower than targets imply. Despite the increasing electrolyzer manufacturing capacity, only about 7% of planned renewable and low-carbon hydrogen projects had reached final investment decisions by late 2023, indicating a substantial gap between ambition and execution. Additionally, sufficient renewable energy availability for hydrogen production, without compromising power sector decarbonization, remains a core challenge for many countries.
The sustainable hydrogen sector is expected to grow by a factor of 100 in the long term, according to estimates by consulting firms. The European Union, the United States, and China are driving hydrogen initiatives to build a climate-neutral economy. Aanand Venkatramanan, who heads ETF investment strategies at LGIM, expects the acceptance of green hydrogen to improve due to upcoming political support from governments worldwide and the continued decline in production costs.
The growth potential arises from the diverse applications of hydrogen technology. Short-term demand for the fund is expected to come from industries such as fertilizer production, steelmaking, and refineries. Medium to long-term, demand could rise from areas like shipping, rail, aviation, heating applications, and power generation. The majority of countries worldwide are interested in a climate-neutral economy, leading to increased investments in this area and accelerating the transformation.
In conclusion, green hydrogen investments are poised for significant growth, driven by political support, technological progress, and expanding electrolyzer manufacturing. However, challenges in moving projects to final investment decisions and scaling renewable capacity sufficiently persist. The outlook depends heavily on maintaining policy support, expanding renewable energy supply in parallel, and overcoming investment and technical hurdles to achieve large-scale commercial green hydrogen production by 2030 and beyond.
References:
- Siemens tests industrial turbine powered by 100% green hydrogen
- China's Belt and Road Initiative and the green energy revolution
- EU hydrogen policy framework under the ‘Fit for 55’ package
- Status of green hydrogen investments and challenges
- Asia-Pacific region leads in green hydrogen projects
Other sectors, such as finance, technology, and the energy industry, are also showing interest in the growing green hydrogen market, with the potential for significant investment opportunities. As the European Union, the United States, and China continue to take steps towards a climate-neutral economy, the rising acceptance of green hydrogen is expected to attract further interest from these industries. The long-term growth of green hydrogen investment is predicted to stem from a diverse range of applications, including shipping, rail, aviation, heating applications, and power generation.
