Exxon Puts Clean Hydrogen Investing on Pause. The Industry Is Reeling.

Exxon’s announcement comes after other big players pulled back on hydrogen production. (Brandon Bell/Getty Images)

Key Points

• Exxon Mobil paused clean hydrogen investments, reducing its low-carbon spending target to $20 billion from $30 billion through 2030.
• Other companies like Plug Power and BP have also pulled back on hydrogen projects.
• China is heavily investing in hydrogen, producing 60% to 70% of the world’s electrolyzers.

Clean hydrogen, a fuel that was expected to become a big part of America’s push to decarbonize, appears to be dead for now.

Exxon Mobil is pausing its biggest investment in the industry, the company said on Tuesday, saying there’s too little evidence of demand for hydrogen. The move is part of a larger pullback in clean energy spending for Exxon. The company also said it reduced its low-carbon spending target to $20 billion from $30 billion through 2030.

“While we’re convinced that low carbon hydrogen will be required for the world to achieve net zero and that our project is advantaged versus today’s alternatives, the markets and customer base are developing slowly,” Exxon CEO Darren Woods said at an investor day on Tuesday.

Exxon recently suspended a hydrogen project at its refinery complex in Baytown, Texas, which would have been one of the largest plants in the world. It was expected to capture and store up to 1 billion cubic feet of hydrogen per day.

The oil giant’s announcement this week comes after other big players pulled back on hydrogen production. Plug Power, America’s largest clean hydrogen producer, announced last month it is pausing development of a hydrogen production plant in Texas that was expected to be partially funded with a loan guarantee from the Department of Energy. Plug has said it is still bullish on hydrogen, but has decided to buy hydrogen from another producer instead of moving forward with more of its own production. Bloom Energy, which makes fuel cells that can run on hydrogen, also says that it is seeing much more demand from customers who want to use natural gas to power the fuel cells instead.

The industry was already hurting coming into the year, and things got even worse when the Trump administration pulled funding for multiple nascent hydrogen projects. The U.S. isn’t the only country that’s turning away from the industry: BP also scrapped plans this month to build a clean-hydrogen plant in England. The International Energy Agency recently cut its 2030 clean hydrogen production estimates by 24% due to global cancelations and delays.

Hydrogen is used in several industries today, from fertilizer production to refining. Hydrogen can also power vehicles, though not many people are driving hydrogen cars yet. But almost all hydrogen is produced using natural gas, and the process emits a significant amount of carbon. There are cleaner ways to make hydrogen, however, by using devices called electrolyzers to separate hydrogen and oxygen in water. If that process is powered by renewable electricity, it can be carbon-free. Making hydrogen with natural gas can also be low-carbon, if the carbon dioxide produced is captured and stored, as Exxon was prepared to do.

Hydrogen industry advocates have said that clean hydrogen can fill a major gap in the clean energy transition, because it’s one of the few resources that can truly clean up industrial plants. But clean hydrogen is more expensive than the dirty kind, and the U.S. hasn’t adopted rules to make companies use it. Few American companies have committed to large-scale purchases.

At least one country is still investing in the industry. China, which has also been installing solar and wind power much faster than anywhere else in the world, is betting big on hydrogen. It has the tools and policy support in place to make it in a cost-competitive fashion.

Brian Murphy, a hydrogen analyst at S&P Global Energy, expects China to double its production of electrolyzers this year, and again in 2026 and 2027. The country already makes 60% to 70% of the world’s electrolyzers. It’s also investing heavily in producing the fuel for export to places like Europe that have green energy mandates, he said.

Murphy said that the country’s recommendations for its next five year plan “indicate that the country is going to continue to heavily invest in the hydrogen market at least through 2030,” Murphy said.

Write to Avi Salzman at avi.salzman@barrons.com