1. Germany poised for growth

Is clean hydrogen in Europe’s largest economy set for a breakthrough in 2026? Perhaps. The current coalition government, which took power in 2025, did not significantly cut back support for green hydrogen as some had expected. In fact, recent policy developments suggest it is determined to establish the clean energy vector at the heart of its decarbonisation strategy

A new “Hydrogen Acceleration Act” declares that hydrogen projects are of “overriding public interest”. This translates into accelerated planning approval processes for hydrogen projects and curbs the ability of legal challenges to halt projects.

The government is also working hard to generate demand. It has set legally binding targets for the use of clean hydrogen and other fuels in the transport sector. Significantly, the new mandates go further than those called for by the EU Renewable Energy Directive 111, which Germany and other EU member states will implement in 2026.

2. EU policy under pressure

The EU will come under pressure to alter some of its clean hydrogen policies in 2026 to try to kick start stalling investment in the sector. Criticism of various policies, especially the complex definition of ‘green’ under the Renewable Fuels of Non-Biological Origin (RFNBO), reached a crescendo in late 2025, with many developers blaming the policy for sluggish investment. The role of the European Hydrogen Bank (EHB), the main channel for EU production subsidies, has also come under fire. Expect further tightening of the criteria for projects bidding for EHB funds as the EU tries to avoid a repeat of the issues seen in 2025, when several successful bidders subsequently backed out of the subsidy process, citing cost challenges and other problems.

3. China gains ground

Europe and the US relinquished their leadership in clean hydrogen to China in 2025. In 2026, the sector’s new champion will further strengthen its position.

Supportive policies at both the national and provincial level will continue to underpin the industry’s growth.  The central government recently signalled its commitment to clean hydrogen by including support for the industry in its five-year plan for 2026–30.

Much of China’s emerging green hydrogen production is aimed at domestic markets. However, its growing production of low-cost electrolyser technology is also aimed squarely at export markets. Tie ups with western manufacturers to create overseas production plants will be a growing trend in 2026, especially in Europe, where this strategy could help Chinese tech firms circumvent protectionist measures put in place by the EU.

4. US projects eye 45V

A major comeback for clean hydrogen project development in the US, after a slowdown in 2025, looks unlikely in 2026. However, an uptick in activity is likely as the strongest projects are fast-tracked to meet the end-2027 construction deadline for the generous 45V production tax credit. President Donald Trump’s One Big Beautiful Bill Act shortened the deadline from the original 2032 cut-off date set under the Inflation Reduction Act.

Legal challenges over what needs to happen for a project to have technically started construction can also be expected in 2026. Deep uncertainty over domestic US demand for clean hydrogen remains, but export markets for US producers have potential as more and more governments around the world start to mandate use in transport and other sectors.

5. AI power struggles

Competition for electricity supplies will intensify in 2026, creating new cost pressures for electrolytic hydrogen projects, especially in the US and Europe. The growth of energy-intensive datacentres, driven by the rise of AI, and electrification of other sectors, will continue to drive up power demand and prices, hitting the economics of electrolysers drawing on general grids especially hard.

Projects co-located with renewable power capacity will see their operational cost advantages over projects seeking power-purchase agreements in the wider market increase further in 2026. In the blue hydrogen sector, the steady growth of operational carbon storage capacity in most regions will offer opportunities for new projects. However, the AI boom will have an impact here too: natural gas prices are likely to be buoyed by demand for power generation in 2026, squeezing the economics of blue hydrogen

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Author: Stuart Penson