S&P Global & bp: The Costs, Policy & Progress of Hydrogen

In 2025, the hydrogen sector finds itself at a critical juncture. 

While enthusiasm for hydrogen’s potential in decarbonisation remains high, the industry faces significant challenges in scaling up and achieving economic viability. 

Industry leaders and experts are reassessing expectations and focusing on execution as the market shifts from hype to reality.

What is hydrogen’s role in decarbonisation?

The hydrogen sector is transitioning from a period of peak optimism to a more pragmatic phase. 

In 2024, new project announcements declined by more than 80% globally, with producers scaling back earlier commitments. 

Looking ahead however, the focus is expected to shift towards execution and tangible progress on existing projects and investments.

“Decarbonising refinery fuel is essential and low-carbon hydrogen provides a clear pathway,” Eugenia Belloni Pocorob, Lead H2 and CC(U)S for the Netherlands at bp, said at StocExpo 2025.

“The technical and financial challenges remain substantial, but the opportunity for emissions reduction is undeniable.”

The transport sector is also exploring the potential of hydrogen.

Amit Rao, Principal Consultant at S&P Global, points out its long-standing industrial applications and emerging demand in aviation.

“We are seeing airline manufacturers investigating pure hydrogen solutions beyond sustainable aviation fuel (SAF),” he says.

“It may seem far-fetched now, but technological advances happen rapidly.”

Despite the benefits it can bring, the high cost of hydrogen projects, as well as carbon capture and storage (CCS), is a weighty challenge.

“The scale of capital required for CCS projects is enormous,” Amit says.

“We have already seen major industry players reconsider their green commitments. The question is: where will the funding come from, and who will drive the transition?”

Traditional investors are also hesitant to engage in projects with long payback periods, creating a need for investors willing to take a long-term view.

Eugenia says: “The appetite for quick returns does not align with the realities of hydrogen investment. We need a different type of investor — one willing to take a long-term view.”

On top of this, intervention from governments has played a decisive role in advancing early-stage projects. 

In the UK, government-backed competition frameworks have helped de-risk investments by aligning the entire value chain.

“By aligning the entire value chain, these initiatives have made projects more viable,” shares Matt Wilson, Head of New Energy Markets at Navigator Terminals.

“Future developments will build on this foundation.”

The impact of geopolitical dynamics

Global political dynamics are increasingly influencing the trajectory of hydrogen investment.

Potential shifts in US policy and renewed trade conflicts could have significant implications for the industry. 

In Europe, rising defense spending might alter energy transition priorities, potentially limiting budgets for hydrogen initiatives.

Amit warns that shifts in US policy could have far-reaching consequences.

“We need to wait out the Trump presidency to gain clarity on the long-term outlook,” he says.

“Over the next four years, we are likely to see renewed trade conflicts — not just with China, but across the board. 

“The US is moving towards decoupling from global markets, which will have profound implications for European industry.”

Rising defence spending in Europe could also reshape energy transition priorities. 

Amit continues: “If governments allocate 3% or more of GDP to defence, other sectors will inevitably face budgetary constraints.”

Market adjustments and cautious optimism

Despite challenges, there's cautious optimism in the industry.

While the number of hydrogen projects has declined, awareness and momentum have grown, Eugenia points out.

“We may have gone from 30 projects to fewer than five, but the fact that some are now moving into construction is significant,” she says. 

“The energy transition is not just theoretical — we are starting to see real implementation.”

Matt adds: “The projects we have in place are gaining traction. The policy framework is set, and the risk profile has improved. 

“This momentum will carry through to SAF and other hydrogen-linked sectors.”

While hydrogen may not be the universal remedy for industrial decarbonisation, its significance in the energy transition is increasingly evident. 

The extent to which it fulfils its potential will hinge on continued investment, supportive policies and the resolution of geopolitical uncertainties.

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