Trend watch: Hydrogen & e-fuels in 2026 — signals, winners, and red flags

Green hydrogen's levelized cost of production (LCOH) ranges from $3-8 per kilogram globally in 2025, but projects in the Middle East and North Africa are achieving $1.50/kg—creating a geographic cost arbitrage that will reshape global energy trade patterns as surely as the shale revolution transformed natural gas markets (IEA Hydrogen Cost Maps, 2025).

The hydrogen and e-fuels sector enters 2026 at a critical juncture. Announced electrolyzer capacity globally exceeds 214 GW, yet actual deployed capacity remains a fraction of announcements. The U.S. Inflation Reduction Act's 45V hydrogen production tax credit (finalized December 2024) offers up to $3/kg over 10 years, fundamentally altering project economics—but implementation complexity and additionality requirements have slowed capital commitment. For procurement professionals, understanding cost trajectories, offtake structures, and infrastructure constraints is essential for evaluating hydrogen and e-fuel supply opportunities.

Why It Matters

Hydrogen and e-fuels represent the primary decarbonization pathway for hard-to-abate sectors where direct electrification is technically or economically infeasible. Aviation, maritime shipping, steel production, ammonia synthesis, and high-temperature industrial heat collectively account for approximately 30% of global CO₂ emissions. ReFuelEU Aviation mandates require 2% sustainable aviation fuel (SAF) blending in 2025, rising to 70% by 2050—with e-kerosene (synthetic jet fuel produced from green hydrogen and captured CO₂) qualifying as a renewable fuel of non-biological origin (RFNBO).

The International Maritime Organization's 2023 strategy targets 70% emissions reduction by 2040, driving demand for e-ammonia and e-methanol as marine fuels. These mandates create guaranteed offtake—the critical missing ingredient that has constrained hydrogen project development.

The e-fuels market is projected to grow from $8.75-18 billion in 2024 to $87-195 billion by 2035 at a CAGR of 24-33% (ResearchAndMarkets, 2025). Aviation represents 35-40% of market share due to the technical difficulty of battery-electric flight at commercial scale. This growth trajectory offers significant opportunities for first movers who secure offtake agreements and develop integrated supply chains.

For procurement, the relevant signal is that e-fuel prices of €2.8-3.4 per liter (2024) will not achieve parity with fossil jet fuel (~€1.50/liter) within current cost structures. The question is not whether e-fuels will be more expensive, but whether mandates, carbon pricing, and corporate net-zero commitments create sufficient demand at premium prices.

Key Concepts

Levelized Cost of Hydrogen (LCOH) encompasses capital costs (electrolyzer, balance of plant), electricity costs (60% of total), operating costs, and financing. The U.S. DOE "Hydrogen Shot" initiative targets $1/kg by 2030—an aggressive goal requiring simultaneous reductions in electrolyzer CAPEX and renewable electricity LCOE.

E-fuels are synthetic hydrocarbons produced by combining green hydrogen with captured CO₂ via Fischer-Tropsch synthesis (e-diesel, e-kerosene), methanol synthesis, or Haber-Bosch ammonia synthesis. Process efficiency ranges from 59-89% depending on pathway, with significant energy losses at each conversion step.

Additionality requires that hydrogen production be powered by new renewable energy capacity rather than diverting existing clean electricity. The IRA's 45V final rules require temporal matching (hourly by 2028), geographic deliverability, and incrementality—creating implementation complexity but ensuring genuine emissions reductions.

KPI	2024 Actual	2026 Target	2030 Target
Green Hydrogen LCOH (global average)	$4.00/kg	$3.00-3.50/kg	$2.00/kg
Green Hydrogen LCOH (MENA low-cost)	$1.50/kg	$1.20/kg	$1.00/kg
E-kerosene Cost	€2,500/ton	€2,000/ton	€1,500/ton
Electrolyzer CAPEX (Alkaline)	€500-800/kW	€400-600/kW	€200-300/kW
Global Electrolyzer Capacity (installed)	~2 GW	8-12 GW	50+ GW
U.S. 45V Credit Value	$3/kg max	$3/kg max	N/A (expires 2033)

What's Working

U.S. IRA Tax Credit Implementation

The 45V hydrogen production tax credit, finalized in December 2024, provides up to $3/kg for hydrogen with lifecycle emissions below 0.45 kg CO₂/kg H₂ over a 10-year period. This credit fundamentally changes project economics—a $4/kg production cost becomes $1/kg net cost, potentially competitive with grey hydrogen. The Department of Energy's regional hydrogen hubs program has committed $7 billion across seven hubs including Hydrogen City (Texas), Pacific Northwest (Oregon/Washington), and Heartland (Minnesota/North Dakota).

Air Liquide announced final investment decisions on multiple U.S. projects leveraging 45V credits, including a 250 MW electrolyzer facility in Texas. Plug Power is commissioning its Georgia green hydrogen production facility with committed offtake from material handling customers.

European Regulatory Push

The EU Hydrogen and Gas Decarbonization Package (May 2024) establishes infrastructure rules for hydrogen transport and storage, creating the regulatory foundation for cross-border hydrogen trade. ReFuelEU Aviation's 2% SAF mandate (effective 2025) and maritime FuelEU regulations create guaranteed demand signals that underpin project financing.

Germany's H2Global mechanism provides double-sided auction support—paying the difference between production costs and market prices to bridge the green premium until costs decline. The initial €900 million allocation has been expanded with additional federal funding.

Middle East Cost Leadership

Projects in Saudi Arabia's NEOM region, the UAE, and Egypt leverage some of the world's lowest-cost solar and wind resources to achieve LCOH below $2/kg. ACWA Power's NEOM green hydrogen project—the world's largest announced—will produce green ammonia for export using 4 GW of renewable capacity. These projects establish price points that create export opportunities to high-cost regions like Europe and Japan.

What Isn't Working

Project Announcement vs. FID Gap

Announced global electrolyzer capacity exceeds 214 GW, but cumulative installed capacity remains approximately 2 GW (BloombergNEF, 2024). The gap between announcements and final investment decisions (FID) reflects uncertainty about offtake, permitting delays, and infrastructure constraints. Many announced projects lack committed buyers, financing, or even detailed engineering—inflating expectations about near-term supply.

Offtake Contract Scarcity

Green hydrogen projects require long-term offtake agreements to secure project financing, but industrial buyers have been reluctant to commit to fixed-price contracts when future hydrogen costs are uncertain and grey hydrogen remains cheaper. This chicken-and-egg dynamic—projects need offtake to finance, buyers want price certainty before committing—creates execution risk across the sector.

The ammonia sector offers the most promising near-term offtake as existing fertilizer producers seek to decarbonize. However, green ammonia premiums of 50-100% over grey ammonia limit adoption to markets with strong regulatory or voluntary sustainability drivers.

Infrastructure Bottlenecks

Hydrogen transportation and storage infrastructure remains nascent. Pipeline conversion projects (adapting natural gas pipelines for hydrogen) face technical challenges around embrittlement and leakage. Salt cavern storage, essential for managing production variability, is geographically limited. The absence of infrastructure creates regional price disconnects—low-cost production in MENA cannot economically serve European demand without significant logistics investment.

Permitting delays compound infrastructure challenges. The average electrolyzer project in Europe faces 3-5 year permitting timelines, compared to 12-18 months for equivalent solar installations. Grid connection queues for renewable energy (required for additionality-compliant hydrogen) add additional delays.

Key Players

Established Leaders

Air Liquide operates across the hydrogen value chain with significant grey hydrogen production transitioning toward blue and green. The company has announced 3 GW of electrolyzer capacity by 2030 and leads industrial gas supply to refineries and chemical plants.

Linde competes globally in industrial gases with growing hydrogen infrastructure investments. The company's engineering capabilities position it for large-scale project development and hydrogen logistics.

Nel ASA manufactures alkaline and PEM electrolyzers with production facilities in Norway and expanding U.S. capacity. Nel has achieved cost reductions through manufacturing scale and standardization.

Siemens Energy offers integrated solutions from electrolyzers through power-to-X conversion, leveraging its position in gas turbines (which can convert to hydrogen combustion) and grid infrastructure.

Emerging Startups

Electric Hydrogen (backed by Breakthrough Energy Ventures) focuses on high-efficiency, low-cost electrolyzer systems optimized for steel and ammonia decarbonization applications. The company has achieved significant cost reductions through cell stack innovation.

INERATEC develops modular Power-to-Liquid facilities for e-fuel production, with deployments in Chile (with GIZ support) and Germany. The company's containerized approach enables faster project execution than conventional construction.

Infinium produces e-fuels from hydrogen and captured CO₂ for aviation and heavy transport, with commercial facilities under construction in Texas. The company has secured offtake from Amazon and American Airlines.

Key Investors & Funders

Breakthrough Energy Ventures (Bill Gates) has invested across the hydrogen value chain including Electric Hydrogen, Form Energy, and multiple electrolyzer and storage companies.

Hy24 (the Ardian-FiveT Hydrogen joint venture) is the largest clean hydrogen infrastructure fund with €2 billion in committed capital targeting production, transport, and end-use assets.

JBIC and NEXI (Japan) provide export credit and project finance support for Japanese companies investing in overseas hydrogen and ammonia projects, reflecting Japan's strategy as a hydrogen importer.

Examples

1. ACWA Power NEOM Green Hydrogen Project (Saudi Arabia): This $8.5 billion project will produce 1.2 million tons per year of green ammonia using 4 GW of solar and wind capacity with Thyssenkrupp electrolyzers. First production is expected in 2026. The project demonstrates bankability at scale with committed offtake to Air Products, which will distribute ammonia globally. LCOH targets below $2/kg reflect exceptional renewable resources and scale advantages.

2. H2Global Germany: The German government's double-auction mechanism bridges the cost gap between green hydrogen production (purchased at global competitive rates) and European offtake (sold at market prices). The €900 million initial allocation supports projects in MENA and South America exporting to Germany, creating demand signals for producers while limiting buyer exposure to green premiums. This model is being replicated by other importing nations including Japan and South Korea.

3. Infinium TexaseFuels Project: Located in Corpus Christi, this commercial-scale e-fuels facility will produce 25,000 gallons per day of e-methanol and e-diesel from renewable hydrogen and captured CO₂. Offtake agreements with Amazon and American Airlines de-risk the project. The facility uses electrolysis powered by Texas wind and solar, demonstrating the integration of renewable electricity, carbon capture, and fuel synthesis required for e-fuel production at scale.

Action Checklist

• Assess hydrogen readiness for industrial heat, ammonia, and transport applications—identify decarbonization pathway dependencies on hydrogen availability
• Monitor 45V implementation guidance and project-specific credit qualification for U.S. suppliers
• Evaluate offtake agreement structures—index-linked pricing, volume flexibility, and credit support mechanisms
• Engage with regional hydrogen hub development in applicable geographies (U.S. DOE hubs, EU Hydrogen Valleys)
• Build internal expertise on hydrogen safety, handling, and infrastructure requirements for procurement specifications
• Track e-fuel certification schemes (CORSIA, ReFuelEU) that determine regulatory compliance value

FAQ

Q: When will green hydrogen achieve cost parity with grey hydrogen? A: Cost parity timing varies by region. In MENA with exceptional renewable resources, green hydrogen at $1.50/kg approaches grey hydrogen costs ($1.50-2.50/kg) today. In Europe, parity requires LCOH below $3/kg—achievable by 2028-2030 with continued electrolyzer cost reductions and carbon pricing above €100/ton. The IRA's $3/kg credit creates immediate parity in the U.S. for qualifying projects.

Q: What is the difference between blue and green hydrogen? A: Green hydrogen is produced via electrolysis powered by renewable electricity—the only zero-carbon production pathway. Blue hydrogen is produced from natural gas via steam methane reforming with carbon capture and storage (CCS). Blue hydrogen's lifecycle emissions depend on capture rates (typically 85-95%) and upstream methane leakage—meaning it is lower-carbon but not zero-carbon. Green hydrogen is the preferred pathway for net-zero aligned procurement.

Q: How should procurement evaluate e-fuel suppliers? A: Key criteria include: renewable electricity source verification (additionality compliance); carbon source transparency (biogenic, industrial, or direct air capture); third-party certification under recognized schemes (ISCC, RSB); lifecycle emissions documentation; and offtake contract flexibility (volume commitment, pricing mechanisms). Request mass-balance or physical traceability evidence rather than relying on certificate trading alone.

Q: What are the infrastructure barriers to hydrogen adoption? A: Key barriers include: limited hydrogen pipeline networks (most grey hydrogen is produced and consumed on-site); absence of large-scale storage (salt caverns are geographically constrained); refueling station scarcity for transport applications; and grid connection availability for electrolyzer projects. Infrastructure development requires coordinated public-private investment with 5-10 year lead times.

Sources

• IEA: "Levelised Cost of Hydrogen Maps" (2025)
• U.S. Department of Energy: "Regional Clean Hydrogen Hubs" program documentation (2024)
• BloombergNEF: "Hydrogen Market Outlook" (2024)
• eFuel Alliance: "Scenarios for the Market Ramp-up of E-fuels in Road Transport" (January 2025)
• Sia Partners: "2025 International e-fuels observatory" (April 2025)
• Fortune Business Insights: "E-fuel Market Size, Share & Forecast Analysis Report 2032"
• ResearchAndMarkets: "e-Fuels Market - Global Opportunity Analysis and Industry Forecast 2025-2035"