The 5 key takeaways from Wood Mackenzie's Hydrogen Conference 2025

On 12–13 November, Wood Mackenzie’s Hydrogen Conference returned to London for a fourth consecutive year. As always, we welcomed industry stakeholders from around the world and across the value-chain to share perspectives and engage in a lively discussion on market developments. Following what has been a challenging year for the sector, the mood was one of level-headedness as macroeconomic and geopolitical headwinds have compounded existing challenges of high costs and policy uncertainty. There has been a rebasing of expectations as stakeholders have acknowledged that the rollout of the sector will indeed be slower than many had envisioned. But there was a resolute determination amongst participants to drive the sector forward at a pace that reflects current energy market realities. 

1. China: defying the downturn

Perhaps the boldest statement made during the conference came from Frank Yu of Envision Energy, stating that ammonia exported from China, cracked back to hydrogen in Europe, will be more competitive than domestic green hydrogen production in Europe. This confidence in achieving low costs stood in contrast to the cautious, pragmatic rhetoric of speakers and attendees representing European projects. However, with China accounting for over 70% of green hydrogen capacity which has reached FID in 2025, Chinese players have reason to be confident.

Low production costs and rapidly maturing supply chains have enabled China to outpace other markets. The prospect of looming Chinese manufacturing dominance, as well as potential export dominance, was a stark warning to European developers and policymakers. Chinese expansion into the seaborne market could undercut other potential green ammonia exporters, and potentially even some blue ammonia exporters. Adding to a crowded marketplace where many post-FID projects have yet to sign binding offtake contracts, and Northeast Asian auctions have not delivered as hoped. However, Chinese disruption could also have the effect of pushing down prices in import markets, reducing cost burdens and enabling more timely market scaling. It also has the potential to support progress towards EU targets and mandates – although diversity and security of supply remains top of mind for European policymakers.

Can Chinese green ammonia compete against conventional ammonia by 2030?

Frank Yu made a bold prediction that, within five years, green ammonia could reach cost parity with conventional ammonia in China. If realised, this would radically improve the outlook for low-carbon hydrogen and derivatives. Wood Mackenzie forecasts that China’s domestic market will consume over 70Mtpa of carbon-intensive ammonia by 2030.

Such a downward shift in costs would kick off a step change in adoption rates within China and would reverberate around the world as other markets benefit from a rising tide of supply chain maturation and economies of scale. The next version of China’s Five-Year Plan will be released in 2026 and will be keenly watched for its potential to set the course for green hydrogen, ammonia, and other derivatives in China and beyond.

Wood Mackenzie's take: The costs for ammonia synthesis, shipping and cracking back to hydrogen are significant. Therefore, China would need to produce an RFNBO-compliant hydrogen molecule with a levelised cost below US$3.0/kg to compete with domestic production in northwest Europe within the next five years. Wood Mackenzie’s analysis shows this is achievable around 2030. Within the domestic Chinese market, grid sourcing could support even lower LCOH costs, but not to the extent that Chinese domestic green ammonia could reach cost parity with grey ammonia by 2030.

Despite questions on the viability of these cost reductions, the scale of Chinese ambition is clear. 2025 was China’s year and there is a pressing need for other markets to quickly establish how to work with an increasingly dominant China. A
balance must be struck between leveraging momentum building in China and supporting domestic value chains to deliver progress - without compromising the integrity of domestic, home-grown supply chains.

2. Policy is not keeping pace with this nascent market

With the sector still in its infancy, supportive policies are required across the entire value chain. Man of the same frustrations which have been expressed over the years was reiterated by several panellists. Particularly that regulations
remain overly burdensome - particularly in European markets. Many policy support measures are still insufficient to support investment decisions, and most are not being implemented quickly enough. Persistent delays, such as the broad
failure of EU member states to meet the RED III transposition deadline in May, continue to hinder progress in Europe.

In the UK, panellists pointed to the challenges posed by the sequencing of policy development across the value chain coming through in a piecemeal fashion. Specifically, support for hydrogen production has not been aligned with the
support needed for the infrastructure to enable trade, blocking progress and leaving would-be producers and offtakers in limbo – the generous CfD production subsidy in itself is not enough. Policy idealism was also blamed for slow rates of progress. The most commonly held gripe was the stringency of the
EU Delegated Acts which set a high bar for green hydrogen producers, while competing power consumers such as data centres are seen to face more lax requirements for power sourcing. This has undermined hydrogen’s competitiveness and presented a substantial barrier to progress.

Despite these challenges and the resulting slow progress seen in recent years, the EU has failed to respond to the challenges while neglecting alternative forms of non-RFNBO hydrogen, which could play a vital role in scaling the sector. Overall, there was frustration expressed that policy is not responding quickly enough to changes in market conditions. Nevertheless, developers are already exploring ways to certify RFNBO and low-carbon non-RFNBO volumes from a single facility which can improve overall project output and returns.

Wood Mackenzie's take: Policymakers must reflect on market realities and respond swiftly to evolving market conditions to ensure that policy measures deliver impact and that they do not serve to stifle progress.

However, this must be balanced against providing certainty on policies and targets, which are critical for market development. Providing a clear framework for developers to produce and certify with more flexibility would lower costs and support investments.

Some funding mechanisms are simply not working. In the early stages of market development, funding should flow to policies with the biggest impact. For example, European projects with capex funding have moved more quickly, whereas those awarded production subsidies continue to struggle. Alongside this, further policy instruments which can help mitigate macroeconomic and geopolitical shifts need to be considered. For example, a carbon price floor in select sectors would provide the certainty some developers and offtakers require to shift to low-carbon alternatives.

3. Costs have stabilised – can the industry finally look forward to reductions?

Hydrogen cost projections are approaching an inflection point, beyond which we could see meaningful cost reductions realised in some markets. Discussions around cost in previous years have focused on the extent of cost increases –
whether through inflationary pressures, rising feedstock costs or the more complete understanding of the challenges these first-of-a-kind projects faced.

As we approach the end of 2025, sentiment has finally started to shift as cost
projections stabilise. As more projects come online and offerings begin the early stages of maturation, OEMs are placing increasing resources into delivering cost reductions. While this may take many forms, standardisation and modularisation were widely touted by conference attendees. Whilst vendors increasingly have been promoting whole-plant offerings which promise to simplify engineering requirements and facilitate faster deployment of projects.

Chinese technology is setting the benchmark in terms of cost – with €1mn/MW for a fully operational facility now seen as the target for some OEMs. But there was agreement from both vendors and project developers that the cost isn’t everything – offerings must compete on efficiency, reliability, and capacity to adapt to the needs of the customer. In this regard, performance guarantees, track records, and vendor credibility remain as important as ever.

Wood Mackenzie's take: The OEMs that thrive going forward will be those that drive down costs in the near term while adapting to customer demands in a market increasingly looking for modularised, turnkey solutions. Chinese vendors will be hard to beat on price and are clocking up a larger operational evidence base as Chinese domestic projects move more quickly. Western vendors must look to differentiate their offerings through greater efficiency and reliability.

4. Power market dynamics complicate the outlook for green projects – and blue…

Interconnection competition is intensifying, with data centres commanding priority access to grid capacity, underpinned by a higher willingness to pay. This trend is placing pressure on the economics and timelines of hydrogen projects, as well as on-grid hydrogen facilities. Grid infrastructure build-out is not keeping pace with electricity demand growth in many markets. Without accelerated investment and regulatory support, hydrogen projects risk being crowded out by
competing power users.

On the other hand, there was discussion around the valuable services electrolysers can provide to power grids, and how providing these services could unlock additional revenue streams for green hydrogen producers. Demand response services and the alleviation of congestion during times of excess renewable generation could yield considerable economic benefits for power systems. In the UK for example, grid constraints will cost up to £8bn by 2030 – costs which will fall on consumers.

Policies aimed at promoting the use of electrolysers as grid service providers have the potential to greatly improve efficiency in power systems, but policy in this space is lacking and more must be done to realise this potential value.

It's not just power markets that are facing a period of uncertainty. Load demand from data centres fueling rapid AI deployment is pulling more gas-generating capacity into the market. This will, in turn, raise gas prices in the US, with
knock-on impacts for global gas markets that are currently entering into a period of oversupply.

The outlook for global gas prices will be a key determinant of hydrogen market developments on production, trade and offtake – with significant implications for the budding ammonia seaborne market…

Wood Mackenzie's take: Power costs – including interconnection fees – are a significant contributor to high hydrogen production costs. Risk, uncertainty and unfavorable regulatory treatment have the potential to suffocate projects in some markets. Policymakers and system operators must acknowledge that hydrogen electrolyser projects can be designed and implemented in a way that provides value to the power network. Additional value can then be extracted by understanding and creating synergies across power and hydrogen networks.

5. Opportunities abound in the ammonia seaborne market… and beyond?

Several project developers moved early with ammonia export focused projects targeting opportunities into Japan and Korea. However, with delays and cancellations to auctions, the uncontracted post-FID position continues to grow.

Europe provides a backstop option for many of these projects, but how much Europe can absorb by the end of the decade will be determined by several factors, including European gas prices, carbon costs, CBAM implementation, import terminal availability, and the maturation of ammonia cracking technology.

With RED III mandates drawing closer there was emphasis placed on the importance of import and onward pipeline infrastructure in the European market. The scheduling risk that comes with reliance on the seaborne market was highlighted as a challenge for some potential offtake industries, such as refiners, who require constant hydrogen throughput. European refiners maintain a high willingness to pay versus other potential offtakers – but only for RFNBO compliant hydrogen. Building out the value chain from production, certification, shipping, terminal, storage, cracker and pipeline remains an almighty challenge – and will require very low cost RFNBO-compliant hydrogen at source.

The emergence of supply chain bottlenecks further complicates the picture for importers who need access to offtakers beyond ports. An example cited was in the UK, where a lack of progress in pipeline infrastructure is stymying progress
on many initiatives. Delays in the UK in developing hydrogen pipeline have meant that much of the European pipe mill capacity is already booked up. The industry will continue to face up to similar challenges around supply chain congestion.

Moving early can help overcome this – but, as mentioned, moving too early can create other challenges which we’re seeing play out for many blue ammonia export projects.

Wood Mackenzie's take: The delivery of midstream infrastructure is vital to unlocking scale, but landing each part of the midstream value chain on time, at the same time, remains a huge challenge. Ammonia crackers will play a key role in import markets but not for all offtakers. Some will not be able to manage the value chain risk, even if the price is lower. Whilst we may see blue ammonia cracked back in Japan or Korea, the rationale to do so in Europe remains limited.

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