Wood Mackenzie: low-carbon hydrogen and ammonia to pick up pace in 2025

After modest progress for low-carbon hydrogen and ammonia last year, 2025 promises to be a pivotal year for the sectors, according to Wood Mackenzie. Despite persistent challenges – such as cost pressures, securing offtake agreements and navigating complex regulatory environments – key milestones are starting to take shape, the global energy consultant observed in its recently released ‘Hydrogen: 5 things to look for in 2025’ report.

Key themes to watch for include the rise of blue hydrogen in the US, a giga-scale green project reaching FID, increased deployment of Chinese electrolysers, the persistent mismatch between project FIDs and offtake contracts and a surge in low-carbon ammonia investments.

The rise of blue hydrogen

The US will consolidate its position as a blue-focused hydrogen market, driven by policy developments under a second Trump administration. More than 1.5 Mtpa of US blue hydrogen capacity will reach FID in 2025 – at least 10 times more than green, which now has a weakened outlook, according to Wood Mackenzie.

“We predict that the 45Q tax credit will remain in place due to strong support from the oil and gas lobby, and its importance in facilitating US exports of blue ammonia,” said Greig Boulstridge, research analyst for Wood Mackenzie. “As a result, we predict that a surge in blue hydrogen investment – with at least three large-scale blue hydrogen projects reaching FID – will see the US emerge as the world's leading blue hydrogen producer. On the other hand, we predict that green hydrogen development will face significant headwinds in 2025, with FIDs continuing to disappoint.”

Giga-scale green project will take FID in 2025
To date, 16GWe of green capacity has reached FID, but only two of these projects are larger than 1GWe. “The path to successful large-scale FIDs is not straightforward,” said Monica Trilho, research analyst for Wood Mackenzie. “Key factors such as securing offtakers, access to renewable energy, favourable regulatory environments, and government subsidies are critical for projects to move forward.  

“Despite the challenges, we anticipate the continued push of giga-scale green hydrogen projects. Over 150 projects have been proposed with +1GWe, but the majority are longer-term or unlikely to materialize. However, we do anticipate at least one more giga-scale FID expected to be announced in 2025.”

Chinese electrolysers to target new global markets
Western electrolyser manufactures have dominated North American and European markets, but Chinese electrolyser manufacturers will begin to increase competition in other regions of the globe.

Wood Mackenzie predicts that outside of North America and Europe, market penetration of Chinese equipment will exceed one-third by the end of 2025. This expectation is based on several factors, including the increasing demand for green hydrogen and the competitive edge that Chinese electrolysers offer in terms of cost, manufacturing capacity, and shorter delivery times.

Project FIDs and offtake contract mismatch persists
Many FIDs have been initiated despite offtake contracts in place, risking cancellations and straining developer pipelines. Acceleration of offtake agreements in Japan, South Korea, and Europe could reduce the gap in 2025. Currently, uncontracted FID volume is more than 2.5 Mpta, with the US accounting for a majority.

“Although some current uncontracted capacity may unwind, overall uncontracted volumes are expected to edge up, driven by anticipated FIDs for blue hydrogen projects,” said Danish Sunasra, research associate at Wood Mackenzie.

Low-carbon ammonia investments surge
2024 delivered major deals across the entire low-carbon ammonia value chain, signaling a maturing market. However, with Japanese firms leading the way, 2025 is poised for an even bigger year, with US$8B in projected deals. This would double 2024’s activity.

“Upstream, we expect US$ 5 billion in investment as companies, including NOCs, renewable energy champions, and large investment funds, continue to expand their portfolios,” said Thomas Pellegrinelli, senior research analyst at Wood Mackenzie. “Many of these investors are targeting new energy markets for hydrogen (e.g. maritime, aviation, etc.), where demand for low-carbon ammonia is rising, positioning themselves to secure long-term offtake agreements as the market scales.”

Meanwhile, downstream, $2 billion is expected to be directed toward ammonia storage terminals, while $1 billion is predicted to flow into large ammonia carriers, ensuring developers can meet rising demand in export markets like Asia and Europe, according to Wood Mackenzie.