Asia’s hydrogen bubble has burst — and that may be a good thing

Whilst the initial rise of hydrogen was exciting, intending to power cars, replace natural gas, decarbonise heavy industry and create a vast new global trade in clean energy, a few years later the perspective on hydrogen may have shifted. These ambitions for hydrogen, whilst still being relevant and still presenting a significant opportunity, have now shifted to the backburner of Asian hydrogen focus.

The bursting of the hydrogen bubble, however, may be marking the beginning, rather than the end of the industry, as governments and investors in Japan and Southeast Asia turn away from some of the grander visions of a “hydrogen economy” and towards smaller, more commercially disciplined projects.

That shift was evident at the Gastech Exhibition & Conference 2026 in Bangkok in mid-September, where a panel on the regulation of hydrogen spent relatively little time debating whether the technology worked and much more discussing demand, subsidies, financing and the rules needed to persuade investors to put money into projects.

“At the end of the day, somebody needs to buy this hydrogen,” said Anne-Sophie Corbeau, a global research scholar at Columbia University's Center on Global Energy Policy and moderator of the discussion.

It is a problem confronting the industry globally. Announced low-emissions hydrogen projects have been cancelled or delayed as developers struggle with high production costs and a lack of customers willing to sign the long-term purchase agreements needed to finance them. But Asia illustrates particularly clearly the divide between the hype surrounding hydrogen and the industry that actually exists.

Southeast Asia already consumes about 4mn tonnes of hydrogen a year, equivalent to almost 4% of global demand, according to the International Energy Agency. Yet nearly 80% is produced from unabated natural gas rather than renewable electricity. Almost half is used to manufacture ammonia, with refining and methanol production accounting for most of the rest. The region therefore has a substantial hydrogen industry already — just not the clean one envisaged during the hydrogen boom.

Pipeline projects

The pipeline of proposed low-emissions projects is also impressive on paper. Announced Southeast Asian projects could produce almost 480,000 tonnes a year by 2030, according to the IEA. More than 90% is concentrated in Indonesia and Malaysia. Only 6% of that planned capacity, however, has reached final investment decision, while 60% remains at a very early stage of development.

Japan offers a warning about what happens when ambition races ahead of economics. Nobuo Tanaka, former executive director of the IEA and now chief executive of Tanaka Global, described the country's early attempt to build a hydrogen economy around fuel-cell cars as “a story of success and failure”.

Japan was among the first countries to make hydrogen a central part of energy policy, encouraged in particular by Toyota's development of fuel-cell vehicles. But the strategy ran into the familiar infrastructure problem: consumers would not buy hydrogen cars without filling stations, while investors would not build filling stations without customers.

“We lost about 10 years just discussing how many cars needed to go to the station, and how many stations were necessary,” Tanaka said. “This chicken-and-egg situation continued for years.” Japan has since shifted the focus away from passenger cars towards much larger industrial applications, including power generation, steel, shipping and ammonia.

Tokyo has backed that second attempt with considerable state support. Japan's Hydrogen Society Promotion Act provides about JPY3 trillion ($19bn) to bridge the price gap between low-carbon hydrogen and conventional fuels.

The government is targeting hydrogen supplies of up to 3mn tonnes a year in 2030, 12mn tonnes in 2040 and 20mn tonnes by 2050. “The bubble is [bursting],” Tanaka told the Gastech panel, but added that the industry was simultaneously “solidifying” around more disciplined markets and practical applications. That more pragmatic approach is increasingly visible elsewhere in Asia.

Thailand's state-owned Electricity Generating Authority of Thailand (EGAT) signed an agreement with Japanese utility JERA in June to examine an entire hydrogen and ammonia supply chain, covering production, transport, storage and consumption. The two companies are also studying using ammonia both as a hydrogen carrier and as a fuel for electricity generation. The distinction is important. One of the assumptions of the first hydrogen boom was that enormous volumes of hydrogen would eventually be transported much as natural gas is today.

Transportation woes

Hydrogen is considerably more difficult to handle, however. Its low volumetric energy density makes storage and transport expensive, while exposure to hydrogen can cause embrittlement in some metals, complicating the conversion of existing pipeline networks. The emerging industry is therefore considering moving the energy in other forms, particularly ammonia, which contains hydrogen but is considerably easier to transport by ship. Hydrogen can then either be recovered from the ammonia or the ammonia itself used as a fuel.

The shift also means hydrogen may develop less as a universal replacement for fossil fuels than as a specialist solution for sectors that are difficult to electrify directly. For developers, however, even good projects still struggle to get through their initial commercial phase.

Isabelle Ireland, board member and head of corporate operations at InterContinental Energy, which is developing large renewable energy and green hydrogen projects including in Western Australia, argued that government intervention should concentrate on getting the first projects built rather than permanently subsidising the industry. “This isn't a case of a subsidy for life of the hubs or the projects,” she said. “The early phase is where we need the support. Thereafter, the cost keeps on going down, and it will become independently competitive with conventional [energy].”

InterContinental Energy's planned Australian Renewable Energy Hub illustrates the new emphasis on scale and industrial demand. The project envisages as much as 26GW of renewable generating capacity spread across about 6,500 square kilometres of Western Australia, combining wind and solar power and potentially supplying hydrogen and other green fuels to mining and industry.

For investors, government support matters less if governments subsequently change the rules.

Keiichi Suzuki, partner and head of renewables and sustainability at Japanese private equity group Advantage Partners, said investors needed a regulatory framework that remained predictable over the decade or more required to recover their capital. “As long as [governments] don't change rules, investors can work out for 10 years, 15 years how to make projects investable,” he said.

That presents a particular challenge for Southeast Asia.

Indonesia, Laos, Malaysia, Singapore and Vietnam have adopted hydrogen strategies, but national policies, resources and energy systems differ considerably across the region. ASEAN is trying to establish common standards capable of eventually supporting cross-border trade.

Abdul Razib Dawood, executive director of the ASEAN Centre for Energy, said governments should not simply wait for the market to emerge. “Government needs to intervene,” he told the panel, calling it a necessary “first mover” to reduce risk and create demand. He argued that finance, standards, carbon pricing, infrastructure and policies to encourage consumption would all have to develop together.

That is a less spectacular proposition than the hydrogen economy promoted five years ago but it may also be considerably more realistic.

The industry emerging from the collapse of the first hydrogen hype cycle is likely to be smaller, more heavily regulated and concentrated around existing industrial customers rather than millions of hydrogen-powered cars.

But Asia does not need hydrogen to replace every form of existing fossil fuel for the technology to become significant. Converting even part of the region's existing 4mn tonnes of annual hydrogen consumption from unabated natural gas to low-emissions production would create a sizeable market before a single new use is added.

For hydrogen, the end of the bubble may finally be forcing the industry to answer the question it previously avoided: not what hydrogen could theoretically do, but where it actually makes economic sense.