The headlines have turned. Mega-projects are collapsing, majors are walking away, and the “hydrogen economy” pitch deck of 2021 looks very different in 2026.
Yet many engineers are more optimistic than they’ve been in years. Not because the market was right before, but because it’s finally getting realistic. The molecules haven’t changed. The physics haven’t changed. The business assumptions have.
The reckoning was overdue
Between mid-2024 and the end of 2025, more than 50 publicly announced green hydrogen projects were cancelled or shelved. ArcelorMittal walked away from a €2.5 billion green-steel conversion in Germany despite major subsidies. BP exited hydrogen-for-transport. Iberdrola and Repsol sharply cut their targets. Australia’s CQ-H2 export project collapsed almost overnight.
If you only follow the headlines, it looks like green hydrogen failed.
It didn’t.
What failed was the assumption that hydrogen would become cheap, fast, and universal all at once. The market is now confronting the constraints engineers have been talking about for years: energy cost, infrastructure, materials, water, and offtake economics.
That correction was necessary.
What matters beyond the numbers
Unsubsidized green hydrogen still sits well above conventional fuel economics in most markets. Even optimistic 2030 targets remain heavily dependent on cheap power, policy support, and major efficiency gains.
At the same time, manufacturing capacity has outpaced real deployment. Electrolyzer factories were built for explosive demand growth that never fully arrived. The result is an industry moving out of the hype cycle and into a harder commercial phase.
That is not unusual. Solar and lithium-ion batteries followed a similar path before costs began to bend downward at scale.
The difference is that hydrogen has tougher engineering constraints.
The engineering problems are real
When Copoint evaluates hydrogen-related SR&ED claims or advises clients on technical risk, the same issues surface repeatedly:
1. Electrolyzer chemistry matters
Alkaline systems are mature and relatively inexpensive, but they respond poorly to intermittent renewable power.
PEM systems are compact and flexible, making them attractive for wind and solar integration, but they rely on scarce materials like iridium and remain significantly more expensive.
AEM technology is promising but still not broadly bankable. SOEC systems offer strong efficiency potential, but durability and thermal cycling remain major barriers.
These are not interchangeable technologies. Choosing the wrong configuration can break project economics before construction is complete.
2. Efficiency and degradation determine viability
Hydrogen projects live or die on long-term operating performance.
Small changes in stack efficiency, degradation rates, or component lifespan can completely reshape project economics over a 20- or 30-year horizon. Many business cases still rely on performance assumptions that have not been proven at commercial scale.
3. Water is not a minor issue
Producing ultra-high-purity hydrogen requires extremely clean feedwater and significant treatment infrastructure.
In regions already facing water stress, including parts of Alberta and interior British Columbia, water availability is becoming a permitting and operating constraint, not just a technical detail.
4. Hydrogen does not behave like natural gas
Hydrogen creates challenges that existing gas infrastructure was never designed for. Embrittlement, leakage, compression, storage, and transport all become more difficult at scale.
That means proximity to demand matters. In most viable projects today, hydrogen production and industrial offtake are geographically close for a reason.
5. The real bottleneck is offtake
Most industrial buyers are not willing to lock themselves into hydrogen prices that remain materially above conventional alternatives.
That is why many projects stalled. Not because the technology failed, but because the economics did.
Subsidies and tax credits help close the gap, but they cannot replace disciplined project selection.
The projects surviving all look similar
The hydrogen projects still advancing globally tend to share the same characteristics:
- A real industrial offtake, usually ammonia, refining, or chemicals
- Access to low-cost and relatively firm power
- Some form of policy or price-risk support
- Scale matched to actual demand rather than headline ambitions
That is the emerging blueprint for bankable hydrogen development.
What this means for Canada
Canada remains well-positioned, particularly as federal incentives become more defined.
The Clean Hydrogen Investment Tax Credit, contracts-for-difference, and expanding clean power capacity all improve the long-term outlook. Alberta also has something many regions lack: existing industrial hydrogen demand tied to refining and upgrading.
The technical development opportunity is also larger than many companies realize.
Catalysts, materials, integration systems, balance-of-plant optimization, durability improvements, and process control work all create meaningful SR&ED potential. Many firms still treat this work as routine engineering when it clearly meets the threshold for experimental development.
The Copoint view
Green hydrogen is unlikely to become the universal energy solution many projected a few years ago.
But that does not mean it lacks a future.
Hydrogen still makes sense in a specific set of hard-to-abate industrial applications, particularly where electrification is difficult and low-carbon molecules have real operational value.
The winners in this market will not be the companies with the biggest announcements. They will be the ones making disciplined engineering decisions: matching the right electrolyzer to the right power profile, the right scale to the right demand, and the right economics to the right policy framework.
That is where the industry is heading now.
And frankly, it is a much healthier place for it to be.
If you are evaluating a hydrogen opportunity, preparing an SR&ED claim tied to electrolyzer or process innovation, or assessing long-term carbon-intensity exposure, we should talk.
Slade Thornhill, P.Eng., PMP, is a Senior Technology Advisor at Copoint.
