Hydrogen: How to bridge the gap between ambition and investment?

Recent geopolitical tensions have once again highlighted the vulnerability of global energy supply chains. As volatility in oil and gas markets persists, governments and corporates are accelerating efforts to diversify towards alternative energy sources. Clean hydrogen is often cited as part of this solution, offering both a pathway to decarbonisation and enhanced energy security. 

Hydrogen is the lightest chemical element and can be used as an energy carrier. Clean hydrogen is hydrogen produced with minimal greenhouse gas emissions. For example, it can be used in steelmaking or to produce ammonia– including as a lower‑emission fuel for shipping or fertiliser. 

However, while the strategic case for hydrogen remains, the investment reality tells a different story. Globally, hundreds of hydrogen projects have been announced in recent years, yet only a small proportion have progressed to final investment decision (FID).  

In other words: ambition is running ahead of execution. 

Hydrogen production technologies, whether electrolysis or reforming with carbon capture are already proven. The issue is not the technology.  For lenders and institutional investors, the critical question is whether projects can deliver predictable, long-term cash flows.  

This is where many projects fall short. Unlike established energy markets such as oil, gas or power, hydrogen lacks mature market structures. There are few trading hubs, no clear price benchmarks and limited demand. As a result, most projects rely on bilateral offtake agreements or assumptions about future market development, creating revenue uncertainty that is difficult to finance. 

Put simply: without visibility on revenues, capital stays on the sidelines. 

The Opens in a new tabhydrogen bottleneck is a demand issue. While supply ambitions are increasing, demand for low-carbon hydrogen remains limited. According to the Opens in a new tabInternational Energy Agency, demand growth is still largely concentrated in traditional uses, with new end-use segments accounting for only a marginal share.  

For project finance, this creates a challenge. Capital-intensive infrastructure requires long-term revenue visibility, typically through contracts with creditworthy counterparties. Yet in hydrogen, only a small share of projects have secured firm offtake agreements, reflecting a broader dynamic between supply development and demand creation.  

Higher fossil fuel prices may improve the economics but do not create the long-term demand needed to finance projects. 

The evolution of past transitions in the energy markets, namely Liquefied Natural Gas (LNG) but also what we consider today as ‘traditional’ renewables, wind and solar, can provide us with useful reference points for the development of hydrogen.  Namely: gradual, contract-led and dependent on the steady build-out of real markets. Today, LNG is globally traded and relatively liquid. But early projects depended heavily on long-term contracts, often with fixed or oil-indexed pricing, to underpin financing. Only after years of market development did more flexible trading structures emerge. Similarly, early developments in renewables relied on Feed in Tariffs and other subsidy support mechanisms to spur investment and provide longer-term revenue certainty to support initial capex investments. 

Hydrogen is still at a much earlier stage. As with previous energy transitions, progress is likely to be gradual and shaped by project-level progress rather than headline policy ambition. Once projects start to reach FID and come online, that will provide confidence to other developers and capital providers alike. 

The first successful projects matter most – they build confidence, unlock capital and create momentum. 

To close the gap between ambition and execution, hydrogen projects will need to evolve along several dimensions: 

• Anchor demand first: Secure long-term offtake agreements with creditworthy buyers.  

• Stabilise revenues: Policy support should  prioritise revenue certainty—through mechanisms such as contracts for difference or price floors—rather than cost reduction alone. 

• Allocate risk realistically: Financing structures must reflect a balanced allocation of risk between sponsors and lenders. Attempting to transfer unmanageable risks into debt structures will continue to limit bankability. 

• Build regional ecosystems: In the near term, hydrogen is more likely to develop through local or regional clusters, where supply and demand can be coordinated, rather than a fully global commodity market. 

Clean hydrogen remains a critical component of the long-term energy transition, particularly for hard-to-abate sectors such as heavy industry and transport. It also has a role to play in strengthening energy security by diversifying the energy mix. 

But scaling hydrogen depends on one thing: investable projects. 
That means predictable revenues, credible counterparties and realistic risk allocation. 

 ING supported renewable gas company Opens in a new tabVireo with a transaction that supports the production of bio-LNG from local waste streams for heavy transport and marine use; ING also supported Opens in a new tabSkyNRG with the world’s first greenfield sustainable aviation fuel plant to secure project financing; and supported TESSAF that converts TotalEnergies’ Grandpuits refinery near Paris into a zero-crude biorefinery capable of producing SAF at scale. Across these deals, ING played a financing role in projects that advance lower-carbon fuels, strengthen European clean energy supply chains and help make emerging transition technologies commercially bankable. 

This article discusses one or more specific transactions and/or contains general statements about ING’s climate approach. The approach and criteria referred to in this document are intended to be applied in accordance with applicable law. Due to the fact that there may be different or even conflicting laws, the approach, criteria or the application thereof, could be different. 

Society is transitioning to a low-carbon economy. So are our clients, and so is ING. We finance a lot of sustainable activities, but we still finance more that’s not. See how we’re progressing on Opens in a new tabour climate approach.