The recent disruption in the Strait of Hormuz has once again exposed how fragile global energy supply chains remain. As tensions around Iran escalate and oil prices surge, governments and businesses are looking for ways reduce dependence on traditional fuels for electricity generation, transport and industry. Alternatives such as clean hydrogen and synthetic fuels could provide pathway to greater energy security.

This logic seems straightforward: If fossil fuel supply is vulnerable, accelerating the shift to new energy carriers should reduce risk. But this narrative has a significant problem. While geopolitical shocks may strengthen the strategic case for clean hydrogen, they are not sufficient to overcome the commercial realities that continue to hold projects back.

Across Europe, the US and parts of Asia, hundreds of hydrogen projects have been announced over the past few years. Yet only a small fraction have reached the final investment decision (FID) stage.

The gap between clean hydrogen ambition and execution is not primarily about technology readiness. It's about bankability, that is, whether a project’s revenue structure and risk profile are robust enough to attract financing.

Finding the missing ingredient: bankable revenue

Lenders and institutional investors know clean hydrogen can be produced, but their key question is whether it can generate stable, predictable cash flows under a range of downside scenarios.

Many projects struggle to meet this threshold. Unlike established energy markets such as oil, gas or power, hydrogen lacks liquid trading hubs, transparent price benchmarks and deep pools of demand. And so projects often rely on bilateral agreements or assumptions about future market development. In practice, this creates uncertainty around revenues, which is difficult for debt providers to accept.

Geopolitical shocks do not help capital-intensive projects that rely on longer-term payback periods and market certainty. While higher fossil fuel prices may improve the relative economics of hydrogen, they do not automatically create long-term offtake agreements or creditworthy buyers willing to lock in prices over 10-20 years.

Without these elements, projects remain exposed to market risk that cannot easily be financed.

Learning from past energy transitions

The development of liquefied natural gas (LNG) provides a useful comparison. LNG is now a globally traded commodity, but it took decades to reach that point. Early projects depended heavily on long-term contracts with fixed or oil-indexed pricing. This provided the revenue certainty needed to secure financing. Only once sufficient infrastructure, liquidity and trust had been built did more flexible trading emerge.

Clean hydrogen is currently at a much earlier stage. Therefore, assuming that it will rapidly develop into a fully liquid global market risks repeating a common mistake in energy transitions: Overestimating how fast markets evolve and underestimating the importance of contractual structures.

Recent hydrogen announcements reflect strong, supportive policy intentions and corporate ambition. In particular, governments are introducing subsidies, tax credits and support schemes such as contracts for difference (CfDs) and dedicated hydrogen funding programmes. While these instruments are essential, they do not always address the core issue. In many cases, they reduce costs without fundamentally stabilising revenues. For lenders, this distinction is critical.

At the same time, hydrogen projects are often more complex, involving multiple interdependent components, such as renewable power generation, electrolysis, storage, transport and end-use applications. If these elements are not developed in a coordinated way, projects face significant execution risk – for example, producing hydrogen before demand is secured or building capacity that cannot be fully utilised.

This combination of revenue uncertainty and execution risk explains why many projects stall before reaching FID.

Scaling the clean hydrogen solution

If clean hydrogen is to scale as both a climate and an energy security solution, project design needs to shift in four ways:

Addressing the hydrogen financing challenge

The current geopolitical environment is a powerful reminder that energy security and climate goals are increasingly aligned. Clean hydrogen and its derivatives have the potential to play a key role in both. But, without addressing the financing challenge, that potential will remain largely theoretical.

Business leaders and policy-makers must understand that accelerating the energy transition is about deploying new technologies, but also designing projects that can attract capital at scale. Until that happens, the gap between announced ambition and real-world investment will persist — regardless of how urgent the need for change becomes.

This blog represents the author’s views, but not necessarily the views of the Oxford Institute for Energy Studies, ING Bank N.V., or any of its members.