While previous years have been filled with a seemingly endless stream of new carbon capture and low-carbon hydrogen project announcements, 2024 was a quieter year marked by companies shifting their focus toward maturing existing plans, taking a more cautious approach to financing and progressing new projects, and waiting for regulatory and funding policies to firm up. For this last installment of our 2025 Energy Outlook Insight series, we reflect on some of the major themes and milestones for carbon capture and low-carbon hydrogen projects in 2024 and discuss what we expect for project development in the coming year.
Consolidated Project Pipeline
Inflation, slower-than-expected market maturation, limited demand for low-carbon products, and regulatory uncertainty forced many companies to rethink their energy transition strategies and downsize project pipelines. In 2024, this led to some noteworthy project cancellations and suspensions:
However, several major projects were still able to reach FID in 2024 amidst these tough market conditions:
Both project cancellations and FIDs throughout 2024 provided insights into the strategies developers used to secure viable projects, e.g., procuring cheap renewable power, taking advantage of existing infrastructure, or securing external funding support. Additionally, these decisions signaled that companies were becoming more selective about which projects they choose to progress. BTU Analytics anticipates that companies will continue to be cautious with their project spending in 2025 as they continue to gain more experience in the market and focus on developing their most promising projects.
CO2 Pipeline and Storage Infrastructure
Permanent CO2 storage is a critical component of many carbon capture projects, and 2024 saw major milestones for storage projects across the globe:
All four of these projects intend to provide a pathway for domestic and/or international parties to sequester their emissions. While this CO2 storage-as-a-service concept has been proposed in various regions, these are some of the first projects to implement the idea at scale. Additionally, these projects indicate industry confidence in the need for integrated CO2 storage hubs.
In the U.S., many storage projects continued to be hampered by the EPA permitting process for Class VI wells. During 2024, the EPA issued only six permits between two storage projects in California and Indiana. This represents a small proportion of the EPA’s application backlog, which currently stands at 56 projects with 161 wells under review. States have been seeking to speed up the permitting process by gaining primacy over Class VI wells, with Louisiana and West Virginia acquiring primacy in January 2024 and January 2025, respectively. Prior to 2024, North Dakota and Wyoming were the only states with Class VI primacy. There are currently eight other states that have started Class VI primacy applications, including Arkansas, Oklahoma, Mississippi, Texas, Utah, Alabama, Colorado, and Arizona. However, most of these states are in the pre-application phase and will likely not gain primacy in 2025.
Final 45V Rules
Progress for many U.S. hydrogen projects, especially those intending to produce green hydrogen with electrolyzers, stalled in 2024 while companies awaited the final rules for the Inflation Reduction Act’s 45V Clean Hydrogen Production Tax Credit. Finally released earlier this month, the rules are considered more lenient than the draft guidance provided in December 2023, most notably in terms of what power sources can be used for green hydrogen projects. However, the fate of the 45V credit and other hydrogen funding programs, such as the Bipartisan Infrastructure Law’s $7 billion Regional Clean Hydrogen Hubs Program, under the Trump administration remains to be seen.
Takeaways
In 2025, BTU Analytics expects the project pipeline for carbon capture and low-carbon hydrogen projects to narrow, as companies continue to prioritize their most mature and commercially viable projects. Two notable FIDs to be on the lookout for in 2025 include Exxon and ADNOC’s blue hydrogen facility in Baytown, Texas and Allied Green Ammonia’s 3 GW green hydrogen project in Australia.
In terms of CO2 pipeline and storage infrastructure, 2025 will be a crucial year for companies to assess the technical success of new storage projects and for third-party emitters to gauge the feasibility of transporting their emissions to these proposed storage hubs. In the U.S., the pace of Class VI permit approvals may be the limiting factor for carbon capture projects in 2025, with projects potentially being delayed if they cannot secure timely storage sites. As for CO2 pipelines, Summit Carbon’s project in the Midwest could help shed some light on the sentiment and regulatory framework surrounding CO2 pipelines to help inform future U.S. projects.
Lastly, with the long-awaited release of the 45V rules, BTU Analytics expects 2025 will prove to be a make-or-break year for many U.S. hydrogen projects. Specifically, increased flexibility for power sourcing may provide some companies with the confidence to progress their green hydrogen projects in 2025. However, project development may remain postponed until after the Trump administration defines its intentions for federal hydrogen funding.
This blog post is for informational purposes only. The information contained in this blog post is not legal, tax, or investment advice. FactSet does not endorse or recommend any investments and assumes no liability for any consequence relating directly or indirectly to any action or inaction taken based on the information contained in this article.