The last major corporate engagement I completed before changing the direction of my business was in the hydrogen sector.
At the time, I was looking into transport options for hydrogen from the Middle East to Europe. The assignment seemed straightforward enough. Produce hydrogen where energy is comparatively cheap, transport it to markets eager to consume it, and build a shiny new industry around the process.
Simple.
At least that was the sales pitch.
Reality, as usual, proved rather less cooperative.
What struck me most was not the cost of producing hydrogen itself, although that was already eye-watering enough. Producing molecular hydrogen at scale is a remarkably expensive exercise. It consumes vast amounts of energy and infrastructure while delivering a product that then proceeds to create a fresh collection of engineering headaches.
But production was only the beginning.
The true horror emerged once one started looking at storage and transportation.
Hydrogen is the diva of the energy world.
It is tiny, difficult to contain, prone to escaping through places where other molecules behave themselves, and possesses an energy density by volume that makes logistics planners reach for strong drink. Compressing it requires energy. Liquefying it requires even more energy. Storing it requires specialized infrastructure. Transporting it requires further expense. Then one has to handle it at the receiving end before it can finally be used for whatever purpose justified this circus in the first place.
At every step of the chain, another invoice appears.
And every invoice is larger than the last.
The realization hit me with all the subtlety of a freight train.
You need copious subsidies merely to produce the stuff.
You need another mountain of subsidies to move it.
You need further subsidies to build the infrastructure.
And then, once the hydrogen finally arrives in the consuming country, you often need yet more subsidies to persuade customers to use it.
It is subsidies all the way down.
An entire industrial ecosystem dependent upon political generosity.
Now, there are periods in history when such arrangements can survive.
When money is plentiful, governments can afford grand experiments. When credit is cheap, politicians can pretend there are no trade-offs. When central banks are creating oceans of liquidity, every ambitious project can find a sympathetic audience.
The last two decades were full of such illusions.
Money could always be found.
Or at least it could be made to appear.
That distinction mattered surprisingly little while the music was still playing.
But the world is changing.
Money is becoming scarcer.
Not because politicians suddenly discovered fiscal responsibility. That would require a miracle of biblical proportions. No, money is becoming scarce because reality is beginning to reassert itself.
Resources are finite.
Budgets are finite.
Patience is finite.
And voters are beginning to notice.
Every euro directed toward a politically fashionable hydrogen project is a euro that cannot be spent elsewhere.
That is the uncomfortable arithmetic.
Subsidies do not emerge from a magical vault hidden beneath parliament buildings. They come from taxpayers, debt issuance, inflation, or cuts elsewhere.
Someone always pays.
The only question is who.
And increasingly that answer leads toward politically sensitive territory.
Welfare.
Healthcare.
Education.
Public services.
Support for families.
Support for pensioners.
Infrastructure maintenance.
The sorts of things voters notice when they stop working.
Politicians understand this perfectly well.
Which creates a problem.
A hydrogen project that requires endless support is competing against line items attached to real human beings. Real voters. Real constituencies. Real consequences at election time.
That is not a battle many politicians wish to fight.
Virtue signaling is attractive when it costs little.
It becomes considerably less attractive when it threatens re-election.
The public may tolerate expensive experiments during prosperous times. During leaner periods they begin asking impolite questions.
Questions like:
How much does this cost?
Who benefits?
When does it become profitable?
Why are we paying for this again?
Those questions have sharp edges.
And many hydrogen projects have remarkably few convincing answers.
This is the fundamental weakness of any industry built upon political support rather than economic necessity.
When conditions tighten, support evaporates.
Markets can survive difficult periods if customers willingly pay for the product.
Subsidy-dependent industries face a different challenge.
Their customers are often politicians.
And politicians are among the least reliable customers in existence.
They arrive with great enthusiasm.
They leave with equal enthusiasm.
Usually after an election.
Which is why I increasingly suspect that many hydrogen dreams will remain exactly that.
Dreams.
Not because the science is impossible.
Not because the engineering is impossible.
Not because hydrogen lacks useful applications.
But because economics eventually arrives like an uninvited auditor.
And economics has a habit of exposing the difference between something that works and something that only works when governments continuously shower it with gifts.
The age of easy money created many miracles.
The age that follows may be considerably less forgiving.
And that is bad news for any industry whose business model begins and ends with the phrase: “Provided the subsidies continue.”