Riyadh has been calling for an international coalition to support the Yemeni government in countering the Houthis – with the support Saudi Arabia has received from its allies so far being less and slower than expected.
The MED This Week newsletter provides informed insights on the most significant developments in the MENA region, bringing together unique opinions and reliable foresight into future scenarios. Today we shed light on whether, in the aftermath of the midterm elections, we can expect a recalibration of US policy in the region.
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In the past few weeks, Saudi Arabia has stepped up political efforts to internationalise the fight against the Houthi threat in Yemen. To this end, Riyadh has been calling for an international coalition to support the Yemeni government in countering the Houthis and, for the first time, it has publicly referred to Russia and China’s alleged involvement, direct or indirect, in the support of the Iranian-backed movement. Five reasons help explain why the Saudis have chosen this very moment to send such messages, which are all part of the same strategy.
Decrypting Saudi Public Messages
In an op-ed published in the New York Times on 27 October, Saudi Arabia’s ambassador to the United States Reema bint Bandar called for a global coalition to support Yemenis in their efforts to militarily defeat the Houthis, and to cut off their financing and weapons supplies. In this regard, she argued that the Houthis today are what the Islamic State was before it seized Mosul in Iraq, proclaiming a caliphate: “a terrorist movement the world underestimated”.
Earlier that month, the deputy minister for public diplomacy at the Saudi Foreign Ministry, Rayed Krimly, claimed that some of the capabilities and intelligence available to Iran and the Houthis came from Russia or China, including commercial entities. He added that Saudi Arabia regularly discusses these matters with both countries and would continue to do so.
These statements reveal a single Saudi goal: to internationalise the fight against the Houthi threat. On the one hand, Riyadh is raising the alarm to rally allies and partners’ concrete backing to “defeat” the Iranian-backed group. On the other hand, by highlighting Russia and China’s alleged support for the Houthis, Riyadh seeks to draw clear red lines in its relationships with both partners; these warnings appear intended to convince the US and its Western allies to step up global efforts to counter the Houthis.
One Goal, Five Reasons
Five reasons explain why Saudi Arabia is pursuing this strategy.
The first regards the Houthis’ continuous attacks on Saudi territory, especially on airports and oil infrastructure, often in breach of Saudi air defences. The return to a full-scale war in Yemen has paralysed the Kingdom, which is set to host prestigious international events, such as Expo 2030. For example, these persistent attacks led to the postponement of summits scheduled for this October, including the Future Investment Initiative conference and the second EU-GCC Summit, with new dates yet to be announced.
The second reason is that, despite the surge in Houthi attacks, Saudi Arabia has, so far, received less and slower support than expected from its allies, except for the United Kingdomand France. The US has been providing intelligence and targeting support, as well as military advisory, while declining to participate in strikes. Meanwhile, the Mecca Defence Alliance’s response has been varied: while Pakistan had already provided troops and air defences to the Kingdom before the Yemen war reignited, the text of the mutual defence pact was ratified by Turkey's Parliament in early November, with the scope of support yet to be determined. The Mecca Defence Alliance aside, after a complex and debated process, the Egyptian Parliament approved measuresto provide purely defensive support to Saudi Arabia.
The third reason is related to the limited achievements of the Yemeni internationally recognised government’s counter-offensive against the Houthis, carried out with Saudi air cover. Back in October, the Yemeni government claimed to have secured the Red Sea waterway, although control over Mokha and the Bab al-Mandab Strait, seized by the Houthis in September, was contested at the time and remains so today. Furthermore, the Houthis have kept Taiz, the country’s third-largest city, under siege and started missile attacks against Aden, the provisional capital where the government has relocated, targeting the airport and even the presidential palace.
The fourth reason is the looming possibility that Israel and/or the US resume strikes against Iran soon. In this case, Saudi Arabia would find itself in a weaker strategic position than it was in in February because of the simultaneous war in Yemen, which has also contributed to export disruptions in the Red Sea corridor. In fact, in case of renewed strikes against Tehran, the Houthis may increase pressure on the US by stepping up attacks on Riyadh. Against this backdrop, continued Houthi targeting of the Kingdom, despite the Saudi-led Mecca Defence Alliance’s visit to Tehran for talks on 26 October, highlights the slow progress and limitations of diplomatic outreach.
The fifth reason regards the European Union’s position vis-à-vis the Houthis. Following a proposal by EU High Representative for Foreign Affairs and Security Policy Kaja Kallas, as late as in October, the European Parliament urged the EU Council to designate the Houthi movement as a terrorist group. On this issue, the Houthi attack against Riyadh airport launched on 11 October, which killed 13 people and wounded more than 300, played a decisive role in hardening the European stance towards the Iranian-backed group. On this note, Saudi Arabia hoped that an EU designation would further restrict international financing and procurement channels sustaining the Houthis.
Is the Time Ripe? Lessons Learned in 2023
In recent years, international stakeholders’ awareness of the Houthi threat has significantly increased. Nevertheless, two takeaways must be considered, based on the lessons learned in 2023, when the Houthis mounted attacks against commercial vessels in the Red Sea. The first concerns States’ reluctance to act against a threat if their interests are not directly targeted. Since July, the Houthis have exclusively attacked Saudi assets, such as airports, energy sites and tankers, without affecting other stakeholder’s material interests. This has likely pushed regional and international powers to refrain from action, isolating Riyadh. The second takeaway is that, once States decide to act, they are more likely to opt for fragmented responses rather than joint initiatives. For instance, following the 2023 Houthi attacks, the US and European States organised two distinct naval missions – Prosperity Guardian and Aspides – to try to restore maritime security in the Red Sea, using different strategies to achieve a shared objective.
In the light of these many reasons, Saudi Arabia is sounding the alarm over the Houthi threat with renewed urgency. However, past experience suggests that the time may not yet be ripe for a truly global effort, contrary to Riyadh’s wishes.
At a time of growing pressure on democracy and multilateralism, international cooperation anchored in shared values is essential to building a common future of progress and well-being. As countries navigate profound geopolitical shifts, growing uncertainty and increasingly complex development challenges, working together and pursuing common solutions becomes a strategic necessity. Strong partnerships and a renewed commitment to international cooperation are needed to translate shared principles into tangible improvements in people's lives. This requires recognising that democracy, development, and multilateralism are deeply intertwined and must evolve together to respond to changing global realities.
Italy and the United Nations Development Programme (UNDP) are advancing this vision through a stronger partnership, anchored in the UNDP Rome Centre for Climate Action and Energy Transition (UNDP Rome Centre). My recent official mission to Rome reinforced my conviction that, in a world more interdependent than ever before, this is the precise moment to deepen development cooperation between Italy and Latin America and the Caribbean (LAC).
Far from starting from scratch, this relationship rests on unique, distinctive traits built on profound historical, cultural, commercial and human ties. Millions of people across LAC trace their roots to their homeland, while Italian citizens form a large community whose ties to Italy remain strong. Argentina and Brazil alone account for more than 1.6 million registered Italian citizens, who can directly elect their representatives to the Parliament in Rome.
These transcontinental bonds are more than a shared history. They provide a strong foundation for partnerships built around shared values, including the safeguarding of democratic and multilateral principles. Today, these principles are under pressure and cannot be taken for granted. Political polarisation, disinformation, organised crime, human mobility and climate-related crises are testing the ability of democratic and multilateral institutions to respond to citizens’ demands.
At the same time, the development cooperation model is reshaping, shifting away from merely assisting others catch up, and moving toward supporting every society to build the capacity to prosper together. Aid is becoming marginal relative to domestic flows and private investment. Last year, aid from Organisation for Economic Co-operation and Development donors experienced the largest drop on record, falling by 23%, with the five largest donors accounting for 96% of the decline. The world that the current model was built for has changed, and a new one has yet to be fully constructed.
This paradigm shift was reflected in the G7 Summit in 2026 in Évian, where leaders placed greater emphasis on investment, guarantees, blended finance and private capital, alongside concessional resources for areas where they are most needed. What unlocks and sustains this approach is the prevalence of the rule of law, clear regulatory frameworks and accountable institutions capable of building trust.
In parallel, countries in LAC are increasingly drawing on their own resources, including domestic revenues, to advance their development priorities. But domestic resources are only part of the picture. With UNDP support, countries are moving from fragmented financing sources toward more integrated financing strategies aligned with their development priorities, bringing together a broader range of actors, capabilities and opportunities together to build partnerships and align public and private resources at scale.
But mobilising more resources is not enough. What matters is how effectively they are translated into tangible results for people – better jobs, quality education and affordable housing – by connecting policies, institutions and financing to countries' priorities. This will, ultimately, be the primary source of trust and legitimacy for our democratic and multilateral institutions.
Policy, Finance and Delivery: Italy Innovating Alongside UNDP
Italy’s partnership with UNDP demonstrates how political commitment, technical expertise and financing can come together to pave the way for a development cooperation model suited to today’s world. The UNDP Rome Centre serves as the operational core of this vision, promoting high-impact global initiatives to accelerate a just energy transition through youth participation, access to clean and affordable energy and public-private investment in climate solutions.
Through the Platform for Investment Support and Technical Assistance, known as PISTA, UNDP projects to unlock more than 500 million dollars in blended finance by 2027 alongside partners such as Cassa Depositi e Prestiti. Other initiatives are also translating this ambition into action. Energy for Growth and Youth4Climate – which has already funded 200 youth-led climate solutions in 69 countries since 2023 – demonstrate that mobilising resources at scale is entirely possible.
The recent decision by Deputy Prime Minister and Foreign Minister Antonio Tajani and UNDP Administrator Alexander De Croo to strengthen the UNDP Rome Centre and to begin moving headquarters management functions of the UN Capital Development Fund to Rome will solidify the Italian capital as a cutting-edge financial and technical hub for development.
The Next Frontier: LAC as a Strategic Partner
Translating shared values into tangible progress for people demands a partnership that looks beyond traditional models of cooperation and embraces opportunities for the future. LAC is not a passive recipient of cooperation, but a strategic partner with assets, capabilities and experiences to help shape solutions to shared global challenges. The region brings distinct strengths to a partnership with Italy, creating opportunities to advance common priorities while delivering concrete development benefits on both sides of the Atlantic:
A foundation of shared democratic values: LAC remains the most democratic region in the developing world. Despite the mounting pressures detailed in UNDP’s Democracy and Development Report “Democracies Under Pressure”, today more than four in five people in the region live under democratically elected governments. This democratic tradition, combined with decades of institutional strengthening and a longstanding commitment to multilateralism, provides a strong foundation for cooperation, investment and collective action on global challenges.
A strategic player in the global energy transition: LAC is a biodiversity powerhouse, a leader in renewable energy and home to substantial reserves of critical minerals essential for decarbonisation. As G7 countries seek to diversify strategic supply chains and accelerate the energy transition, the region can become an indispensable partner. But the ambition must extend beyond extraction and export of natural resources. The real opportunity lies in turning these endowments into engines of productive transformation, quality employment and more resilient development.
A partner for innovation and shared prosperity: Beyond its natural wealth, LAC offers opportunities for joint investment, technological collaboration and the development of new productive capabilities. Partnership with Italy can help strengthen regional value chains, expand technology transfers, develop resilient infrastructure and foster innovation, while opening new markets and opportunities for Italian firms. The objective is to build a partnership that generates value, strengthens markets and delivers tangible benefits for people in both regions. During my engagements in Rome, including meetings with private sector representatives such as Enel and Enel Foundation, multilateral organisations such as the Italo-Latin American International Organization (IILA), and government officials, I was encouraged by the shared recognition of the opportunities that closer cooperation with LAC can create, as well as the interest in moving beyond traditional cooperation models.
Italy as a System, UNDP as a Platform
The success of this next chapter relies on coupling two complementary forces: Italy as an integrated system, and UNDP as a global bridge and regional platform in LAC. The Sistema Italia brings together the capabilities of the country’s public institutions, private sector, industrial base, research centres and innovation ecosystem. Italian companies contribute entrepreneurial experience, technological expertise and innovation capacity across sectors. UNDP offers over six decades of presence on the ground, the trust of governments, specialised knowledge and the technical capacity to adapt, innovate and scale what works.
A living testament to this synergy is the partnership between IILA, the Bambino Gesù Children's Hospital – the Holy See’s world-renowned paediatric research hospital – and UNDP to develop a regional paediatric training centre in Panama serving six Central American countries and the Dominican Republic. Other Italian initiatives, including the Ministry of Environment and Energy Security's cooperation with Caribbean Community countries on climate and sustainable finance, also point to opportunities to strengthen resilience and support vulnerable island States highly exposed to climate risks.
While resources are key, the ultimate strength of our partnership will be measured by what it can deliver to people: greater opportunities, improved well-being and the ability to shape their own futures. By connecting the fabric of the Sistema Italia with UNDP’s platform we can prove that international cooperation remains the most powerful tool for renewing our democracies, rebuilding trust and advancing resilient human development. The task now is to translate the existing ties between Italy and LAC into partnerships that respond to today's challenges, while contributing to reshaping the future of democracy, development and multilateralism.
The haste and improvisation behind United States President Donald Trump’s plan to bring peace to the MENA region have produced disappointing results, both on the ground and at home. His activism in the Middle East, particularly the war against Iran launched on 28 February 2026, has contributed to rising living costs in the US. The Democrats’ major victory in the midterm elections was partly driven by voters’ discontent over soaring fuel prices and, among segments of the Democratic electorate, growing criticism of Israel. Opposition to the war also emerged within the MAGA movement, reflecting both the impact of the global energy shock on the middle classes and the perception that Trump had betrayed his own guiding principle of America First. Since the beginning of his second term nearly two years ago, Trump has sought to resolve conflicts across the MENA region, from Gaza and Yemen to Iran and Lebanon, as well as Libya and Western Sahara. His most significant achievement was brokering the October 2025 ceasefire between Israel and Hamas. Yet Israeli attacks on Gaza have continued, with the United Nations recording at least 1,500 casualties in the year since it began, while the 20-point Peace Plan remains largely unimplemented, with the Board of Peace failing to fulfil its commitments so far. Nor did the May 2025 ceasefire between Washington and the Houthis bring lasting stability to Yemen: hostilities with Saudi Arabia resumed in July 2026, creating fresh tensions around the Bab al-Mandab Strait. Trump’s attempts to resolve the Iranian nuclear dispute through diplomacy, first in spring 2025 and again in early 2026, were both cut short by US-Israeli air strikes. These failed to bring down the Islamic Republic or settle the uranium enrichment dispute, while giving Tehran another strategic weapon, namely, control of the Strait of Hormuz. Similarly, the June 2026 ceasefire between Israel and Lebanon has failed to secure an end to (mostly Israeli) attacks, a withdrawal from southern Lebanon or Hezbollah’s disarmament – the very conditions underpinning the agreement. In North Africa as well, Trump’s unconventional, ad hoc approach has yet to produce tangible results. Libya remains divided despite the Boulos Plan, promoted by the US Senior Advisor for Arab and African Affairs (after whom the plan is named), which prioritises a business-first approach over the more inclusive UN-led roadmap. Meanwhile, Washington’s determination to back Morocco’s position on Western Sahara contributed to the non-renewal, in October 2026, of the UN peacekeeping mission deployed there for 35 years, removing the only framework within which negotiations, however fruitless, had taken place. As the saying goes, those who do nothing make no mistakes. Yet Trump’s record in the MENA region has so far produced more setbacks than successes. The question now is how his unpredictable response to the recent electoral defeat will affect US policy in the region. Iran is likely to be the first testing ground.
Experts from the ISPI network discuss implications of the midterm election results across various contexts in the MENA region.
Will inertia now prevail in US policy towards the Middle East?
“A key question is whether Trump will punish Iran or Netanyahu for the drubbing the Republican Party took at the polls. JD Vance has acknowledged that the war, and the high energy prices it caused, were a major factor in the party’s epic defeat. But Trump has said he would still have gone to war despite its impact on the economy and, as commander-in-chief, he has the power to resume major combat. This might be less likely if Netanyahu is replaced by a new Israeli government more concerned about Israel’s plummeting popularity in the US. Trump has already said that there will be no continuation of military aid to Israel, but defense and intelligence cooperation will continue, with Israel continuing to buy US weapons unless the new Congress tries to block such sales, which may be difficult. Inertia is a powerful element of US foreign policy no matter who wins elections.”
Palestinian rights gain limited ground in Washington
“For Palestinians, the Democratic sweep may offer a political opening rather than a fundamental shift in US policy. The election results reflect growing support for Palestinian rights, accountability for Israeli violations of international law, and an end to US support for Israel. In a rebuke of the US-Israel relationship, several newly elected and incumbent lawmakers are part of the progressive wing of the Democratic Party and are outspoken advocates for Palestinian rights and for ending US aid to Israel. However, the Democratic leadership remains deeply committed to unconditional support for Israel, alongside a Trump administration largely aligned with Israeli interests. While a Democratic Congress could increase scrutiny of military aid, settlements and violence in the West Bank, and humanitarian conditions in Gaza, any immediate changes are likely to be limited. But the election underscores the emergence of a growing political constituency demanding a new rights-based approach to Israel and Palestine, laying the groundwork for more significant policy debates and shifts in the years ahead.”
Tamara Kharroub, Executive Director, Arab Center Washington DC
A Democratic Congress, an anxious Israel: is the US-Israel alliance at risk?
“The Democrats’ sweeping victories in both chambers of Congress represent a strategic warning for Israel, not an immediate rupture with Washington. President Trump retains broad foreign policy powers and a veto, but a Democratic Congress can intensify scrutiny of arms transfers, military aid, the Gaza war and West Bank violence – turning Israel into a recurring subject of partisan confrontation. The result also reflects public frustration with the Iran war, potentially increasing pressure on Trump to seek a diplomatic exit, even as he pursues a Middle Eastern legacy. In Israel, the response is mixed but increasingly anxious. Opposition figures blame Netanyahu’s close identification with Trump for eroding bipartisan support, while the political uncertainty following Israel’s own election complicates any reset. Trump’s surprise claim that annual military assistance will end early – despite an existing agreement through 2028 – adds urgency. The challenge is to rebuild bipartisan ties and anchor security cooperation in mutual, enduring interests.”
“For Tehran, the US midterm elections likely prompted a mix of satisfaction at seeing Trump’s party weakened and worry that the conclusion of legislative races would lift a restraint on the White House for potentially resuming military action. Facing the prospect of either sustained pressure on its beleaguered economy or a possible resumption of major hostilities, Iran’s government has been aggressive in its warnings about the consequences of the latter, while also negotiating terms to relieve the former. But while weeks of intense diplomatic engagement involving various intermediaries have sought to find an off-ramp, they have, at least so far, remained hung up on familiar issues that Tehran seems reluctant to make concessions on – sanctions relief, the Strait of Hormuz, the fate of its fissile material and wider nuclear programme – as well as the sequence wherein one side’s commitments would be reciprocated by the other.”
Naysan Rafati, Senior Analyst, International Crisis Group
Negotiations no longer in Western Sahara
“Western Sahara is, perhaps, the most geographically and geopolitically peripheral case in which Trump has sought to claim credit for bringing about a peace settlement. Yet the dispute remains highly significant for the balance of power in the MENA region, particularly the Maghreb. Although the entire process has unfolded within the UN framework – through the two Security Council meetings held at the end of October 2025 and October 2026 to renew the mandate of the United Nations Mission for the Referendum in Western Sahara (MINURSO) – the international organisation’s role has been increasingly eroded by the negotiations held over the past year between the parties involved. Washington has called for a swift resolution based on Morocco’s proposal aimed at granting autonomy to the disputed territory, which was first put forward in 2007 and a detailed version of which was presented to the Polisario Front only this year. However, US pressure to impose this solution and rule out a referendum – one of MINURSO’s core mandates – has failed to deliver results. With the renewal of the peace mission mandate blocked by both Russian and US vetoes, what remains untouched is the status quo. More worryingly, the prospect of an armed conflict between Morocco and Algeria can no longer be dismissed as a remote one.”
Hydrogen has entered a critical but necessary phase in its development. After several years of ambitious targets, large project announcements and expectations of rapid cost reductions, developers are confronting the practical constraints and long lead times of large-scale energy deployment. Securing affordable low-emissions supply, sustained demand, infrastructure, permits and finance takes longer than early projections often assume.
This phase, which I call the “valley of realization,” exposes the gap between technical feasibility and commercial viability within integrated energy systems. Project delays and cancellations are often interpreted as evidence that hydrogen has failed. But they can also reflect a process of industrial learning and market selection, helping to clarify where —and under what conditions—hydrogen can generate sufficient value to justify investment.
Solar and wind offer useful precedents. Both industries experienced periods of heightened expectations, policy-driven expansion, difficult economics and consolidation, requiring repeated adjustments to business models and support mechanisms. Their progress depended on manufacturing improvements and learning by doing, alongside effective project execution, grid integration, dependable revenues and reliable supply chains.
Hydrogen is undergoing a comparable process, although its trajectory and eventual scale will reflect different technical and market conditions. The experience of solar and wind demonstrates the importance of commercial discipline and adaptation across energy systems, but it does not establish that every hydrogen application will eventually become competitive.
The connection goes beyond this historical parallel. The renewed interest in hydrogen owes much to the substantial cost reductions achieved by solar and wind, technologies once considered too expensive for widespread adoption. Their increasing competitiveness, together with advances in electrolyzer technology and manufacturing, has improved the prospects for low-carbon hydrogen at scale. Progress in one part of the energy system has opened opportunities in another.
Why this cycle is different
Lower renewable generation costs do not automatically translate into affordable hydrogen delivered to customers. The final cost depends on electricity procurement, electrolyzer utilization, capital costs, operating performance, water availability, compression, storage, transport and certification. Variable renewable generation creates a trade-off: electricity may be inexpensive when available, but electrolyzers must operate enough hours to recover their capital costs. A project designed around the lowest electricity price may therefore produce more expensive hydrogen than one using a higher cost but more consistent power supply. The comparison with solar and wind has limits: falling component costs do not guarantee equivalent reductions in the cost of the service delivered by the complete system.
Hydrogen is an energy carrier, not a primary energy source: producing it consumes energy, and further losses arise from conversion, storage and use. Direct electrification will often provide a more efficient pathway. Hydrogen has a stronger case where molecules serve as an essential feedstock or provide a service that electricity cannot deliver as effectively or at lower total system cost. Such applications include existing industrial uses (such as refining and ammonia production), industrial processes that are difficult to decarbonize, hydrogen-derived fuels and, under suitable conditions, long-duration energy storage.
Hydrogen can complement renewable and nuclear generation by converting low-emissions electricity into chemical form for later use, potentially enabling long-duration or seasonal storage. Stored hydrogen can then supply industrial users or be reconverted into electricity, although the value of this flexibility must be weighed against conversion losses and infrastructure costs.
These applications must be assessed by comparing the costs, emissions, reliability and performance of complete systems delivering equivalent services. The comparison should also include the emissions and energy security implications of continued reliance on incumbent fuels.
From announcements to investment decisions
Deployment remains modest relative to earlier ambitions and investment announcements. Low-emissions hydrogen accounts for only a small fraction of global hydrogen production (less than 1% in 2025, according to the IEA), and current project pipelines suggest that conventional hydrogen will continue to dominate supply through the end of the decade. Announcements alone therefore remain a poor measure of progress.
The hydrogen sector is moving beyond a race for technological leadership and capacity expansion, fueled partly by subsidies and the pursuit of first-mover advantages. Early access to public support encouraged developers to announce projects and secure strategic positions before markets and infrastructure had matured. Attention is now turning to industrial reliability, system integration and bankable demand.
Electrolyzer manufacturers illustrate this adjustment. They face slower-than-anticipated demand growth, higher financing costs and manufacturing overcapacity, despite accumulating technical and commercial experience. This combination is characteristic of the valley of realization: knowledge continues to grow, but the investment pipeline narrows as early assumptions are tested against the realities of deployment.
Limited deployment and investment in low-carbon hydrogen constrain manufacturing experience, infrastructure development and the cumulative learning through which costs and risks decline. Innovation at this stage is not confined to electrolyzer technology; it also involves project design, financing, infrastructure, contracting and market formation.
A bankable hydrogen project requires more than a subsidy or a favorable production cost estimate. It needs customers prepared to enter into long-term purchase agreements, reliable electricity or feedstock supply, equipment backed by credible performance guarantees, and access to storage and transport. Securing such commitments is particularly challenging where low-emissions hydrogen carries a substantial premium over conventional alternatives. Industrial customers operating in competitive markets may be unable or unwilling to absorb that premium unless regulation, carbon pricing, procurement requirements or other market mechanisms reward emissions reductions.
Construction, regulatory and market risks must be allocated to the parties best able to manage them. Certification and tracking along the value chain must substantiate the product’s emissions benefits. Public support can bridge initial cost gaps and reduce revenue uncertainty, provided it is sufficiently stable and predictable to support the long-term financing typical of the energy sector. Deployment targets cannot, by themselves, create these commercial conditions.
The policy challenge is to sustain commitment over the time required to build energy infrastructure and markets at scale. Jurisdictions able to align industrial policy, infrastructure development, financing and demand creation over long time horizons may be better positioned to bring technologies into commercial use than those relying primarily on individual project incentives.
Disciplined project selection can improve capital allocation. Projects serving established industrial demand, supported by firm offtake agreements and located near enabling infrastructure have a clearer path to final investment decision (FID). Those that depend on export terminals, pipelines, import rules and premium-paying customers all developing in parallel face interdependent risks. Coordinated infrastructure investment and efficient market designs may resolve some of these challenges. Other projects will need to be redesigned, developed in stages or cancelled.
Efficiency at the system level
A race to maximize capacity through individual projects can duplicate infrastructure and leave assets underutilized or stranded. Regional hydrogen hubs offer a more coherent approach by bringing production, identifiable demand and shared infrastructure together. As with natural gas, regional networks such as the SoutH2 Corridor could provide a foundation for wider trade as infrastructure, demand and commercial agreements mature, although hydrogen and its derivatives may follow different pathways.
Anchor customers can support the initial investment in production, storage and transport, allowing additional users to join as the network develops. In some regions, replacing conventional hydrogen in refining and ammonia production may establish demand sooner than creating entirely new applications. In others, the location of industrial clusters, ports or suitable storage resources may favor a different sequence. Resource availability, industrial structure, power market design and regulation will determine which configurations are most viable.
Spain’s Puertollano project, inaugurated in 2022, integrates a 100 MW solar photovoltaic plant, a 20 MW electrolyzer, a 20-MWh lithium-ion battery system and about 6 tons of hydrogen storage to supply an existing ammonia plant. The €150 million facility was designed to produce up to 3,000 tons of renewable hydrogen per year. According to Iberdrola the project is expected to avoid approximately 39,000 tons of CO₂ emissions per year. Hydrogen storage helps maintain a stable supply to the ammonia plant while enabling a more efficient use of variable renewable generation. The project illustrates how renewable electricity, battery storage, and hydrogen production and storage can complement one another operationally, enhancing system flexibility and enabling more effective integration of renewable energy. However, the project documentation does not demonstrate a cost advantage over conventional hydrogen production.
The hub approach makes these relationships central to investment decisions. Production capacity must be developed alongside the infrastructure and demand needed to use it, with expansion based on credible expectations of utilization. Commercial discipline can help developers and investors assess whether projects can deliver reliable emissions reductions at acceptable costs. For EU Member States, the priority is to align policy commitments with infrastructure lead times and credible demand, while retaining the flexibility to redirect support as evidence develops. Success should be judged by the contribution of the overall system to affordability, energy security and decarbonization, rather than announced capacity alone.
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