Decentralized Hydrogen Deals Point to a Smarter US Growth Path

Smaller, localized hydrogen projects are gaining traction as investors look for faster returns and lower risk alongside ambitious national hub plans

5 Jan 2026

The US hydrogen market is beginning to show signs of a shift in how projects move from planning to delivery, as investors back smaller, decentralised production models alongside large federal-backed hubs.

A recent investment in Independence Hydrogen by Sumitomo Corporation of Americas highlights growing confidence in projects that prioritise speed and flexibility over scale. Rather than building large central plants, the company produces hydrogen close to end users, capturing waste hydrogen from industrial sites and upgrading it for commercial use.

Supporters of the approach argue that decentralised production avoids long development timelines and high upfront capital costs that have slowed many large hydrogen projects. By converting an existing byproduct into a usable fuel, the model aims to bring supply to market more quickly and with lower risk.

The investment comes as parts of the industry reassess the pace and complexity of large hydrogen hubs, which remain central to long-term US decarbonisation plans. Developers and investors have cited challenges including complex permitting, high capital intensity and uncertainty over the durability of federal incentives. These factors have increased interest in projects that can be built in stages and begin generating revenue earlier.

Independence Hydrogen plans to use the new funding to expand into additional regions and customer segments. Its initial focus includes warehouses, backup power systems and small vehicle fleets, where demand is local and reliability is often more important than volume. Producing hydrogen near customers reduces transport costs and limits exposure to supply disruptions, a persistent constraint in early hydrogen markets.

Distribution is handled through partnerships with established fuel distributors such as Suburban Propane, allowing the company to use existing delivery networks rather than build new infrastructure. Developers say this shortens deployment timelines and simplifies regulatory requirements for customers.

Critics argue that decentralised projects alone will not deliver the scale needed to meet national climate targets. Even so, many analysts see them as a useful complement to hub development, helping demand, infrastructure and regulation evolve in parallel.

As capital continues to flow towards repeatable and lower-risk models, local hydrogen production is emerging as a meaningful part of how the US hydrogen market develops.