Why Smaller Hydrogen Networks Could Drive Bigger Gains

Localized hydrogen production reduces costs and risk, pointing to emerging adoption trends and new opportunities for flexible supply models

17 Dec 2025

A shift is under way in the US hydrogen market as companies look beyond large, centralised plants and instead bring production closer to where the fuel is consumed. The move reflects efforts to address high transport costs, long project timelines and infrastructure gaps that have slowed wider adoption.

Interest in decentralised hydrogen networks has grown following a recent strategic investment by Sumitomo Corporation of Americas in Independence Hydrogen. The investment has been viewed by market participants as an endorsement of local supply models that rely on smaller, modular systems to produce and purify hydrogen near end users.

Hydrogen is costly and complex to move. Pipelines and tanker fleets typically require long-term demand commitments to be viable, limiting adoption by early users. Localised production changes that calculation by allowing hydrogen to be supplied directly to warehouses, factories, ports or vehicle depots. Companies can start with smaller volumes and expand as demand builds, rather than waiting for large-scale infrastructure to be completed.

Developers and investors say the appeal of decentralised systems lies in their flexibility. Modular units can be deployed more quickly, adapted to local conditions and scaled over time. This approach fits current market realities, where customers are cautious about long-term commitments and capital-intensive projects.

Federal energy strategy has left room for such models. US policy supports a mix of hydrogen infrastructure, including regional clean hydrogen hubs and efforts to reduce production costs. Localised systems could help stimulate early demand, support pilot projects and limit financial exposure before larger investments are made.

The approach is not without challenges. Smaller facilities must secure reliable feedstocks and operate within regulatory frameworks often designed for large industrial plants. Poorly designed projects can add complexity and raise costs. Proponents argue, however, that these risks are manageable and offset by lower upfront capital needs and faster deployment.

For the hydrogen sector, the trend suggests that growth may come from distribution as much as scale. As decentralised networks gain traction, they could play a role in expanding hydrogen use across transport, logistics and industrial applications, supporting gradual adoption under present market conditions.