A recent report from the International Energy Agency (IEA) indicates that while investments and initiatives in low-emissions hydrogen are on the rise, there is a pressing need for policies that can stimulate demand in critical areas like heavy industry, refining, and long-distance transportation to accelerate deployment.
Sustained momentum amid challenges
The report emphasizes that a surge of new projects demonstrates sustained momentum for low-emissions hydrogen, despite ongoing challenges such as regulatory uncertainties, persistent cost pressures, and insufficient incentives to boost demand from potential buyers.
Doubling down on production capacity
According to the IEA’s annual Global Hydrogen Review 2024, the number of projects that have achieved final investment decisions has doubled over the past year, with the potential to quintuple global low-emissions hydrogen production by 2030. Currently, the total electrolyser capacity that has reached this stage stands at 20 gigawatts (GW) worldwide.
Ambitious production goals
“If all announced projects come to fruition globally, total production could approach nearly 50 million tonnes annually by the end of this decade,” the IEA stated. However, this would necessitate the hydrogen sector to expand at an extraordinary compound annual growth rate of over 90 percent from now until 2030, a rate significantly higher than that experienced by solar PV during its most rapid growth phases.
China’s dominance in electrolyser production
The report notes that out of more than 6 GW of electrolyser capacity that secured final investment decisions in the last year, China represents over 40 percent. With its expertise in the mass manufacturing of clean energy technologies, including electrolysers, China accounts for 60 percent of global electrolyser production capacity, which, at 25 GW annually, far exceeds the global average deployment rate.
Role of investors and policymakers
The IEA Executive Director, Fatih Birol, noted that the increase in new projects reflects strong investor interest in low-emissions hydrogen production, which could play a crucial role in reducing emissions from industrial sectors such as steel, refining, and chemicals. He emphasized that for these initiatives to succeed, it is essential for low-emissions hydrogen producers to find buyers. Birol also pointed out that policymakers and developers need to carefully consider strategies to foster demand while simultaneously reducing costs and ensuring clear regulations that would support further investment in the sector.
Disparities in production and demand targets
The report also highlights a disparity between government production and demand targets. Worldwide production goals sum up to around 43 million tonnes per year by 2030, but demand projections only reach a little over a quarter of that, at 11 million tonnes by 2030. Some governmental policies are already in place to encourage demand for low-emissions hydrogen and hydrogen-based fuels.
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