The International Energy Agency's Global Hydrogen Review 2024 reveals a doubling of low-emissions hydrogen projects reaching final investment decision over the past year. Global electrolyser capacity that has secured investment now totals 20 GW. However, the sector faces challenges, including regulatory uncertainties, cost pressures, and insufficient incentives to drive consumer demand.
Despite these hurdles, the global hydrogen industry is expanding, with potential production nearing 50 million tonnes annually by 2030. Achieving this goal requires unprecedented growth, with a compound annual growth rate of over 90%, far surpassing the expansion pace seen in solar power.
China leads the global market, accounting for over 40% of new electrolyser capacity and boasting 60% of global manufacturing capacity, though deployment rates remain sluggish due to lingering uncertainties. While project announcements have increased, actual installed capacity and production volumes are still low, as developers await clearer government support.
IEA Executive Director Fatih Birol stressed the need for demand creation, saying, “The growth in new projects suggests strong investor interest in developing low-emissions hydrogen production, which could play a critical role in reducing emissions from industrial sectors such as steel, refining, and chemicals. But for these projects to be a success, low-emissions hydrogen producers need buyers.” He called for policymakers to focus on demand stimulation, cost reductions, and regulatory clarity.
The review also highlights a gap between production and demand targets. Governments aim to produce up to 43 million tonnes of hydrogen annually by 2030, while demand projections only reach 11 million tonnes. Although some policies like carbon contracts for difference and sustainable fuel quotas are in place to drive demand in aviation and shipping, progress remains inadequate to meet climate goals.
Production costs and supply chain issues also challenge the sector. Electrolysers, in particular, have faced setbacks, with cost reductions reliant on technology improvements, mass manufacturing, and optimised deployment processes. If the global electrolyser project pipeline of 520 GW is realised, hydrogen production via electrolysis in China could become cheaper than producing it from coal by 2030.
The report also identifies untapped opportunities in industrial hubs, where low-emissions hydrogen could replace fossil-fuel-based hydrogen. Additionally, Latin America is highlighted as a potential low-emissions hydrogen hub, with many countries focusing on export opportunities. However, near-term prospects lie in domestic refining and ammonia production, with a phased approach recommended to mitigate risks and build the experience necessary for future large-scale projects.
