The International Energy Agency has predicted that the growth of low-emissions hydrogen between 2024 and 2030 will “resemble the fast expansions” of technologies including solar. But the IEA and participants at the latest meeting of our Power-to-X Leadership Council have highlighted ongoing challenges with cost, political support and off-take deals.
The growth of low-emissions hydrogen between 2024 and 2030 is set to “resemble the fast expansions of other clean energy technologies seen in recent years, such as solar PV”. That is one prediction from the International Energy Agency (IEA) in the fifth edition of the ‘Global Hydrogen Review’ report that was published last Friday (12th September).
The IEA bases that forecast on the fact that production of low-emissions hydrogen from projects that are already operational or have reached final investment decision is set to reach 4.2 million tonnes per year (Mtpa) by 2030, which is a fivefold increase compared to the figure in 2024. That also means low-emission hydrogen would rise from being 1% of total global hydrogen production today to around 4% in 2030.
In addition, the IEA forecast that an extra 6 Mtpa of low-emissions hydrogen production projects had “strong potential” to be operational by 2030 “if effective policies to create demand and facilitate off-take are implemented”. But the challenges for low-emissions hydrogen production discussed elsewhere in the report, and at the latest meeting of Tamarindo’s Power-to-X Leadership Council in Madrid last Tuesday (9th September), indicate that it is far from certain that the technology will mimic the growth of solar.
“Not met all of the expectations”
The IEA reported that low-emissions hydrogen production has gone from a handful of demonstration projects in 2021 to over 200 committed investments today, and they are increasing in both number and scale. It said this reflected “the importance of hydrogen for climate goals, energy security and industrial competitiveness”.
But it also recognised that low-emission hydrogen has “not met all of the expectations raised at the start of the decade and remains uneven”. The Covid-era excitement has given way to uncertainties around costs, the state of supporting infrastructure, and the evolving regulatory frameworks needed to enable faster deployment. Electrolysers are more expensive, natural gas is cheaper, and off-taker demand has slowed too.
These challenges have led to a wave of project delays and cancellations, and reduced the expectations for the rollout of low-emissions hydrogen this decade. It identified that potential production of low-emissions hydrogen by 2030 from announced projects has declined from 49 Mtpa in last year’s report to 37 Mtpa this year, or a fall of 24.4%.
It added that a decline in electrolysis-based projects accounted for 80% of that slump, with cancellations of early-stage schemes in Europe, the Americas, Africa and Australia.
The appetite for using hydrogen in sectors including refining, chemicals and shipping is still there, but policies to create demand are being implemented slowly. Europe has the amended Renewable Energy Directive, also known as RED III, and other policies like the International Maritime Organisation’s Net-Zero Framework inspire some confidence – but low-emissions hydrogen developers are clear that far more is needed.
Leadership Council: Key takeaway points
Low-emissions hydrogen developers and investors at the latest meeting of our Power-to-X Leadership Council echoed concerns in the IEA report that government policies in Europe are not going to drive the installation numbers that were promised.
For example, one developer in the UK argued that some projects that secured support in the government’s Hydrogen Allocation Rounds 1 and 2 (HAR1 and HAR2) are now turning down those funds, worth around £500m, as they are unable to meet installation timelines. They also explained that green hydrogen developers in the UK are struggling to secure hydrogen off-take deals as customers will not sign deals that match the length of the 15-year Low Carbon Hydrogen Agreements awarded in HAR1 and HAR2.
In the European Union, experts at the Leadership Council said the EU was being too strict about the types of green hydrogen projects it wanted to back with its European Hydrogen Bank funding initiative, which is shutting out innovative projects. This is in addition to wider political turmoil in key markets such as France, where Prime Minister François Bayrou last week lost a vote of confidence in the National Assembly. Major political change can dramatically shift energy policy, including for green hydrogen.
Developers also said they are finding it a challenge to secure green hydrogen off-takers because of the cost of green hydrogen compared to non-green alternatives; the need to provide certainty over volumes of green hydrogen in those deals; and the impacts that fluctuating prices of green power can have on the price, and thus project profit margins.
However, they welcomed the recognition in the industry that green hydrogen has more focused use cases than in 2020, when the fuel was being seen as a panacea for a wide range of industry ills. The narrower policy focus on unlocking low-emissions hydrogen for use in refineries, ammonia production and for green aviation fuels helps developers. But they said that more contracts, such as a recent deal by TotalEnergies, are needed.
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