Clean hydrogen gains traction but faces hurdles, says IEA report

September 22 (Renewables Now) - Low-emissions hydrogen continues to attract strong interest, but cost pressures and slow roll-out of incentives are putting projects at risk, according to the International Energy Agency’s (IEA) latest annual Global Hydrogen Review report, launched today.

Installed electrolyser capacity for hydrogen production could increase from almost 700 MW at the end of 2022, to 2 GW by the end of 2023, with half of it located in China. If all announced projects, including those at an early stage, come to fruition, electrolyser capacity could reach 420 GW by 2030, a 75% rise compared to the IEA’s 2022 review. Annual production of low-emission hydrogen could reach 38 million tonnes by the end of the decade, if all announced projects are realised. Almost three quarters of this will be from renewables-powered electrolysers and the rest from fossil fuels with carbon capture, utilisation and storage.

IEA Executive Director Fatih Birol said that while there has been incredible momentum behind low-emissions hydrogen projects in recent years, economic challenges will now test the resolve of both developers and policymakers to accomplish planned projects. He added that greater progress is needed on technology, regulation and demand creation to fully unlock the potential of low-emissions hydrogen.

IEA’s recommendations include governments taking bolder action to stimulate demand creation, including by combining support measures with regulations, such as quotas or mandates, to require the adoption of low-emission hydrogen in existing applications.

Currently, the combined government targets for low-emission hydrogen production account for 27 million-35 million tonnes by 2030, well above the targets for creating demand, which account for 14 million tonnes.

According to the report, global hydrogen use hit 95 million tonnes in 2022, a rise of nearly 3% from 2021. Low emissions hydrogen, however, accounted for only 0.6% of total hydrogen demand.

The report notes that governments have started to make funding available to back low-emission hydrogen production such as the US Hydrogen Production Tax Credit, the EU Important Projects of Common European Interest and the UK Low Carbon Hydrogen Business Model. Slow implementation of support schemes, however, is delaying investment decisions.

To reduce risks to projects, IEA recommends urgent implementation of these schemes, as well as aiding developers during the inflationary period via interventions like loan guarantees, export credit facilities or public equity investment in projects. The report further calls for tackling market barriers such as licensing and permitting and for fostering international co-operation to accelerate hydrogen certification and mutual recognition of certificates.

The report is available on IEA's website.

Below is IEA's map of announced low-emission hydrogen production projects.