Rising costs and uncertain regulatory and demand picture have made low-emission hydrogen projects more challenging and clean hydrogen production by 2030 could be a quarter lower than expected at this time last year, the International Energy Agency (IEA) said on Friday.
The low-emission hydrogen uptake is not yet meeting expectations set by industry and governments in recent years, the agency said in its annual Global Hydrogen Review published today.
High costs, demand and regulatory uncertainty, and slow infrastructure development continue to impede growth, the IEA said, although it still expects robust expansion to 2030 despite the wave of project cancellations.
The IEA’s latest analysis of announced projects found low-emissions hydrogen production by 2030 now has the potential to reach up to 37 million tons per year. That’s down from a potential 49 million tons per year, projected last year based on announced projects—nearly a 25% decline.
Actual production is even likely to be lower than the 37 million tons per year, as not all announced projects will be ultimately built, the IEA warned.
Projects that are operational, under construction, or have reached a final investment decision by 2030 are set to increase more than fivefold from 2024 levels to more than 4 million tons per year. An additional 6 million tons per year also has strong potential to become operational by 2030, but “if effective policies to ensure demand are implemented,” the IEA said.
Related: Autumn Winds Crucial for European Clean Energy Targets
Earlier this week, the Hydrogen Council also noted challenges in projects, but said that despite recent delays and cancelations of projects, the clean hydrogen industry has surpassed $110 billion in investment in more than 500 projects that have moved past the final investment decision.
The lobby group acknowledged in a new report, co-authored with McKinsey & Company, that about 50 projects have been publicly cancelled in the past 18 months, representing about 3% of the total pipeline since 2020.
“Structural challenges, including persistently high interest rates and delayed policy implementation in some regions, are adding pressure to this selection process,” the Hydrogen Council said, noting that the industry now needs firm demand for supply to thrive.
This, according to the Council, needs strong policy support.
By Tsvetana Paraskova for Oilprice.com
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