The IEA has cut its 2030 clean hydrogen production forecast by a quarter as widespread cancellations and delays cause the global project pipeline to contract for the first time.

Potential global production by 2030, based on industry announcements, stands at 37mt/yr, down from a forecast of 49mt/yr a year ago. Green hydrogen accounted for 80% of the reduction.

When placed alongside the over-ambitious targets set five years ago by policymakers in the EU, the UK and elsewhere, these numbers look worrying. However, in absolute terms, the outlook for this nascent industry looks more positive. The IEA said production is on track for “strong growth” through 2030.

“The latest data indicates that the growth of new hydrogen technologies is under pressure, but we still see strong signs that their development is moving ahead globally” Birol, IEA

Production from projects that are already operational or have reached FID is set to hit 4.2mt/yr by 2030—a fivefold increase compared with 2024 production.

While this is much lower than government and industry ambitions at the start of this decade, it represents growth from less than 1% of total hydrogen production today to around 4% in 2030, the IEA said.

“The latest data indicates that the growth of new hydrogen technologies is under pressure due to economic headwinds and policy uncertainty, but we still see strong signs that their development is moving ahead globally,” said IEA Executive Director Fatih Birol. “To help growth continue, policymakers should maintain support schemes, use the tools they have to foster demand and expedite the development of necessary infrastructure.”

Widening cost gap

The headwinds faced by the sector are significant. Globally, it remains much cheaper to produce hydrogen from fossil fuels. “The gap has widened lately due to recent declines in natural gas prices and an increase in the price of electrolysers due to inflation and slower-than-expected deployment of the technology,” the IEA said.

However, it sees the gap narrowing by 2030 due to declining technology costs and, in some regions, strong renewables growth and the enactment of new regulations. In Europe, carbon prices will help to narrow the gap, with elevated natural gas prices also working in green hydrogen’s favour. “In regions where natural gas is cheaper, such as the US and Middle East, the cost gap is set to remain larger,” the IEA said.

The demand outlook is also unclear. Momentum slowed in the market for hydrogen offtake deals in 2024. New deals signed reached 1.7mt/yr, compared with 2.4mt/yr in 2023. Tenders yielded “mixed results” in 2024. In the steel sector in Europe, some were delayed or put on hold, although tenders for refining and fertilisers led to FID for production plants in Europe and India.

China leads

One thing that is not in doubt is China’s lead in the global clean hydrogen sector. “China is the driving force today in the deployment of electrolysers to produce low-emission hydrogen,” the IEA said.

The country accounts for 65% of global electrolyser capacity that has been installed or reached FID, and it is home to nearly 60% of the world’s electrolyser manufacturing capacity.

However, China’s widely touted push into export markets with low-cost electrolysers may not play out as expected. The cost of installing Chinese electrolysers outside China is not significantly lower than installing those made by other producers when all factors, including transport costs and tariffs, are considered, according to the IEA.

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Author: Stuart Penson