Hydrogen Project Investments Are Accelerating, but Uncertainty Remains, Says IEA

By Forrest Crellin

PARIS – According to a report released by the International Energy Agency (IEA), final investment decisions for hydrogen projects have doubled in the past year, largely driven by developments in China. Despite this surge in investment, overall installed capacity and demand for hydrogen remain low, leaving the industry facing considerable uncertainty.

The report indicates that investment decisions signal a five-fold increase in low-emission hydrogen production by 2030, with China accounting for more than 40% of these developments. Such growth is expected to surpass the rapid expansion seen in the solar energy sector.

However, the current demand targets fall just above 25% of the production projects outlined. The IEA emphasized that existing progress in the hydrogen industry is inadequate to meet global climate objectives.

Many of the ongoing projects are still in their infancy, as the IEA highlighted that the project pipeline is under threat from various challenges such as unclear demand signals, financing obstacles, regulatory uncertainties, and operational difficulties.

IEA Executive Director Fatih Birol remarked that "policymakers and developers must look closely at the tools available to foster demand while also working to lower costs and establish clear regulatory frameworks that promote further investments in the sector."

The agency anticipates that global hydrogen demand could rise by approximately 3 million tonnes in 2024, primarily in the refining and chemical industries. However, this growth should be interpreted more as a reflection of broader economic trends rather than effective policy measures.

Currently, demand is predominantly satisfied by hydrogen produced from unabated fossil fuels, with low-emission hydrogen still occupying a minor role in the market.

Technological advancements and production cost pressures continue to be significant factors for the industry, particularly regarding electrolysers, which are currently experiencing price hikes and supply chain issues. Achieving cost reductions will depend on ongoing technological innovation and the realization of economies of scale.