The Global Hydrogen Review is an annual publication by the International Energy Agency that tracks hydrogen production and demand worldwide, as well as progress in critical areas such as infrastructure development, trade, policy, regulation, investments and innovation. It shows that momentum behind low-emissions hydrogen is continuing to grow. But lagging policy support & high inflation are putting investment plans for further projects at risk.
This year’s report includes a focus on demand creation for low-emission hydrogen. Global hydrogen use is increasing, but demand remains so far concentrated in traditional uses in refining and the chemical industry and mostly met by hydrogen produced from unabated fossil fuels. The number of announced projects for low-emission hydrogen production is rapidly expanding. Annual production of low-emission hydrogen could reach 38 Mt in 2030, if all announced projects are realised, although 17 Mt come from projects at early stages of development.
After a slow start, China has taken the lead on electrolyser deployment. In 2020, China accounted for less than 10% of global electrolyser capacity installed for dedicated hydrogen production, concentrated in small demonstration projects. In 2022, installed capacity in China grew to more than 200 MW, representing 30% of global capacity, including the world’s largest electrolysis project (150 MW). By the end of 2023, China’s installed electrolyser capacity is expected to reach 1.2 GW – 50% of global capacity – with another new world record-size electrolysis project (260 MW), which started operation this year. China is poised to further cement its leading position in electrolyser deployment: the country accounts for more than 40% of the electrolysis projects that have reached FID globally.
North America and Europe have taken the lead in implementing initiatives to encourage low-emission hydrogen production. Large amounts of government funding are being made available through schemes such as the US Hydrogen Production Tax Credit, the EU Important Projects of Common European Interest and the UK Low Carbon Hydrogen Business Model. However, the lengthy time lags between the announcement of the schemes and the moment at which funds are made available to project developers is delaying project execution, and even putting projects at risk. This has been aggravated by the lack of clarity about regulation, which has only very recently been resolved in some jurisdictions.
Electrolyser manufacturershave announced that around 14 GW of manufacturing capacity are available today, half of which is in China. Electrolyser production in 2022 is estimated to be just over 1 GW. Manufacturers have announced plans for further expansion, aiming to reach 155 GW/year of manufacturing capacity by 2030, but only 8% of this capacity has at least reached FID. Realising manufacturers’ ambitious plans will depend on solid demand for electrolysers, which today is highly uncertain. Such uncertainty is already resulting in delays to these expansion plans, some of which are being put on hold.
Hydrogen demand reached a historical high in 2022, but it remains concentrated in traditional applications. Global hydrogen use reached 95 Mt in 2022, a nearly 3% increase year-on-year, with strong growth in all major consuming regions except Europe, which suffered a hit to industrial activity due to the sharp increase in natural gas prices. This global growth does not reflect a success of policy efforts to expand the use of hydrogen, but rather is linked to general global energy trends. Demand remains concentrated in industry and refining, with less than 0.1% coming from new applications in heavy industry, transport or power generation. Low-emission hydrogen is being taken up very slowly in existing applications, accounting for just 0.7% of total hydrogen demand, implying that hydrogen production and use in 2022 was linked to more than 900 Mt of CO2 emissions. Prospects are better in industry, particularly for ammonia production, with refining lagging behind.