Energy Transition

Growing momentum for low-emissions hydrogen but further support needed: IEA

Further support is needed to get low-carbon hydrogen projects off the ground. (Image source: Adobe Stock)

A new report from the IEA finds that investment and projects in low-emissions hydrogen are growing, but it still accounts for less than 1% of total hydrogen production.

The IEA’s annual Global Hydrogen Review 2024 finds that the momentum for low-emissions hydrogen is growing, as illustrated by a wave of new projects, despite challenges due to regulatory uncertainties, persistent cost pressures and a lack of incentives to accelerate demand from potential consumers. The number of projects that have reached final investment decision has doubled in the past 12 months, which would increase today’s global production of low-emissions hydrogen fivefold by 2030. The total electrolyser capacity that has reached final investment decision now stands at 20 gigawatts (GW) globally. Global electrolyser manufacturing capacity doubled in 2023, with China accounting for 60% of this.

If all announced projects are realised worldwide, total production could reach almost 50 million tonnes a year by the end of this decade. However, this would require the hydrogen sector to grow at an unprecedented compound annual growth rate of over 90% between now and 2030.

Lack of clarity on government support, along with uncertainly around demand and regulatory frameworks means that installed capacity for electrolysers and low-emissions hydrogen volumes remain low, with most potential production still in planning or early-stage development, with some larger projects facing delays or cancellations due to these barriers along with permitting challenges or operational issues.

“The growth in new projects suggests strong investor interest in developing low-emissions hydrogen production, which could play a critical role in reducing emissions from industrial sectors such as steel, refining and chemicals,” said IEA executive director Fatih Birol. “But for these projects to be a success, low-emissions hydrogen producers need buyers. Policymakers and developers must look carefully at the tools for supporting demand creation while also reducing costs and ensuring clear regulations are in place that will support further investment in the sector.”

The report highlights a gap between government goals for production and demand, as well as technology and production cost pressures, with progress in electrolysers in particular stalling due to higher prices and tight supply chains. A continuation of cost reductions relies on technology development, as well as optimising deployment processes and moving to mass manufacturing to achieve economies of scale.

Unabated fossil fuels continue to dominate

Despite the growth in momentum, the report points out that low-emissions hydrogen accounted for less than 1% of total hydrogen production in 2023. Producing renewable hydrogen today is generally one-and-a-half to six times more costly than unabated fossil-based production, the IEA notes. It forecasts that hydrogen production is likely to continue to be largely dependent on unabated fossil fuels this year, with unabated natural gas accounting for around two-thirds of total production. The Middle East is a key player, producing 20% of all hydrogen from unabated natural gas.

China leads in terms of production, accounting for almost 30% of the global total, followed by the USA and Middle East with 14% each, and India with 9%. Total hydrogen production reached 97Mt in 2023, and could approach 100Mt by the end of 2024.

Industrial hubs – where low-emissions hydrogen could replace the existing large demand for hydrogen that is currently met by production from unabated fossil fuels – remain an important untapped opportunity by governments to stimulate demand, the IEA says.

The Middle East saw stronger growth in hydrogen demand than other regions (more than 6% growth year-on-year, due to an increase in demand in refining and methanol production). The region accounted for 14% of hydrogen use in 2023. The Middle East was the second largest consumer of hydrogen in industrial applications after China, with 4% growth, mainly driven by methanol production.

New electrolyser technology launched

ZSW and Ecoclean employees jointly celebrated the commissioning of the first EcoLyzer. (Image source: Ecoclean GmbH)

The Zentrum für Sonnenenergie- und Wasserstoffforschung Baden-Württemberg (Centre for Solar Energy and Hydrogen Research Baden-Württemberg) and Ecoclean GmbH have brought the first production-ready EcoLyzer electrolyser into operation for green hydrogen production

The P200, which consists of two modular units and has an output of one megawatt, for the production of around 200 Nm³/h of hydrogen, is based on a modular system concept that the partners developed together as part of the "EcoLyzer BW" joint project, the aim of which was to develop an internationally competitive electrolysis system for the series production of green hydrogen. The modular concept enables the cost-efficient construction of plants with a system output of 1 to 20 MW close to the energy source.

"We had our first contact with the ZSW and hydrogen around three years ago and today we are producing the first green hydrogen with the P200," said Manfred Hermanns, director Sales & Customer Services at Ecoclean GmbH. "The collaboration with the ZSW helped us enormously to develop a product ready for series production and put it into operation in such a short time."

After the remaining test phase of the EcoLyzer, it will be delivered to the Rheinisch-Westfälische Technische Hochschule (RWTH) Aachen, where it will produce green hydrogen for the Chair of Thermodynamics of Mobile Energy Conversion Systems (TME).

Efficient hydrogen production

Technologically, the EcoLyzers are based on a system technology for alkaline pressure electrolysis developed and optimised by ZSW over the last 10 years. In contrast to other electrolysis processes, this technology for efficient hydrogen production does not require any resource-critical raw materials such as precious metals and rare earths. In addition, it can be easily scaled up to higher performance classes and is characterised by low-maintenance operation.

Parallel to the development of the electrolysis system, the machine and plant manufacturer has built up production capacities for the series production of electrolysers, which are already available on the market. In the first stage, production is designed for an output of 200 MW per year and can easily be doubled depending on market developments. The modular design enables cost-effective production of the electrolysers with comparatively short delivery times. They can be easily adapted to different applications in the areas of mobility, industry, energy and neighbourhood supply for on-site hydrogen production.