Despite tremendous fanfare and a flood of promised subsidies, the clean hydrogen industry is struggling to get off the launchpad, according to the International Energy Agency.
In a new report, the agency touted the potential for a major new clean fuel source. But it also underscored that most project developers are hesitating to make the final decision to move ahead because projects are expensive and few committed buyers have stepped up so far.
The agency looked at two types of the fuel that it calls ‘low-emission’: hydrogen made from natural gas with carbon capture technology and hydrogen produced via a machine called an electrolyzer that uses renewable electricity to separate the gas from water.
The agency said new types of low-emission hydrogen could account for 38 million metric tons of production by 2030 — a little less than half the size of the existing market, in which hydrogen is produced through an emissions-intensive process. But just 4% of that projected production is from projects that companies have actually approved to go ahead, the agency said.
Governments are set to pour massive subsidies into both types in the coming years, in the hope that clean hydrogen can replace carbon-intensive fuels, such as those used in long-haul trucking and maritime shipping, and help overhaul carbon-intensive processes, such as steel and cement making.
As with so many clean technologies, China is pushing ahead most aggressively, accounting for 40% of the renewable hydrogen projects that have received final approval. By the end of this year, the country is expected to account for half of the global capacity to produce hydrogen with renewable energy.
Outside of China, a lack of buyers willing to commit to long-term deals has made producers hesitant even with the lure of government subsidies like those in the 2022 Inflation Reduction Act in the United States and Europe’s clean hydrogen industry support. Globally, companies have so far signed agreements for only 2 million metric tons of low-emission hydrogen annually, and half of those contracts are not binding, the IEA said.