Dive Brief:
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Total investment in hydrogen projects has grown from $390 billion in May 2022 to an expected $680 billion in May 2024, according to a new report by the Hydrogen Council, a global industry trade group. North America claimed $96 billion of that funding, according to the report.
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About 100 North American hydrogen projects have secured a final investment decision, up from just 10 projects with an FID in 2020, the report said. As of May 2024, the Hydrogen Council is tracking 1,572 hydrogen projects globally in various stages of development.
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Although North America is on track to supply about a third of the world's hydrogen by 2030, the majority of that hydrogen will be derived from natural gas, according to the report. China has become the world's largest producer of green hydrogen made from renewable energy in a “movie we have seen before,” Hydrogen Council CEO Ivana Jemelkova said.
Dive Insight:
Uncertainty around incentives and regulatory policies for hydrogen in the U.S. may cost the country the dominance it sought to secure in the renewable hydrogen sector, Jemelkova said.
Hydrogen project announcements around the world have grown seven-fold since 2020, and the number of projects that have reached the engineering design phase or later has grown by a factor of 20, according to the Hydrogen Council.
But of the four to six million metric tons of production that is expected to come online in the U.S., 75% of that hydrogen will be derived from some form of fossil fuel paired with carbon capture. In Europe, Asia and the rest of the world, electrolytic facilities that aim to make hydrogen from renewable energy dominate the majority of planned capacity, according to Hydrogen Council projections.
China currently leads the world in renewable hydrogen production, with some 1,150 MW of electrolyzers already installed, according to the Hydrogen Council. The U.S., by comparison, has deployed just 150 MW of electrolyzer capacity.
“The way hydrogen is progressing in places like India and China is absolutely formidable, and we have seen this movie before,” Jemelkova said. “We have seen Asia come in strong on clean energy solutions, and in many ways it is happening again.”
Differences in industrial policy and incentives can explain most of the difference, Jemelkova said. While countries like China and India have leaned heavily into supportive industrial policies on both the supply and demand side of the equation — creating a business case for the purchase of clean hydrogen by mandating industry targets and the like — Jemelkova said the US has focused on incentivizing supply while overlooking supportive demand-side policy.
Meanwhile, the 45Q tax credits for carbon capture processes created by the Inflation Reduction Act have spurred the growth of fossil-based hydrogen projects in the U.S., allowing these projects to dominate the North American market, she said. But uncertainty surrounding the 45V tax credit for hydrogen production, which has not been finalized since the December release of an unpopular slate of proposed rules by the Department of the Treasury, has stalled most U.S. renewable hydrogen projects. Investors are unwilling to fully commit to these projects pending clarity on whether they will qualify for the 45V credits, Jemelkova said.
And policy uncertainty may not be the only factor. Jemelkova noted that Europe, which currently leads the world for overall hydrogen project announcements, has also had trouble getting those facilities across the finish line. About two and a half yeas ago, the European Union adopted a regulatory framework similar to the incentive rules proposed by the U.S. Treasury, Jemelkova said. But they're now re-assessing whether that policy framework has stalled hydrogen growth in Europe, she said.
“Nothing could be more instructive than seeing Europe do it,” she said. “We don't have to discuss the pros and cons. Real life experience says you go down that path, and 2.5 years later the discussion is back on the table.”
But there are some bright spots for hydrogen production in the U.S., she said. Hydrogen production for heavy industrial users like refineries and fertilizer manufacturers is taking off, as is the use of hydrogen as a fuel for heavy-duty shipping. In addition, Jemelkova said there is a strong interest in Asia and other markets in importing hydrogen from the Gulf Coast. These imports would take advantage of the region's low natural gas prices and expanding infrastructure to gain access to low-cost hydrogen fuel.
“I was just in Houston and the buzz around ports, infrastructure, and the vision for hydrogen as the next export ... was stunning,” Jemelkova said. But to realize that vision will require significant work to align global policy frameworks and connecting infrastructure, a “formidable task” that Jemelkova said likely won't come to fruition in the immediate future.
