Investment in hydrogen projects is accelerating, but uncertainty remains, IEA says by Reuters

By Forrest Crellin

PARIS (Reuters) – Final investment decisions for hydrogen projects have doubled over the past 12 months, led by China, but installed capacity and demand are low as the industry faces uncertainty, the International Energy Agency (IEA) said on Wednesday ) in a report.

The investment decisions represent a fivefold increase in current low-emission hydrogen production by 2030, with China covering more than 40% in the past 12 months, which would eclipse the fastest-paced solar expansion, the group said.

Demand targets, however, account for just over a quarter of production projects and progress so far in the hydrogen sector is not enough to meet climate targets, the IEA added.

Most projects are also in early stages, the AIE said, and the project pipeline is at risk due to unclear demand signals, financing hurdles, stimulus delays, regulatory uncertainties, licensing and permitting issues and operational challenges.

“Policymakers and developers must carefully consider tools to support demand creation, while reducing costs and ensuring that there are clear regulations that will support further investment in the sector,” said IEA Executive Director Fatih Birol.

Global hydrogen demand could increase by around 3 million tonnes (Mt) in 2024, concentrated in the refining and chemical sectors, but this should be seen as a result of wider economic trends rather than successful policies , said the AIE.

Demand is currently largely covered by hydrogen produced from unmitigated fossil fuels, with low-emission hydrogen still only playing a marginal role, he added.

Pressures on technology and production costs remain an important factor, with electrolysers in particular declining due to higher prices and tight supply chains, while cost reductions rely on technology development and achieving economies of scale.