In the last few years, over 60 nations have crafted plans to boost the hydrogen market, especially within the industrial field. Nevertheless, a recent study indicates that by 2023, less than 10% of the initially projected green hydrogen production has been achieved. The primary issue is that hydrogen is still too costly, and there is a general reluctance to absorb these expenses.
In recent years, more than 60 countries have formulated strategies aimed at enhancing the hydrogen market, particularly in industry. However, a new study featured in the journal Nature Energy reveals that in 2023, only a fraction—less than ten percent—of the initially projected green hydrogen output has come to fruition. The main factor hindering progress is the high price of hydrogen, coupled with a low willingness to pay these costs. Researchers Adrian Odenweller and Falko Ueckerdt from the Potsdam Institute for Climate Impact Research (PIK) have assessed this competitiveness gap across 1,232 hydrogen projects announced globally. They recommend a strong political approach that centers on realistic hydrogen expectations and aims to bridge the implementation gap.
“In the past three years, global announcements for green hydrogen projects have nearly tripled,” states Adrian Odenweller, a lead researcher at PIK. “Yet, only seven percent of the production capacity forecasted for 2023 has been completed on schedule.” The study attributes the challenges in advancing the green hydrogen market to rising costs, a lack of consumer willingness to pay, and uncertainties regarding future subsidies and regulations.
“To achieve all announced hydrogen projects by 2030, substantial additional funding of about one trillion US dollars would be necessary,” says Falko Ueckerdt of PIK. “Due to its lack of competitiveness, green hydrogen will continue to struggle in meeting high future expectations.” Permanent subsidies, however, are not a viable solution. Therefore, the researchers suggest implementing demand-side measures like binding quotas to direct green hydrogen toward sectors that are more challenging to electrify, such as aviation, steel, or chemical industries. For instance, per EU legislation, starting in 2030, 1.2 percent of all aviation fuel must be blended with hydrogen-based synthetic fuels, increasing to 35 percent by 2050.
Subsidy needs far surpass global subsidy announcements
The study highlights three major gaps that exist between theoretical projections and actual implementation: the past implementation gap, the future ambition gap, and the future implementation gap. The past implementation gap refers to the disparity between announced hydrogen projects and those realized by 2023. The ambition gap reflects the difference between the volume of hydrogen necessary by 2030 in line with 1.5-degree scenarios and the projects currently anticipated for that timeframe. Though the announced hydrogen projects can meet the criteria for most scenarios evaluated, a significant implementation gap remains. The subsidies needed to actualize all projects by 2030 dramatically exceed the global public financial support that has been pledged so far.
Based on a meticulously verified global database of 1,232 green hydrogen projects scheduled by 2030, the researchers calculate the competitiveness gap for each of the 14 defined end uses, comparing the green product to its fossil fuel counterparts. By considering the volume and timing of the project announcements, the required subsidies to execute all projects by 2030 are determined.
The researchers caution against fossil fuel dependency that could lock companies into continued usage, thereby jeopardizing climate objectives. To reduce public financial outlays and create a level competitive arena with alternative climate solutions, a shift toward technology-neutral market mechanisms like carbon pricing is essential in the long term. They advise a strong strategy that offers short-term support for hydrogen initiatives through direct subsidies and regulatory measures, all while being grounded in realistic expectations for hydrogen’s future.
