Final investment decisions (FIDs) on clean hydrogen projects have surged by 90% since last October, but a $335bn financing gap might have put 2030 ambitions out of reach, according to the Hydrogen Council’s latest Hydrogen Insights report.
Despite an increase in the global project pipeline from 1,418 projects ($570bn) in October 2023 to 1,572 ($680bn) in May 2024, the report noted a slowdown in new announcements.
However, FID’d projects, which accounted for less than 7% of investments in the previous publication, have now grown to 11% – 434 projects or $75bn.
Read more: Hydrogen project pipeline grows to $570bn – just 7% have passed FID, says Hydrogen Insights report
Whilst the cumulative production capacity of announced projects now totals some 48 million tonnes per annum (mtpa) of clean hydrogen by 2030, committed capacity accounts for just 4.6 mtpa – an increase of 1.6 mtpa since October 2030.
“Natural attrition drives industry maturation by phasing out less viable projects and prioritising those with the highest potential,” the report reads.
Similar trends were observed in the early years of wind and solar industries prior to reaching maturity, with typical success rates of project funnels at about 10-20% from initial development to commissioning, it added.
The report estimates that 12-18 mtpa is likely to come online by 2030, with green hydrogen accounting for 7-11 mtpa – representing 375GW of announced electrolysis capacity by the end of the decade.
Large-scale industrial use makes up for the biggest portion of committed investment – accounting for 200 of the 434 projects. Mobility follows with 123.
China leads the way on FID’d projects, with committed investments in the People’s Republic totalling $31bn (over 40% of global investments). This is despite the country holding just 10% of the global project pipeline, although the report notes that many projects are not announced until they reach FID.
On the blue hydrogen front, the report estimates that North America accounts for over 90% of the committed volumes – 2.4 mtpa.
The report says the uptick is thanks to “clear and effective” incentives, demand-side visibility, and “strong industrial policy” driving down costs.
Newly appointed Hydrogen Council CEO, Ivana Jemelkova, said the report sends a clear message. “Hydrogen is happening,” she remarked.
“Now that hydrogen is a reality in the energy transition, it’s time to drive significantly more investment by 2030 to meet our mid-century targets.”
2030 ambitions unlikely to be met
But it will be a tall order. Despite the high levels of announced and committed investments, the report estimates an investment gap of $335bn to reach the sector’s 2030 goals – an eight-fold increase in the $75bn of FID’d projects.
Interestingly, the report said hydrogen production investments surpass what is needed for 2030 targets by $15bn. This is compared to the $145bn gap for end-use applications and $190bn for infrastructure.
“It is unclear when the investment gap can be expected to be closed,” it reads. “With the current announced investments and the growth observed since the last publication investments are behind the required Net Zero pathways with Net Zero targets unlikely to be met.”
Nonetheless, Jemelkova called for urgent action to overcome challenges posed by macroeconomic headwinds, geopolitical tensions, sector-specific regulatory uncertainty and rising power and electrolyser costs.
The report specifically highlights delays in implementing the EU’s Renewable Energy Directive (RED) III at a member state level and the finalised guidance for the US’ 45V tax credits baked into the Inflation Reduction Act (IRA).
“Coupled with cost increases for renewable power and electrolysers, this has led to delays and cancellations of projects – in particular, renewable hydrogen projects,” it read.
“Equipped with concrete lessons learned from the past four years, we must urgently address challenges in key markets and create a more favourable environment for project execution,” Jemelkova stressed.
Hydrogen Council Co-Chair and CEO of Linde, Sanjiv Lamba, said such a realisation would require a “united effort” from governments and industry.
“With a supportive regulatory framework and targeted incentives, investors will have the certainty they need to move projects to FID – ultimately contributing to achieving global climate goals.”
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