Hydrogen Insights 2024

Executive Summary

Walking the talk: Seven-fold increase in investment for hydrogen projects reaching FID globally within the past four years

The global hydrogen industry is nascent and facing challenges as it scales, however, looking at the development of the global hydrogen industry since the first publication of Hydrogen Insights in 2021, the progress achieved thanks to the efforts of decision-makers in industry and governments is undeniable.

Clean hydrogen projects that reached final investment decision (FID) have seen a dramatic increase from 102 committed projects in 2020, representing some USD 10 billion in committed investment, to 434 in 2024, representing some USD 75 billion.

Key factors driving successful projects to FID include clear and effective incentives (e.g., 45Q tax credit in the United States), demand-side visibility that drives offtake (e.g., contract-for-difference instruments driving hydrogen demand for power production in Japan), and strong industrial policy driving cost down thanks to deployment at scale (e.g., in China).

Growing project maturity: progress towards FEED coupled with natural attrition

While the global project pipeline has grown by a factor of seven since 2020 from 228 projects in 2021 to 1,572 projects in 2024 across the value chain, it has also matured. Over the years, a larger portion of projects have shifted from announcements to more advanced stages. Between 2020 and 2024, investments made in front end engineering design (FEED) stage projects increased by factor 20.

Natural attrition drives industry maturation by phasing out less viable projects and prioritizing those with the highest potential. Similar trends have been observed in the early years of the wind and solar industries prior to reaching maturity with typical success rates of project funnels at about 10% to 20% from initial development to commissioning, and remain common in other fast-growing climate technologies, such as the battery industry.

Navigating turbulence: Regulatory uncertainty and macroeconomic headwinds fueling delays

Alongside other clean energy industries, hydrogen has been facing a set of macroeconomic headwinds, varying from increased inflation and interest rates to turbulence in global energy markets following the geopolitical crises, supply chain constraints, and higher than anticipated renewable electricity prices.

A key sector-specific challenge for the hydrogen industry is uncertainty in associated with a number of regulatory frameworks (e.g., outstanding implementation of RED III at Member State level, rulebook for IRA 45V) which impedes project bankability. Coupled with cost increases for renewable power and electrolysers, this has led to delays and cancellations of projects – in particular, renewable hydrogen projects. Considering these delays and expected project attrition, 12-18 Mt p.a. of the 48 Mt p.a. announced hydrogen supply could be deployed by 2030. At the same time, over the past year, regions such as North America become home to over 90% of global low-carbon hydrogen capacity that has passed FID largely thanks to robust policy incentives (e.g., 45Q tax credit for CCS projects under the IRA).

Beyond the breakthrough: Achieving climate goals requires significant investment jump

While the industry has seen an extraordinary seven-fold increase in hydrogen capacity reaching FID globally over the past four years, the pace and scale of deployment has not been sufficient to remain on track with climate commitments. To accelerate the global energy system decarbonisation, an 8-fold increase of investments in hydrogen is required until 2030, compared to the current investment of USD 75bn past FID.

Addressing this challenge calls for a joint effort by decision-makers in government and industry. Government incentives and enabling legislative frameworks play a critical role in mobilizing private capital and advancing mature projects within this decade. In the next two years, ensuring greater regulatory clarity and certainty and support for demand drivers will be critical for tackling project delays observed today alongside the development of the enabling midstream infrastructure.

Together, governments and industry have a unique opportunity to build on the undeniable progress made over the past four years in the hydrogen sector, unlocking environmental and socio-economic gains for the global economies alongside cost-efficiency benefits for the energy systems.