Hydrogen Insights: Hydrogen project pipeline grows by 35% since January 2023 despite macro-economic headwinds

December 12, 2023

• Global clean hydrogen momentum continues despite macro-economic headwinds; the number of announced projects grew by about 35% to over 1,400 from about 1,050 in January – and more than doubled compared to May 2022. Announced projects represent over USD 570 billion investments through 2030, with strongest growth in projects in FEED (investments up by 60%).
• Deployment continues, with more than 1 GW electrolysis capacity deployed globally (400 MW added this year) and a total of 12 GW having passed FID. Announced clean hydrogen supply globally has reached about 45 Mt p.a. through 2030. However, only 7% of investments in clean hydrogen overall have passed FID. Continued efforts are needed to foster the faster maturing of projects from announcement to deployment.
• Globally, higher CapEx, more expensive renewable energy and higher cost of capital pushed up costs of producing renewable hydrogen – with costs increasing by 30–65% in the past year. The outlook remains positive, with renewable hydrogen production costs expected to fall to 2.5 – 4.0 USD/kg H₂ through 2030.

BRUSSELS, December 12, 2023 – The global hydrogen economy is growing despite global headwinds resulting from rising interest rates and constrained supply chains, according to an analysis of over 1,400 large hydrogen projects published today by the Hydrogen Council.

Hydrogen Insights 2023 December Update, co-authored by McKinsey & Company, is the industry’s latest update on global hydrogen development. The project pipeline has grown to USD 570 billion, including clean hydrogen production, end use and infrastructure – a 35% increase from 6 months ago.

Europe is found to maintain its lead in the overall project pipeline with over USD 190 billion of announced investments. However, only 7% of announced investments in clean hydrogen have passed FID – in Europe this figure is only 4% (USD 8 billion), in North America 15% (USD 10 billion), in China 35% (USD 12 billion).

Hydrogen projects globally account for 45 Mt p.a. of announced clean hydrogen production capacity through 2030, of which more than 3 Mt p.a. have passed FID as of October this year.

Yoshinori Kanehana, Chairman of the Board, Kawasaki Heavy Industries Ltd., and Co-Chair of the Hydrogen Council, said: “The latest data shows clean hydrogen is progressing steadily, but to achieve our goals we must work together. Making the globally announced 1,400+ clean hydrogen projects a reality with its associated 45 Mt annual supply through 2030 will require ambitious concerted action by both private and public stakeholders.”

While the reported growth continues to be strong, more projects need to be announced and existing projects need to mature faster. An additional USD 430 billion in projects are required to put the world on track to a timely decarbonization.

Sanjiv Lamba, CEO of Linde and Co-Chair of the Hydrogen Council, said: “It’s promising to see clean hydrogen projects developing across geographies, with 12 GW of electrolyzer capacity reaching FID. However, we need to further build on this momentum if hydrogen is to fulfil its role in supporting the energy transition. This is achievable with the right regulatory frameworks in place, and through collaboration across the entire hydrogen value chain.”

These developments in hydrogen are playing out in a more challenging macroeconomic environment. Higher costs of capital, higher EPC costs and higher costs of renewable power have increased the cost of making renewable hydrogen. Estimates for production costs of renewable hydrogen are up 30-65%, resulting in USD 4.5-6.5/kg.

In the long run, the Hydrogen Council expects production costs to fall to USD 2.5-4/kg of renewable hydrogen.

Reductions in electrolyzer costs of up to 70% through 2050 are considered to be the strongest lever to bring down renewable hydrogen CapEx and overall costs. However, further measures – such as the standardization of projects – are required to fully optimize renewable hydrogen production CapEx, and while it could fall by 45% through 2030, the report finds that active project optimization could decrease costs by an additional 25%.

Bernd Heid, Senior Partner at McKinsey, said: “Optimizing renewable hydrogen CapEx is key to countering recent increases in the cost of producing renewable hydrogen of about 30-65%. Cost increases have mainly been caused by global interest rate hikes, supply chain constraints, and increased renewable energy costs. Optimizing renewable hydrogen production could cut CapEx by half vs 2023 levels.”

You can read the full Hydrogen Insights 2023 December Update report here.