The Ambition-Reality Gap in Green Hydrogen Production
Over 60 countries have developed strategies to boost the hydrogen market, particularly for industrial applications. However, by 2023, less than 10% of the green hydrogen production initially announced had materialized. Specifically, only 7% of the capacity scheduled for 2023 was completed on time.
This significant gap raises questions about the trajectory and pace of the global energy transition. The findings, published in Nature Energy, highlight a troubling reality: the competitiveness of all 1,232 announced low-emission hydrogen projects worldwide is at risk due to this shortfall.
Why Is Green Hydrogen Production Falling Short?
The PIK study identifies three primary factors behind this disparity:
- Rising Costs: Increasing expenses for materials and infrastructure are slowing progress.
- Weak Demand-Side Commitment: Insufficient willingness from buyers to pay for green hydrogen.
- Uncertainty Around Subsidies and Regulation: A lack of clarity on future financial incentives and policy frameworks.
While project announcements have surged, actual production remains sluggish. Since 2021, the pipeline of announced projects has nearly tripled to 422 GW. However, without substantial public funding, these projects risk stagnation.
The Crucial Role of Subsidies
Public funding will be a decisive factor in the future of green hydrogen. The study estimates that achieving all announced projects by 2030 will require global subsidies of approximately $1.3 trillion—far exceeding current government commitments.
“To realize all hydrogen projects announced by 2030, we would need additional massive subsidies of around $1 trillion,” explains Falko Ueckerdt, one of the study’s authors. He adds, “Green hydrogen will continue to struggle to meet high expectations due to its lack of competitiveness.”
Carbon Pricing: A Long-Term Solution
While subsidies are essential in the short term, carbon pricing must eventually replace them to make green hydrogen economically viable. The study warns that permanently subsidizing green hydrogen and synthetic fuels to compete with cheap fossil fuels would be unsustainable.
Carbon pricing plays a “key role” in narrowing the cost gap. Without it, achieving the growth needed for green hydrogen under a 1.5°C scenario would demand annual subsidies far exceeding historical support for solar and wind energy.
A Call to Action
Green hydrogen holds immense potential to decarbonize industrial processes and accelerate the clean energy transition. However, realizing its promise requires coordinated global efforts, significant financial investments, and a robust policy framework. The stakes are high, and the time to act is now.