| Hydrogen and power-to-X
Mixed messages from the IEA
The hydrogen sector continues to grow despite persistent barriers and project cancellations, concluded the IEA’s 2025 Global Hydrogen Review
Some of the IEA’s key findings: ● Global hydrogen demand increased to
almost 100 million tonnes in 2024, up 2% from 2023 and in line with overall energy demand growth. This rise was driven by greater use in sectors that have traditionally consumed hydrogen, like oil refining and industry. Demand from new applications accounted for less than 1% of the total and was almost entirely concentrated in biofuels production. The supply of hydrogen continued to be dominated by fossil fuels, using 290 billion cubic metres of natural gas and 90 million tonnes of coal equivalent in 2024. Low- emissions hydrogen production grew by 10% in 2024 and is on track to reach 1 Mt in 2025, but it still accounts for less than 1% of global production.
● While the uptake of low-emissions hydrogen is not yet meeting the ambitions set in recent years – held back by high costs, uncertain demand and regulatory environments, and slow infrastructure development – there are still notable signs of growth. A recent wave of project delays and cancellations has reduced expectations for the deployment of low-emissions hydrogen this decade. However, in the early stages of adopting new technologies, there are often moments of strong progress as well as periods of sluggish development, and several indicators suggest that the sector continues to mature. For example, although final investment decisions (FIDs) continue to trail well behind announcements, more than 200 low-emissions hydrogen production projects have achieved positive FIDs since 2020, when there was only a handful of demonstration facilities in operation. Innovation is also moving at an impressive pace, with a record number of technologies across the hydrogen value chain showing significant progress over the past year.
● The pipeline of low-emissions production projects has shrunk, but a strong expansion by 2030 is still in sight. For the first time, potential low-emissions hydrogen production by 2030 based on announced projects has declined. Cancellations and delays mean that production that could be achieved by 2030 based on industry announcements now stands at 37 million tonnes per year, compared with 49 Mtpa when the 2024
Status of announced low-emissions hydrogen projects, by technology, 2023. Source: IEA, 2025 Global Hydrogen Review
IEA review was published a year ago. Potential production fell for both projects using electrolysis and those using fossil fuels with carbon capture utilisation and storage, although electrolysis projects were responsible for more than 80% of the total drop. These delays and cancellations included early-stage projects across Africa, the Americas, Europe and Australia. At the same time, the number of projects that have received a final investment decision grew by almost 20% since publication of the 2024 review and now represent 9% of the total project pipeline to 2030.
● Despite the recalibration of industry plans, low-emissions hydrogen production is expected to grow strongly by 2030. Low-emissions hydrogen production from projects that are today operational or have reached FID is set to reach 4.2 Mtpa by 2030, a fivefold increase compared with 2024 production. While this is much lower than government and industry ambitions at the start of this decade, it represents growth from less than 1% of total hydrogen production today to around 4% in 2030. This low- emissions hydrogen growth to 2030 would resemble the fast expansions of other clean energy technologies seen in recent years, such as solar PV. Moreover, a new, comprehensive assessment of the prospects for announced projects for this
year’s Review finds that an additional 6 Mt of low-emissions hydrogen production projects has strong potential to be operational by 2030 if effective policies to create demand and facilitate offtake are implemented.
● The cost gap between low-emissions hydrogen and unabated-fossil-based production remains a key barrier for project development, but it is expected to narrow. The sharp decline in natural gas prices from levels observed in 2022-23 – and the increase in the cost of electrolysers due to inflation and slower-than-expected deployment of the technology – has led to a larger cost gap relative to production from unabated fossil fuels, meaning that support schemes remain necessary for longer. However, the gap is expected to narrow by 2030. Renewable hydrogen in China could become cost-competitive by the end of this decade due to low technology costs and cost of capital. In Europe, the gap is also set to shrink due to carbon dioxide prices and in areas with high renewable potential, and because natural gas prices for industrial users in the region are set to be more elevated than elsewhere. In regions where natural gas is cheaper, such as the United States and Middle East, the cost gap is set to remain larger, and CCUS is likely to be more competitive for producing low-emissions hydrogen in the near term.
www.modernpowersystems.com | January/February 2026 | 29
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