Hydrogen and power-to-X |
● China is the driving force in electrolyser deployment and manufacturing today, but overseas sales face barriers. Global installed capacity of water electrolysis reached 2 GW in 2024, and more than 1 GW of capacity had been added on top of that by July 2025. China now accounts for 65% of global installed capacity and capacity that has reached a final investment decision. China is also home to nearly 60% of global electrolyser manufacturing capacity.
● Electrolyser manufacturers outside China face headwinds, raising concerns about the health of the industry. Strong momentum in the Chinese market contrasts with prospects for manufacturers elsewhere, which are experiencing sharp reductions in revenue and increased financial losses. For some, this has led to bankruptcies or acquisitions in what may signal a coming wave of consolidation. In China, the industry is not immune to such developments; its existing manufacturing capacity of 20 GW per year is significantly above current demand, which was around 2 GW in 2024. This may also lead to consolidation in due course.
● Outside China, the cost of installing Chinese electrolysers is not significantly lower than installing those made by other producers when all factors are taken into account. The cost of making and installing an electrolyser outside China in 2024 was USD 2000 to USD 2600 per kW, compared with USD 600 to 1200 per kW for electrolysers manufactured and installed in China. However, the cost of equipment is just part of the total investment needed to install an electrolyser. More than half of the total corresponds to engineering, procurement, construction and contingency costs, which depend on the project location. When transport costs and tariffs are also considered, the cost of installing a Chinese electrolyser outside China is USD 1500 to USD 2400 per kW – narrowing the gap with non-Chinese competitors.
● Barriers preventing the use of Chinese electrolysers outside China remain, but this may change soon. While installing electrolysers made in China can reduce upfront investment, they face efficiency and underperformance issues and need to be adapted to local standards. This can drive up operational costs, which can in turn make the overall production of hydrogen more expensive and diminish any investment cost advantages. This is currently limiting the global uptake of Chinese electrolysers, along with uncertainties related to maintenance and repairs over the lifetime of the plant. However, Chinese manufacturers are now addressing many of these barriers through innovation and exploring the expansion of manufacturing operations overseas.
Likelihood of low-emissions hydrogen production being available by 2030, by technology. Source: IEA, 2025 Global Hydrogen Review
● Momentum for hydrogen offtake agreements slowed in 2024, with new deals concentrated in refining, chemicals and shipping. New offtake agreements signed in 2024 reached 1.7 Mtpa, compared with 2.4 Mtpa in 2023. However, some preliminary agreements signed in previous years were firmed, leading to investment in production projects. Existing uses of hydrogen in the refining and chemical sectors – and the use of hydrogen-based fuels in shipping and, to a smaller extent, aviation and power generation – account for almost all firm offtake agreements announced by the private sector to date and 80% of investment in committed production projects.
● Policies to create demand are now being implemented, but at a slow pace. Europe leads the way on the adoption of sectoral quotas for hydrogen use in transport and industry, as set out in the EU Renewable Energy Directive (RED) and mandates for the aviation sector. India (with a focus on refining and fertilisers) and Japan and Korea (with a focus on power generation) have also started ambitious programmes.
● Analysis of existing infrastructure and its proximity to low-emissions hydrogen production reveals early opportunities. Nearly 80 ports have well-developed expertise in managing chemical products, indicating a strong readiness to also handle hydrogen-based fuels. These ports, which are widely distributed across the globe, include some of the largest in the world, such as Rotterdam, Singapore and Ain Sokhna (Egypt). More than 30 of these ports could each access at least 100 ktpa of low-emissions hydrogen supply from announced projects within 400 km.
30 | January/February 2026 |
www.modernpowersystems.com
● The pipeline for low-emissions hydrogen production in Southeast Asia shows considerable promise but needs to mature. Based on announced projects, low-emissions hydrogen production could reach 480 ktpa by 2030, highly concentrated in Indonesia and Malaysia. However, only 6% of announced production has reached a final investment decision, and 60% remains at very early stages of development. One notable exception is a 240 MW electrolyser project under construction in Viet Nam – one of few projects at this scale outside China to reach FID. Around 40% of the projects are geared for exports – mostly of ammonia, which is the target product of the large majority of the pipeline.
● Existing industrial applications and shipping provide key opportunities for early adoption. The greatest opportunities to adopt low-emissions hydrogen in southeast Asia include ammonia production in Indonesia, Malaysia and Viet Nam and methanol production in Malaysia, to improve trade balances by reducing imports of natural gas and natural gas-based products; steel production in Indonesia and Viet Nam to meet growing regional demand; and maritime bunkering in Singapore to supply emerging demands in international shipping. The geographical concentration of existing applications, particularly in countries with large state-owned enterprises, provides a strong foundation for scaling up the sector. Near-term success will depend on accelerating the deployment of renewables to reduce production costs, implementing targeted policies for fuel-switching, and developing pilot projects that enable gradual progress towards commercialisation.
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