‘Realistic’ political strategy needed for green hydrogen market ramp-up – report

A robust political strategy based on realistic expectations for hydrogen production is needed as demand for the gas remains low due to its high costs and other factors, researchers at the Potsdam Institute for Climate Impact Research (PIK) said. More than 60 countries have developed industrial market ramp-up strategies for hydrogen in recent years, but in 2023, less than 10 percent of the originally announced green hydrogen production was realised, according to their latest report.

PIK researchers Adrian Odenweller and Falko Ueckerdt examined "all 1,232 globally announced hydrogen projects" and identified the competitiveness gap that continues to plague the development of the technology. They therefore advocate for a strong political strategy based on realistic expectations for hydrogen that can close the implementation gap.

The report attributes the problems of green hydrogen’s market ramp-up to increased costs, a lack of willingness to pay on the demand side and uncertainties about future subsidies and regulation. The subsidies required to realise all projects by 2030 far exceed the global public financial support announced to date. "Enormous additional subsidies of around 1 trillion U.S. dollars would be required to realise all announced hydrogen projects by 2030," Ueckerdt explained.

"Green hydrogen will continue to have difficulties meeting the high expectations in the future due to a lack of competitiveness," Ueckerdt added. Instead of subsidies, the researchers recommend demand-side instruments, such as binding quotas that can channel green hydrogen into sectors that are difficult to electrify, such as aviation, steel and chemicals. They cite as an example an EU regulation requiring 1.2 percent of all aviation fuels to be blended with synthetic fuels based on hydrogen from 2030 and up to 35 percent by 2050.