Global hydrogen demand reached 97 Mt in 2023, an increase of 2.5% compared to 2022. Demand remains concentrated in refining and the chemical sector, and is principally covered by hydrogen produced from unabated fossil fuels. As in previous years, low-emissions hydrogen played only a marginal role, with production of less than 1 Mt in 2023. However, low-emissions hydrogen production could reach 49 Mtpa by 2030 based on announced projects, almost 30% more than when the Global Hydrogen Review 2023 was released. This strong growth has been mostly driven by electrolysis projects, with announced electrolysis capacity amounting to almost 520 GW. The number of projects that have reached a final investment decision (FID) is also growing: Announced production that has taken FID doubled compared with last year to reach 3.4 Mtpa, representing a fivefold increase on today’s production by 2030. This is split roughly evenly between electrolysis (1.9 Mtpa) and fossil fuels with carbon capture, utilisation and storage (CCUS) (1.5 Mtpa).

Hydrogen production from fossil fuels with CCUS has gained ground over the past year – although the total potential production from announced projects grew only marginally compared with last year, there were several FIDs for previously announced large-scale projects, all of which are located in North America and Europe. As a result, the potential production in 2030 from projects using fossil fuels with CCUS that have taken FID more than doubled in the last year, from 0.6 Mtpa in September 2023 to 1.5 Mtpa today.

Overall, this is noteworthy progress for a nascent sector, but most of the potential production is still in planning or at even earlier stages. For the full project pipeline to materialise, the sector would need to grow at an unprecedented compound annual growth rate of over 90% from 2024 until 2030, well above the growth experienced by solar PV during its fastest expansion phases. Several projects have faced delays and cancellations, which are putting at risk a significant part of the project pipeline. The main reasons include unclear demand signals, financing hurdles, delays to incentives, regulatory uncertainties, licensing and permitting issues and operational challenges.

Announced electrolyser capacity that has reached FID now stands at 20 GW globally, of which 6.5 GW reached FID over the last 12 months alone. China is strengthening its leadership, accounting for more than 40% of global FIDs in capacity terms over the same period. China’s front-running position is backed by its strength in the mass manufacturing of clean energy technologies: it is home to 60% of global electrolyser manufacturing capacity. China’s continued expansion of manufacturing capacity is expected to drive down electrolyser costs, as has occurred with solar PV and battery manufacturing in the past. Moreover, several large Chinese manufacturers of solar panels have entered the business of manufacturing electrolysers, and today they account for around one-third of China’s electrolyser manufacturing capacity. However, other regions are also stepping up efforts: in Europe, FIDs for electrolysis projects quadrupled over the last year to reach more than 2 GW, while India has emerged as one of the key players thanks to a single FID for 1.3 GW. 

Government investment in hydrogen technology RD&D has been growing since 2016, and this effort is starting to bear fruit. To date, progress has occurred mostly on the supply side, and numerous technologies are either already commercially available or close to this point. Promising results are also being seen for end-use technologies, with several applications in industry and electricity generation reaching demonstration stage, as well as significant progress in transport applications, particularly in the shipping sector. In addition, the number of patent applications leapt up 47% in 2022, with most of the growth coming from technologies that are primarily motivated by climate change concerns. Increased activity around patenting suggests that additional public funding for R&D and growing confidence in future market opportunities, backed by supportive policies, are stimulating more new ideas and product designs with commercial potential. 

Low-emissions hydrogen is an emerging sector and, as such, there is uncertainty about costs. Today’s electrolyser costs have been revised upwards for this report, based on newly available data from more advanced projects. The future cost evolution will depend on numerous factors, such as technology development, and particularly on the level and pace of deployment. With the deployment seen in the IEA’s Net Zero Emissions by 2050 Scenario (NZE Scenario), the cost of low-emissions hydrogen production from renewable electricity falls to USD 2-9/kg H₂ by 2030 – half of today’s value – with the cost gap with unabated fossil-based production shrinking from USD 1.5-8/kg H₂ today to USD 1‑3/kg H₂ by 2030. Deployment levels in the Stated Policies Scenario (which considers existing policies only) mean that the cost range would fall only around 30%. As natural gas prices fall in many regions, low-emissions hydrogen production from natural gas with CCUS is also set to experience cost reductions.

Cost reductions will benefit all projects, but the impact on the competitiveness of individual projects will vary. For example, full development of the entire electrolyser project pipeline of almost 520 GW would achieve similar global cost reductions as in the NZE Scenario. In China, global deployment at such a level would mean that the vast majority of the production from its current electrolyser project pipeline (1 Mtpa) would be cheaper than hydrogen produced from unabated coal. Globally, by 2030, more than 5 Mtpa could be produced at a cost competitive with production from unabated fossil fuels, and up to 12 Mtpa with a cost premium of USD 1.5/kg H₂.

This cost gap will remain an important challenge in the short term for project developers, but for final products for which hydrogen is an intermediate feedstock, the impact is likely to be manageable in many cases. The cost premium of low-emissions hydrogen production decreases along the value chain, meaning that consumers often see only a modest price increase in final products. For example, using steel produced with renewable hydrogen today in the production of electric vehicles (EVs) would increase the total price of an EV by around 1%. 

Efforts to stimulate demand for low-emissions hydrogen (and hydrogen-based fuels) are now gaining traction as governments begin implementing key policies (such as Carbon Contracts for Difference in Germany and the EU mandates in aviation and shipping). These measures have also triggered action on the industry side, with a growing number of offtake agreements signed and the launch of tenders to purchase low-emissions hydrogen. However, the overall scale of these efforts remains inadequate for hydrogen to contribute to meeting climate goals.

Policies and targets for hydrogen demand set by governments add up to around 11 Mt in 2030, nearly 3 Mt lower than last year due to the downward revisions of some targets for hydrogen use in industry, transport and power generation. Yet the amount of low-emissions hydrogen production that has taken FID (3.4 Mtpa) or is already operational (0.7 Mtpa), at 4 Mtpa, is well below that level. The gap constitutes a call for action to industry and governments to facilitate offtake agreements that can help unlock investment on the supply side.

At the same time, government policies and targets for demand are well behind the production targets by governments (which add up to 43 Mtpa in 2030) and are even lower than the potential supply that could be achieved from announced projects (49 Mtpa). Policy measures are still insufficient to create the level of demand needed to scale up production to meet government expectations. In addition, some more ambitious actions (like the EU targets in industry applications or the refining quotas in India) have not yet been translated into national legislation. Moreover, from the around USD 100 billion of policy support for low-emissions hydrogen adoption announced by governments over the past year, support on the supply side is 50% larger than on the demand side. Stronger government action will be needed to stimulate demand for low-emissions hydrogen as an essential requirement to underpin investments on the supply side. Industrial hubs, where low-emissions hydrogen could replace the existing large demand for hydrogen met today by unabated fossil fuels, remain an important untapped opportunity for governments to stimulate demand.

Governments are accelerating the development of regulations on the environmental attributes of low-emissions hydrogen, particularly regarding greenhouse gas (GHG) emissions. Clear and predictable regulations can strengthen certainty for long-term investments. Yet these frameworks, and the associated certification schemes, remain unaligned across different regions, creating potential for market fragmentation. In response, at COP 28, 37 governments committed to mutual recognition of national certification schemes, while Latin America launched “CertHiLAC”, a regional certification framework. In addition, the International Organization for Standardization (ISO) has released a methodology for determining GHG emissions associated with hydrogen production, transport and conversion/reconversion. This will be the basis for a full standard expected by 2025 or 2026, which could serve as a common methodology to enable the mutual recognition of certificates. However, some questions related to the assessment of GHG emissions in hydrogen supply chains remain unresolved, such as how to account for emissions from the construction and manufacturing of production assets. In the case of fossil-based production, there is a need for better data on upstream and midstream emissions of fossil fuel supply available in national inventories in order to ensure robust assessment of the GHG emissions associated with these production routes.

This year’s report includes a special focus on Latin America and the Caribbean, following the launch of the IEA’s Latin America Energy Outlook in 2023. Latin America is well-positioned to emerge as a major producer of low-emissions hydrogen, capitalising on its abundant natural and renewable energy resources and largely decarbonised electricity mix. Based on announced projects, by 2030, Latin America could produce more than 7 Mtpa of hydrogen with a carbon intensity below 3 kg CO₂-eq/kg H₂ (3-4 times lower than using unabated natural gas), in line with the requirements of several existing regulations around the world (e.g. the EU Taxonomy, Japan’s Hydrogen Society Promotion Act and the US Clean Hydrogen Production Standard). However, achieving this potential in full would require a significant increase in electricity generation capacity – equivalent to 20% of the region’s current power output – and substantial investments in enabling infrastructure, such as transmission lines.

Many Latin American countries already have hydrogen strategies with a strong focus on export opportunities. However, these plans may need to be updated in light of uncertainty about the size of the global hydrogen market. At the global level, there has been no growth in announced projects linked to trade of hydrogen and hydrogen-based fuels in the past year, suggesting that project developers have instead focused on domestic opportunities. In the case of Latin America, these opportunities are mostly in refining and ammonia production, which offer immediate large-scale applications. In the case of ammonia, developing domestic production capacities would help to reduce import dependency for fertilisers in a region where agriculture makes a significant contribution to national gross domestic product.

As the market develops, new applications in steel, shipping and aviation will emerge, together with the establishment of hydrogen hubs. These hubs can open an opportunity to scale up hydrogen use and production for domestic needs, while also providing the opportunity to export hydrogen-based fuels, as well as materials produced with low-emissions hydrogen, such as hot briquetted iron, allowing countries that are today large exporters of iron ore, like Brazil, to develop new industrial capacities and scale up in the value chain. A phased approach to supply in the region, starting with smaller-scale projects, will help mitigate risks, reduce capital investment, and provide valuable experience for scaling up in the future. Infrastructure planning and development, especially in long-lead projects like power transmission, should begin immediately to support future hydrogen production.

Accelerate demand creation for low-emissions hydrogen by leveraging industrial hubs and public procurement

Governments should take bolder action to stimulate demand for low-emissions hydrogen. The implementation of policies such as quotas, mandates and carbon contracts for difference has already started, but remains limited in geographical coverage and scale. Governments can capitalise on the opportunity offered by existing hydrogen users and high-value sectors such as steel, shipping and aviation, which are often co-located in industrial hubs. Pooling demand in these hubs can create scale and reduce offtake risks for producers. Additionally, making use of public procurement for final products that consume low-emissions hydrogen in their production, and encouraging the development of markets where consumers are willing to pay small premiums for low-emissions hydrogen-based products, can help drive early adoption.

Support project developers to scale up low-emissions hydrogen production and drive cost reductions

Governments should provide targeted support to project developers in the scale-up phase to bridge the cost gap between low-emissions hydrogen and unabated fossil-based hydrogen. Timely support is critical to unlock investment decisions, as experienced in Europe with a wave of FIDs after the confirmation of funding for several large projects. Governments should also provide long-term visibility over the level and form of support so developers have clarity over future business cases and can attract investors. While initial projects may require substantial financial backing, support levels will decrease as the sector matures and costs decline. In addition to grants and subsidies, governments can explore other policy options such as loan guarantees, export credit facilities, and public equity investments which can help to reduce investment risk and lower the cost of capital, which is crucial for these capital-intensive projects.

Strengthen regulation and certification of environmental attributes for low-emissions hydrogen

The release of the ISO methodology provides a standardised approach to assessing GHG emissions. It is now time for governments to implement clear regulations that set thresholds for acceptable emissions levels in hydrogen production. Ensuring regulatory consistency with the ISO methodology and forthcoming standards can facilitate global interoperability. However, in addition, governments should intensify efforts to assess and verify upstream emissions from fossil fuel supply, ensuring transparency by making this data accessible to market participants and the public. 

Identify opportunities to start developing hydrogen infrastructure

Governments should strengthen efforts to accelerate the development of hydrogen infrastructure to avoid further delays that risk slowing the scale-up of low-emissions hydrogen production and demand. Without timely infrastructure deployment, the link between supply and demand cannot be established, hindering market growth and creating uncertainty for both producers and consumers. Immediate action can include early planning, a focus on repurposing existing natural gas pipelines and storage facilities to minimise cost, streamlining regulatory frameworks to speed up permitting, and fostering cross-border co-operation on hydrogen networks. Public-private partnerships can also be leveraged to de-risk investments, ensuring that infrastructure keeps pace with hydrogen market development.

Support emerging markets and developing economies (EMDEs) in expanding low-emissions hydrogen production and use

EMDEs, particularly in regions such as Africa and Latin America, hold significant potential for low-cost, low-emissions hydrogen production. To unlock this potential, governments of advanced economies and multilateral development banks should provide targeted support, including grants and concessional financing, to address key challenges such as access to financing, which is a major barrier for project developers in EMDEs. Developing these projects can help to cover domestic needs, reduce import dependencies and potentially enable the export of hydrogen or hydrogen-based products like hot briquetted iron and fertilisers.