Green hydrogen faces ‘significant step-up challenge’ - report

Green hydrogen faces a ‘significant step-up challenge’ in the next five years, according to a report, with projects expected to take longer to deliver than expected.

Electrolysis projects are taking longer to deliver than expected, according to the report (image credit: jroballo/Getty Images Plus)

More than 1,000 large-scale project proposals had been announced by the end of January 2023 for all types of low-carbon hydrogen, according to the Hydrogen Insights report, produced by McKinsey consultancy and the Hydrogen Council

It expected 795 projects to be fully or partially commissioned by the end of 2030, representing total investments of $320 billion and capacity of 38Mt per year.

About 25Mt of that capacity is from renewables. The report said that of the 12Mt of projects added in the past eight months, about 10 Mt are renewable hydrogen. It pointed to the high growth in announcements in renewables-rich regions such as Africa and the Middle East.

But projects are taking longer to deliver than expected, the report warned. Out of the 6GW of electrolysis projects due for deployment by the end of 2022, only 700MW have been delivered – largely in China.

More than 200GW of electrolysis capacity is needed by 2030 to track net zero in 2050, according to the report – more than 200 times the capacity installed today. “The next three to five years represent a significant scale-up challenge,” it added.

'Lack of government support'

The report blamed slow deployment on lack of government support and slow permitting, supply chain and engineering, procurement and construction capacity constraints. It also lamented the high cost of deploying projects while offtakers would not pay a green premium.

Some 120GW of electrolysis projects were undergoing feasibility studies, the report said, while only 9GW had achieved final investment decision (FID). Geographically, Europe is the largest market but has less than 1.5GW past the FID stage.

“Momentum is strong, and the industry is planning investments into clean hydrogen, yet much more needs to be done,” the report concluded.

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