Key Takeaways from Hydrogen Insight's Latest Report

Overview

Although this report was published six months ago, I think it is worth reviewing again as it cuts through a lot of the noise around hydrogen. At the end of this article, there's a question for you.

The Hydrogen Insights 2023 December Update, a collaboration between the Hydrogen Council and McKinsey & Company, provides an in-depth analysis of the global hydrogen economy. It highlights the current state of hydrogen deployment and the evolving costs of renewable hydrogen.

Key takeaways

1.   Role of Hydrogen in Decarbonisation

Hydrogen is crucial for decarbonising difficult sectors, enabling large-scale energy transport to resource-constrained areas, and supporting a clean, resilient energy system.

2.   Market Dynamics

Tailwinds: Increasing and maturing project pipelines and supportive decarbonisation regulations.

Headwinds: Rising costs, project delays, regulatory uncertainties, and higher financing costs.

3.   Project Pipeline Growth

Over 1,400 projects announced globally, up from 1,040, representing USD 570 billion in investments (previously USD 435 billion) and 45 million tonnes per annum (Mt p.a.) of clean hydrogen supply by 2030 (previously 38 Mt p.a.).

Europe leads with 540 projects, followed by North America with 248.

A quarter of projects with known commissioning dates have progressed past the final investment decision (FID), representing 7% of the total announced investments.

Investments in the front-end engineering and design (FEED) phase have increased to USD 110 billion from USD 75 billion.

Global electrolysis deployment has surpassed the 1 gigawatt (GW) mark, with around 12 GW capacity having passed FID.

4.   Regulatory Landscape

Support is emerging through production tax credits (PTC) in the US, renewable hydrogen mandates in Europe’s Renewable Energy Directive (RED III), and contracts for difference (CfD) in Japan.

However, regulatory uncertainties persist, particularly regarding the US Inflation Reduction Act (IRA) PTC requirements and the implementation of RED III in EU member states.

5.   Cost Challenges

Costs for renewable hydrogen have increased, with the levelised cost of hydrogen (LCOH) now estimated at 4.5 to 6.5 USD/kg, a 30% to 65% rise due to higher labour and material costs, increased capital costs, and a more than 30% rise in renewable power costs.

Despite current cost challenges, renewable hydrogen costs are expected to decrease to 2.5 to 4.0 USD/kg by 2030, driven by advancements in electrolyser technology, economies of scale, design improvements, and lower renewable power costs.

6.   Impact on Industry Development

The industry’s growth has slowed, with a 10% drop in announced clean hydrogen supply through 2025.

Continued collaboration between industries and governments is necessary to overcome these hurdles and support further growth in the global clean hydrogen sector.

The report underscores hydrogen's pivotal role in future energy systems while highlighting the current challenges and necessary steps to advance the global hydrogen economy.

The question

What has changed in your world regarding the hydrogen sector since this report was published? Comments are welcome.

Read the full report here:

https://hydrogencouncil.com/wp-content/uploads/2023/12/Hydrogen-Insights-Dec-2023-Update.pdf