The hydrogen economy is entering a critical phase of development, with recent growth falling short of expectations set back during the ambitious energy transition plans of 2020.
Despite this slowdown, demand for low-carbon hydrogen is still projected to increase as industries like steel, transportation, and power seek to decarbonise their operations.
GlobalData reports that about 83 per cent of the low-carbon hydrogen capacity expected to come online by 2030 will be from green hydrogen plants, with blue hydrogen accounting for the remainder.
Currently, only 2 per cent of the total expected capacity by 2030 is operational.
Ravindra Puranik, Oil and Gas Analyst at GlobalData, stated: “Low-carbon hydrogen is set to occupy a crucial role in the decarbonisation efforts of several energy-intensive industry verticals.”
He highlights its potential in reducing emissions in downstream oil and gas processes and its applications in transportation, particularly for marine and heavy vehicles.
The oil and gas industry is expected to remain the dominant consumer of hydrogen in the near future, with additional demand emerging from metallurgy, power generation, and transportation sectors.
While there has been a significant increase in low-carbon hydrogen project announcements in recent years, nearly 75 per cent of these projects are still in the feasibility stage.
This reflects the growing interest in the market as industries seek to capitalise on the global energy transition.
Oil and gas companies are investing in blue and green hydrogen production as part of their long-term energy transition strategies, with a preference for green hydrogen.
However, the success of the hydrogen economy hinges on the expansion of distribution networks, including new pipelines.
By 2025, the United States is expected to produce about 0.4 million tonnes of hydrogen, with the Donaldsonville plant in Louisiana contributing 0.3 million tonnes of blue hydrogen.
Europe is focusing more on green hydrogen, with multiple projects set to come online, including Shell’s 200-megawatt project in the Netherlands.
Despite progress, low-carbon hydrogen production is projected to reach only four million tonnes by 2030, falling short of policy targets such as the REPowerEU programme’s goal of nine million tonnes of green hydrogen production.
The hydrogen economy faces several challenges, including funding issues, grid congestion, rising costs, potential trade wars, and performance concerns.
The introduction of import tariffs and ongoing geopolitical tensions create uncertainty around investment decisions in 2025, affecting not just hydrogen but the entire energy sector.
As the hydrogen economy navigates this critical phase, its future trajectory will be determined by developments in the coming years, particularly in addressing infrastructure and cost challenges.
