IEA's Reality Check: Languishing Policy & Escalating Costs Threaten to Burst Hydrogen's Green Dream
Amid accelerating global interest in clean hydrogen as a linchpin for decarbonization, a stark warning emerges from the International Energy Agency (IEA). The “Global Hydrogen Review 2023” reveals that skyrocketing costs and legislative inertia might squander critical low-carbon hydrogen investments.
Although clean hydrogen initiatives are mushrooming—electrolyzer capacity alone burgeoned to nearly 700MW by the end of 2022—the IEA divulges a disquieting underbelly. The current installed capacity and generated volumes are markedly subpar. Why? Project developers hang in a liminal space, starved for definitive government action and financial inducements.
It’s not that governments are mum—quite the contrary. The U.S. Clean Hydrogen Production Tax Credit, the European Union’s Important Projects of Common European Interest, and the U.K.’s Low Carbon Hydrogen Business Model are but a few instances of legislative frameworks taking shape. Yet, there’s a gaping chasm between political pageantry and concrete action. As a result, a myriad of ventures languishes in bureaucratic limbo.
Zooming out, the IEA speculates that electrolyzer capacity could triple to an eye-watering 2GW by the end of 2023. By 2030, assuming all projects reach fruition, we’re looking at an unprecedented 420GW, a 75% leap compared to last year’s forecast.
Despite this ostensibly rosy outlook, the accurate picture is more nuanced. Low-emission hydrogen contributes a measly sub-one percent to the global hydrogen mix, even as over 40 nations have unfurled national hydrogen blueprints. The pith of the issue? Inflation and soaring borrowing costs put a financial stranglehold on new initiatives, inflating prices across the hydrogen value chain.
IEA executive director Fatih Birol said that the challenging economic environment will "test the resolve" of hydrogen developers and policymakers to follow through on planned projects.
"We have seen incredible momentum behind low-emissions hydrogen projects in recent years, which could have an important role to play in energy-intensive sectors such as chemicals, refining, and steel," he said. "Greater progress is needed on technology, regulation and demand creation to ensure low-emissions hydrogen can realise its full potential."
In short, governments must buckle up. The call is for a cocktail of more robust financial support, demand-boosting mandates, and streamlined licensing. To truly internationalize low-carbon hydrogen, there’s a clarion call for global alignment on standards, regulations, and certifications.
Ultimately, low-emission hydrogen remains a fledgling sector, with production primarily dominated by fossil-fuel-based methods—culminating in an egregious 900 million tonnes of CO2 emissions in 2022. All said and done, clean hydrogen’s promise teeters precariously, dangling between grand governmental visions and the grim reality of underinvestment and regulatory bottlenecks.