By Forrest Crellin
PARIS (Multibagger) - The International Energy Agency (IEA) reported on Wednesday that final investment decisions for hydrogen projects have doubled over the last 12 months, with China taking the lead. However, despite this growth, installed capacity and demand remain low, leading to uncertainty in the industry.
The IEA stated that the investment decisions made could result in a five-fold increase in low-emission hydrogen production by 2030, with China accounting for over 40% of these decisions in the past year. This growth could overshadow the rapid expansion of solar energy, according to the group.
Despite these positive indicators, the IEA highlighted that current demand targets are only a fraction of the production projects, and the progress in the hydrogen sector is insufficient to meet climate goals. Most projects are still in early stages, with potential risks such as unclear demand signals, financing obstacles, regulatory uncertainties, and operational challenges.
IEA Executive Director Fatih Birol emphasized the need for policymakers and developers to focus on creating demand, reducing costs, and establishing clear regulations to attract further investment in the sector.
The IEA projected that global hydrogen demand could increase by around 3 million tonnes (Mt) by 2024, primarily driven by the refining and chemical sectors. However, this growth is more reflective of broader economic trends rather than successful policies, the IEA noted.
Currently, most hydrogen demand is met by hydrogen produced from unabated fossil fuels, with low emissions hydrogen playing a minor role. Technology and production costs remain key factors, with electrolysers facing challenges due to high prices and supply chain constraints. Cost reduction will depend on technological advancements and achieving economies of scale.
Overall, the hydrogen sector is showing promising growth, but challenges remain in meeting demand targets and transitioning to low-emission production methods. Policymakers and industry players must address these obstacles to unlock the full potential of hydrogen as a clean energy source.
Analysis:
The IEA's report highlights the increasing interest and investment in hydrogen projects, particularly in China. While the growth in investment decisions is positive, challenges such as low demand targets, regulatory uncertainties, and cost pressures pose risks to the sector's development.
For investors, this indicates potential opportunities in the hydrogen market, but careful consideration of the risks and uncertainties is essential. As global demand for hydrogen grows, there is a need for clear policies, technological advancements, and cost reductions to support the sector's expansion and contribute to climate goals.