Rapid Growth of Low-Emission Hydrogen Investments: Policies Needed to Boost Demand in Heavy Industry

Jakarta, INTI - Investments and project developments in low-emission hydrogen are showing a growing trend despite challenges such as regulatory uncertainties, cost pressures, and a lack of incentives to stimulate demand in strategic sectors. The latest Global Hydrogen Review 2024 report by the International Energy Agency (IEA) highlights significant progress in this sector but underscores the need for more concrete policies to accelerate the adoption of low-emission hydrogen in heavy industries, refining, and long-distance transport.

Low-Emission Hydrogen Projects Double

Over the past year, the number of low-emission hydrogen projects reaching the final investment decision (FID) has doubled. This is expected to increase global production fivefold by 2030. Currently, global electrolyzer capacity that has reached FID stands at 20 gigawatts (GW). If all announced projects materialize, hydrogen production could reach 50 million tons per year by the end of this decade.

However, achieving this figure would require the hydrogen industry to grow at an unprecedented compound annual growth rate (CAGR) of over 90% through 2030. This growth rate far exceeds the rapid expansion experienced by solar PV during its fastest growth phases.

China's Dominance in Electrolyzer Production

China leads hydrogen technology development, contributing more than 40% of global electrolyzer capacity reaching FID over the past year. With a manufacturing capacity of 25 GW per year—around 60% of the global total—China demonstrates its advantage in mass-producing clean energy technologies. Nevertheless, installed electrolyzer capacity remains low as developers await clearer policies and government support.

Policy and Market Demand Challenges

IEA Executive Director Fatih Birol stated, “Low-emission hydrogen projects are advancing rapidly, showing strong investor interest. However, the success of these projects depends on real demand from key industrial consumers.”

Currently, there is a significant gap between global production and demand targets set by governments. Production targets are projected to reach 43 million tons annually by 2030, but demand targets only amount to around 11 million tons. Some policies, such as carbon contracts for difference and sustainable fuel quotas for aviation, are beginning to yield positive effects. This is evident from the increasing number of agreements between low-emission hydrogen producers and consumers.

Opportunities and Production Cost Challenges

Low-emission hydrogen faces high production cost challenges, particularly in electrolyzer technology. Continued technological advancements and mass production are essential to reduce costs and achieve economies of scale. For instance, if the global pipeline of electrolyzer projects totaling 520 GW materializes, hydrogen production via electrolysis in China could become cheaper than coal-based hydrogen without emissions control by 2030.

Potential in Latin America

Latin America holds significant potential as a hub for low-emission hydrogen production and consumption. Many countries in the region have developed hydrogen strategies focusing on export opportunities. However, near-term opportunities are centered on domestic applications such as refining and ammonia production. A phased approach allows for risk mitigation, reduced capital investment, and valuable experience for scaling up future projects.

Steps Towards the Future

To accelerate low-emission hydrogen adoption, governments must establish supportive policy frameworks and provide adequate incentives. Meanwhile, the industry should focus on technological innovation and cross-sector collaboration to address cost and regulatory challenges. With these measures, hydrogen could become a cornerstone of the global energy transition.

The IEA report provides strategic guidance for governments and industries to address existing challenges and seize opportunities in the low-emission hydrogen sector. Through close cooperation, the vision of a low-carbon economy can be realized.