Green hydrogen: Study shows big gaps between ambition and global implementation

In recent years, more than 60 countries have developed strategies to stimulate the market ramp-up of hydrogen, particularly in the industrial sector. However, in 2023, less than 10% of the originally announced green hydrogen production was realized, shows a new study published in the journal Nature Energy.

The main reason: hydrogen remains an expensive good for which there is little willingness to pay. Adrian Odenweller and Falko Ueckerdt from the Potsdam Institute for Climate Impact Research (PIK) determined this competitiveness gap for all 1,232 globally announced hydrogen projects. They advocate for a robust political strategy that is based on realistic expectations for hydrogen and closes the implementation gap.

"Over the past three years, global project announcements for green hydrogen have almost tripled," says PIK researcher and lead author Odenweller. "However, only 7% of the production capacity originally announced for 2023 has been completed on time during this period."

According to the study, the recent problems with the market ramp-up of green hydrogen can be attributed to increased costs, a lack of willingness to pay on the demand side and uncertainties about future subsidies and regulation.

"Enormous additional subsidies of around one trillion US dollars would be required to realize all announced hydrogen projects by 2030," explains Ueckerdt from PIK, "Green hydrogen will continue to have difficulties meeting the high expectations in the future due to a lack of competitiveness."

However, permanent subsidies are not a solution. The two researchers therefore recommend using demand-side instruments such as binding quotas to channel green hydrogen specifically into sectors that are difficult to electrify, such as aviation, steel or chemicals. For example, according to an EU regulation, 1.2% of all aviation fuels must be blended with synthetic fuels based on hydrogen from 2030. This quota is set to rise to 35% by 2050.

Subsidy requirements far exceed announced global subsidies

In their study, the researchers quantified three key gaps between theory and practice: the past implementation gap, the future ambition gap and the future implementation gap. The first results are from the difference between originally announced hydrogen projects and the projects actually realized in 2023. The ambition gap refers to the discrepancy between the amount of hydrogen that would be required by 2030 according to 1.5-degree scenarios and the projects currently announced by 2030.

Although announced hydrogen projects are sufficient for the majority of the scenarios analyzed, a wide implementation gap remains: The subsidies required to realize all projects by 2030 far exceed the global public financial support announced to date.

The study is based on a global and manually verified project database with 1,232 green hydrogen projects announced until 2030. For each of the 14 designated end uses of the projects, the authors calculate the competitiveness gap between the green product and its fossil competitor. Together with the volume and the timing of the project announcements, this yields the subsidies required to realize all projects by 2030.

The researchers warn against fossil lock-ins, which could tie companies to fossil fuels and thus endanger climate targets. In the long term, a transition to technology-neutral market mechanisms such as carbon pricing is crucial in order to limit public costs and ensure a level playing field with other climate mitigation options. They therefore recommend a robust strategy that supports hydrogen projects in the short term through direct subsidies and demand-side regulation, but is based on realistic expectations for hydrogen.

Provided by Potsdam Institute for Climate Impact Research