Hydrogen as an alternative source of fuel and electricity made substantial inroads in 2024, with a number of significant projects coming to life on both the production and consumption side. Analysts see the new year as bringing more opportunities for the hydrogen industry, even under a possibly skeptical new Trump administration.
“There is uncertainty in the hydrogen space, but we’re seeing continued optimism since hydrogen is ultimately supported by oil and gas,” said Kyle Hayes, partner and co-chair of the hydrogen practice at New York-based law firm Foley & Lardner. “So as an asset class, hydrogen still makes sense under a Trump administration.”
In Hayes’ opinion, tax incentives for hydrogen development put in place during the Biden administration should survive into the new one because of the aforementioned benefits to the fossil fuel industry, which predominately benefit red states. At the same time, increasing hydrogen production should also increase supply and lower costs for alternative fuel applications.
According to the International Energy Agency (IEA), global hydrogen reached 97 million metric tons per annum (Mtpa) in 2023, less than 1% of which was from low-carbon sources (blue or green). International agreements and national tax incentives are increasing the amount of low-carbon hydrogen produced. The IEA says production of low-emission hydrogen could reach 38 Mtpa in 2030, if all announced projects are realized.
A report from London-based market research firm Wood Mackenzie said blue hydrogen, which is produced from natural gas through steam reforming where the carbon dioxide byproduct is captured and sequestered, will account for the dominant share of new projects reaching final investment decision (FID) in the United States. The firm projects U.S. blue production to reach 1.5 Mtpa in 2025, more than any other country.
At the same time, production of green hydrogen, which is made from water using electrolysis with energy supplied by renewable sources, is expected to weaken as blue projects dominate. Blue production is more attractive because it uses existing natural gas infrastructure.
However, prospects for green production are not entirely bleak. While Western electrolyzer manufactures have dominated North American and European markets, the report said, Chinese electrolyzer manufacturers are gaining ground in other regions of the globe. Price competition could make green hydrogen production more attractive.
“Despite the challenges, we anticipate the continued push of giga-scale green hydrogen projects,” said said Monica Trilho, research analyst for Wood Mackenzie, referring to the energy capacity of electrolyzers in given projects.
Looking ahead to 2025, the report said emerging economies in South America, the Middle East, India and China are likely to lead the way with new giga-scale projects. These regions benefit from low-cost renewable power, access to low-cost Chinese electrolyzers and supportive government initiatives. According to New York-based hydrogen startup Ecolectro, the global green hydrogen market was valued at $7 billion in 2023 and is projected will grow 41.6% annually over the next ten years.
Despite the dominance of blue production methods, green hydrogen production continues to make headway in Europe and North America. In November, Norway-based HydrogenPro, a manufacturer of electrolyzer systems for green hydrogen production, recently signed an agreement with Germany’s J. Heinr.
Kramer Group, an industrial engineering and construction firm, to develop projects in Germany, Austria and the Benelux countries focused on 5 to 50 MW scale facilities. A 10 MW electrolyzer can be expected to produce about 4.8 metric tons of hydrogen per day, which is enough to refuel the hydrogen fuel calls of more than 100 trucks.
New Jersey-based Avina Clean Hydrogen recently broke ground on a new facility in Vernon, Calif., that will produce green hydrogen to refuel hydrogen-powered trucks carrying cargo from the nearby port of Long Beach. The plant is expected to produce up to 4 metric tons of compressed hydrogen per day.
On the consumption side, California-based data center developer ECL opened its first facility in Mountain View in June powered by hydrogen fuel cells and battery storage. In September, ECL announced it is building a 1 GW facility near Houston that will run on fuel cells with hydrogen taken from gas pipelines on the site.
The company says the first phase of the project will require 50 MW of power and is expected to go online in the summer of 2025 at a cost of $450 million. Current plans are for the facility to have a capacity of 1 GW of on-site, off-grid power supplied by hydrogen fuel cells and battery storage at a cost of $8 billion. ECL says it is financing the TerraSite-TX1 with its own funds and those of its financial partners.
Many industries including airlines, energy suppliers and even liquor distilleries have announced hydrogen projects in 2024 that should increase demand.
Intriguingly, researchers around the world are delving for potentially vast quantities of natural hydrogen trapped in underground geologic formations. While there are currently no reliable methods for extracting this natural hydrogen, the ability to tap it could provide a boost to the global hydrogen economy going forward.
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