The clean hydrogen sector has boomed in the past couple of years, and from the graph below we see that close to 180 hydrogen production projects were announced last year alone, which we are already not too far from this year. It’s quite likely that we will surpass the number of announcements made in 2021 by the end of 2022. The global project pipeline currently holds more than 400 hydrogen production projects worth about USD$400 billion, with green hydrogen projects accounting for more than 85% of the projects in the pipeline.
Based on data from the EIC, the total global electrolyser capacity to come online between 2022 and 2030 currently stands at 364GW, this includes both green and pink hydrogen projects. Out of this total capacity, 13GW will come online before 2025 while the remaining 351GW is expected to start generating hydrogen in 2025 and beyond. Assuming all these projects come to fruition, and that the electrolysers are working 90% of the time in a year, we will be looking at a production of about 54 mtpa. In terms of blue hydrogen / ammonia projects, a total capacity addition of at least 4.43 mtpa is expected by the end of the decade if all blue projects are realised between now and then. Combined, the 2020-22 announced blue, green and pink hydrogen capacity, if all projects go ahead, would provide 58.43 mtpa on the supply side.
What about the demand side? Global hydrogen demand was in fact nearly 94 mtpa in 2021 mostly met by unabated fossil-fuels, often generalised as grey hydrogen (i.e. by-product from catalytic naphtha crackers and steam crackers, steam methane reforming, coal-gasification) – meaning we are only about halfway towards meeting current demand for which more than 650GW in electrolysis capacity would be needed.
Importantly, if the pace and scale of project announcements continues at its current rate, this remaining demand (to “green the grey”) is highly likely to be reached in just the next 12 to 24 months.
A total of 346GW worth of electrolysis projects were added to the project pipeline in 2021 and 2022 alone. Assuming this trend in announcements continues, we could be looking at more than double the current electrolysis capacity in the global project pipeline by the end of 2024.
This means we are close to an important tipping point. Until such time as all grey hydrogen is replaced by clean hydrogen, then one could argue that there is legitimate existing demand for these new projects. But what happens when we start to see project announcements beyond the 94 mpta? This is just 12-24 months away from now. Will demand grow through government stimulation to keep pace with growing supply, or will there be a rapid slow-down in new projects when new demand is found to be wanting?
The clean hydrogen train may be about to run out of track. The time when projects will no longer have off-takers is fast-approaching and could lead to a rapid commodity price reduction for hydrogen but also rapid negative Return on Investments for many of the touted new hydrogen projects.
It is therefore clearly imperative to increase clean hydrogen demand now to stimulate its uptake as a clean energy vector. Insufficient demand will quickly lead to clean hydrogen producers not being able to secure off-takers and to the supply chain not being able to unlock innovation and investment to scale up production.
Stuart Broadley
EIC CEO
Madana Leela
EIC Regional Analyst, APAC