In this article we track the progress of global hydrogen projects, take a look at the bottom-up modelling of market demand, and projections for the levelized cost of hydrogen (LCOH). After delays in final investment decisions (FIDs) for green hydrogen projects across 2022 and 2023, key bottlenecks could start to clear at the end of 2024, driven by regulatory certainty in the US, and USD 36bn of subsidies globally.
In Europe, the levelized costs of green hydrogen (H2) is at parity with "grey" fossil fuels by 2026, assisted by reducing forward energy curves, and it is cheaper than grey and blue H2 in the US in 2024 (when USD 3/kg tax credits are applied). This could unlock the global green H2 pipeline of 828GW in 2023 (~3.6 times the levels of 2020) to drive our forecast of a ~70% Compound Annual Growth Rate (CAGR) in global electrolyser installations from 2025 to reach 236GW by 2030, followed by a 25% CAGR by 2050 to reach 4,255GW.
Key bottleneck of green hydrogen regulation to clear
Only ~2% of announced green H2 projects have reached Final Investment Decision (FID) in 2023, with one of the key bottlenecks has been policy uncertainty on the regulations for green hydrogen in Europe and the US. This should be confirmed in the US in 2024 which could catalyse orders by year-end and subsidy schemes are launching in Europe that can unlock orders.
Cash burn remains a risk in the sector
Delays to hydrogen orders have increased the risk of cash burn in the sector, and higher interest rates have exacerbated sector underperformance with earnings before interest, taxes, depreciation, and amortization (EBITDA) breakeven pushed to ~2027 from ~2024-25.
