Are we there yet? Clean hydrogen’s challenges and opportunities in 2024

2024 looks to be the breakout year for determining the future of clean hydrogen as a crucial opportunity for modern energy systems. These systems are amid the decarbonization transition due to public concerns about greenhouse gas (GHG) emissions, the availability of specific energy resources, rapid technical innovation, and the growing population from developing nations emerging from energy poverty (Anderson, 2022). Low-carbon energy sources and carriers must replace high-carbon ones to handle the growing energy demand during the current energy transition (Corbeau et al., 2022). Global decarbonization efforts achieved a vital milestone when the COP28 climate conference reached agreements for transitioning from fossil fuels (UNFCC, 2023).

Clean hydrogen, comprising blue, green, or pink hydrogen, can help decarbonize up to 25% of global energy-related CO2 emissions (DOE; Lazard, 2023). While clean hydrogen is not a panacea for this transition, it may assist direct electrification, biomass-based fuels, and energy efficiency measures to achieve favorable decarbonization outcomes (Hydrogen Council, 2021). Hydrogen enthusiasts expected 2023 to be the year when clean hydrogen, especially a green one, went from idea to reality since a surge of global government subsidy programs was supposed to enter into force virtually guaranteeing profitability for green hydrogen projects.

Unfortunately, these programs took longer to implement, delaying final investment decisions (FID) by developers, with knock-on effects for electrolyzer makers and investors (Martin & Collins, 2023). Industry experts and governments also became more realistic about the cost of producing green hydrogen and the sectors that should be subsidized to use it. Some governments worldwide started to rethink how clean and, especially, green hydrogen should be utilized, concluding that it should be reserved for sectors where electrification is impossible or difficult to achieve at scale (Maquire; 2023; Martin & Collins, 2024).

This article briefly describes significant challenges and opportunities for clean hydrogen in 2024 - a vital year for matching ambitions and progress in achieving its potential as a clean energy solution. The following section describes key challenges for clean hydrogen. 

What are the headwinds and potholes? 

The current downbeat outlook on clean hydrogen contrasts the mood surrounding hydrogen just a few years ago, when hydrogen bulls hyped it as the "Swiss Army knife of decarbonization" (Gates, 2022, p. 1). For example, the International Energy Agency (IEA) cautions that, except for China, green hydrogen production will grow more slowly than expected (IEA, 2024). Liebreich (2024) estimates that the clean hydrogen production in 2030 would be at most 15 million tons.

ING describes the potential adverse developments in 2024 that may create obstacles for clean hydrogen, such as 1) populist victories in the worldwide elections, 2) conservative transition plans of energy-intensive companies, 3) continued problems with electrolyzer technologies, 4) unsuccessful hydrogen auctions; 5) hydrogen supply chain’s issues, and 6) electrolyzer trade problems (Hieminga & Zhang, 2024). Wood Mackenzie warns about the impact of policy uncertainty, macroeconomic headwinds, cost inflation, and the sluggish emergence of offtake opportunities on clean hydrogen projects. If this trend continues, project delays and cancellations will be inevitable. Since the announcement of projects also outpaces developments, with half of the global capacity being speculative, most of these projects remain speculative (Douglas & Boulstridge, 2024). 

Furthermore, Bloomberg NEF cautions about the current "severe overcapacity on a global scale" since the global supply of electrolyzers exceeds demand from green hydrogen projects. For instance, it counts over 31GW of factory capacity to assemble electrolyzers versus a 2023 demand of under 2GW and an assumed 2024 demand of about 4GW. Factory capacity can rise to more than 50 GW in 2024 and 75 GW in 2025. Despite such a promising and rapid scale-up, the green hydrogen developers, unsure about the slower-than-expected rollout of subsidies, did not secure the major orders expected in 2023. In turn, most electrolyzer manufacturers, such as Plug Power and Enapter, reported annual losses of $1.4 billion and $13 million, respectively.

Only Thyssenkrupp Nucera reported a profit of $23 million in 2023, primarily due to the current fulfillment of a 2.2GW order from the NEOM project in Saudi Arabia, the world's largest under construction green hydrogen facility (Martin, 2024a). The following section outlines clean hydrogen's opportunities. 

Where are the bright lights on the horizon? 

Despite rough headwinds and potholes on the road to fulfilling the clean hydrogen promise, there are still reasons to be hopeful. For instance, ING outlines the potential developments in 2024 that can spur progress for the clean hydrogen market:

1) green election victories;

2) radical transition plans of energy-intensive companies of the medium-term usage of clean hydrogen;

3) success stories for electrolyzer projects;

4) effective hydrogen auctions,

5) increased policy support to stimulate hydrogen demand, similar to the ones by the US Department of Energy (DOE, 2024a) to create demand-side support mechanisms for unlocking the market potential of its hydrogen hubs or Japan’s $21 billion as clean hydrogen subsidies (Collins, 2023);

6) robust development of hydrogen supply chain, and

7) reduced or stagnant electrolyzer shipments out of China may indicate increased green industry support for US and European electrolyzer manufacturers (Hieminga & Zhang, 2024). 

Furthermore, countries and regions continue to show progress in the hydrogen sector’s development. For instance, 63% of the European countries have published their hydrogen national strategies, with only 6% of the countries in the draft stage (EHO, 2024). The USA continues its work on making H2Hubs a cornerstone for the national clean hydrogen network (DOE, 2024b). Moreover, there are bright lights in Asia and the MENA (The Middle East and North Africa) region. Japan intends to launch its largest green hydrogen hub project in Asia in Hokkaido (Martin, 2024b).

China expects to meet and exceed its green hydrogen production estimates by 2025 (IEA, 2024). Lastly, the MENA region also stands out as a beacon of clean hydrogen-related progress with several successes, such as Saudi Arabia’s Public Investment Fund and ACWA, in partnership with Air Products, reaching FID on the $8.5 billion NEOM Helios Green Fuels Project (Douglas & Boulstridge, 2024) and Oman rising as a frontrunner in the green hydrogen production with expected investor commitment of $40-60 billion by 2030 toward new hydrogen industry (Prabhu; Zanon; 2024). 

May the road rise to meet you… 

This article briefly summarizes the main challenges and opportunities for clean hydrogen in 2024. Cleaner energy enthusiasts, still believing in unlocking clean hydrogen potential, will undoubtedly face frosty headwinds and unexpected potholes on the road to decarbonization. Other potential problems related to geopolitical uncertainties, the struggle for critical minerals, slow progress in decarbonizing electric grids, and water scarcity problems (Hosop, IEA, Lloyd, 2024; Woods et al., 2022) will test even the most resilient clean hydrogen road warrior.

However, to paraphrase the famous Irish blessing, “May the Road Rise to Meet You” (Wilson, 2023), the road will only rise to meet the ones who decides to walk it. In time, the brave and realistic global cleaner energy road warriors (who do not consider clean hydrogen a silver bullet in energy transition) might see additional opportunities for its development as many more bright lights on the decarbonization’s horizon.