Green hydrogen faces critical challenges in bridging ambition and reality

"Over the past three years, global project announcements for green hydrogen have almost tripled," says PIK researcher and lead author Adrian Odenweller. "However, only seven percent of the production capacity originally announced for 2023 has been completed on time during this period." According to the study, recent challenges in scaling up green hydrogen production stem from increased costs, limited demand-side willingness to pay, and uncertainties surrounding future subsidies and regulations.

Falko Ueckerdt from PIK elaborates, "Enormous additional subsidies of around one trillion US dollars would be required to realise all announced hydrogen projects by 2030. Green hydrogen will continue to have difficulties meeting the high expectations in the future due to a lack of competitiveness." Ueckerdt emphasized that permanent subsidies are not a viable solution. Instead, he and his colleagues advocate for demand-side strategies like binding quotas to ensure green hydrogen is directed into sectors resistant to electrification, such as aviation, steel, and chemicals. For instance, an EU regulation mandates that starting in 2030, 1.2 percent of aviation fuels must incorporate synthetic fuels derived from hydrogen, with this figure increasing to 35 percent by 2050.

Subsidy gaps highlight financial hurdles

The researchers identified three major gaps that hinder the deployment of green hydrogen: the past implementation gap, the future ambition gap, and the future implementation gap. The past implementation gap highlights the disparity between announced hydrogen projects and those completed by 2023. The ambition gap reflects the difference between the hydrogen volumes needed for 1.5-degree climate scenarios and the currently announced projects for 2030. While many announced projects align with these scenarios, the implementation gap persists due to subsidy requirements vastly exceeding global commitments.

The study analyzed a manually verified global database of 1,232 green hydrogen projects planned through 2030. The authors assessed the competitiveness gap between green hydrogen and fossil alternatives for 14 designated end uses. Combining these factors with project timelines and volumes, they calculated the subsidy levels needed to achieve the 2030 goals.

Recommendations for sustainable green hydrogen growth

The study warns against the risk of fossil lock-ins, which could entrench reliance on fossil fuels and jeopardize climate targets. To address this, the researchers recommend transitioning to technology-neutral market mechanisms like carbon pricing to reduce public expenditure and foster competition among climate solutions. They propose a balanced strategy that includes direct subsidies and demand-side regulations in the short term while maintaining realistic expectations for green hydrogen's role.

Research Report:Green Hydrogen ambition and implementation gap