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October 9, 2023

IEA calls for policy incentives to stimulate clean hydrogen production

Hydrogen tube trailers and storage cylinders. The IEA says global governments are showing continued interest in the alternative fuel (Photo: Angel Garcia/Bloomberg)
Hydrogen tube trailers and storage cylinders. The IEA says global governments are showing continued interest in the alternative fuel (Photo: Angel Garcia/Bloomberg)

Governments’ targets for clean hydrogen consumption do not match those set for its production, according to an International Energy Agency study

According to the International Energy Agency only 1 per cent of global hydrogen production currently uses low-emission energy. It calls for policies that offer greater incentives to stimulate growth in a new report.

Hydrogen is deemed low-emission by the IEA when the electricity used to power the electrolysis process is generated either from renewable or nuclear power, or fossil fuel sources abated using carbon capture and storage.

Despite controversy surrounding hydrogen’s sustainability credentials, the IEA found that global governments are showing continued interest in the alternative fuel. Four governments have updated their hydrogen strategies in the year since the IEA’s 2022 Global Hydrogen Outlook, while an additional 15, largely in developing countries, have implemented an entirely new hydrogen strategy. 

China took the lead on electrolyser – the apparatus used to produce hydrogen – development, accounting for 30 per cent of global capacity in 2022. By the end of 2023, this is expected to reach 1.2 gigawatts, representing half of global capacity.

Use of all hydrogen types reached a historic high of 95 million tonnes in 2022, but its use centred on traditional applications such as refining and the chemical industry. Less than 0.1 per cent of demand came from new applications such as heavy industry, transport and power generation.

The report finds that global low-emission hydrogen production targets do not match the demand targets set by international governments. In total, all government targets for low-emission hydrogen production account for 27-35 Mt, yet targets for creating demand account for only 14Mt.

Low-emission hydrogen is seeing slow uptake for existing applications, accounting for just 0.7 per cent of total hydrogen demand. The IEA calculates that hydrogen production and use in 2022 was linked to more than 900Mt of CO₂ emissions.

According to the IEA, incentives are necessary to ensure demand creation. The report says policy action is still limited, with the number of policies for demand creation announced in 2022 equalling those announced in 2021. In Europe, however, this may change following the recent announcement of mandatory targets for member states on hydrogen demand in industry and transport.

Environmental groups have criticised the hydrogen lobby, stating that the oil and gas industry is among its most vocal supporters. Critics claim that hydrogen produced using natural gas, also called blue hydrogen, is sometimes used to adhere to energy transition targets while preserving the interests of oil and gas majors.

“We have seen incredible momentum behind low-emission hydrogen projects in recent years,” says IEA executive director Fatih Birol in a press release accompanying the report. “But a challenging economic environment will now test the resolve of hydrogen developers and policymakers to follow through on planned projects.”

Annual production of low-emission hydrogen could account for 38Mt a year in 2030 if all the projects that have been announced are realised, the report found. Three quarters of this will be generated using renewable energy, with the remainder coming from fossil fuel generation abated using carbon capture.

You can read the report here.

A service from the Financial Times