Green Hydrogen Market - Global Outlook & Forecast 2024-2029

MARKET OUTLOOK

The global green hydrogen market was valued at USD 6.42 billion in 2023 and is expected to reach USD 84.03 billion by 2029, growing at a CAGR of 53.53%. Green hydrogen is produced by splitting water into hydrogen and oxygen using renewable electricity. This is quite a different pathway compared to gray and blue hydrogen. The green hydrogen market is in its nascent stage, but it holds substantial potential in addressing the challenges and limitations associated with the direct replacement of fossil fuels with electricity, particularly in industries requiring intense heat for processes such as the production of steel, cement, glass, and chemicals. This unique capability positions hydrogen as a key player in decarbonizing industrial sectors, complementing electric arc furnaces (EAF) technologies in steelmaking.

Green hydrogen is emerging as a versatile and environment-friendly energy carrier in industries such as steelmaking. Moreover, the industrial sector can benefit from the green hydrogen market as a feedstock for the cleaner production of essential chemicals, including ammonia and organic. Green hydrogen is poised to play a crucial role, particularly in sectors such as shipping, aviation, and, to a lesser extent, heavy goods vehicles. The synthetic fuels derived from hydrogen, such as ammonia and methanol, and fuel cell technology offer promising solutions for decarbonizing these challenging sectors. However, it has been acknowledged that hydrogen faces stiff competition from other alternative fuel options, particularly battery electric vehicles, in light-duty vehicles such as passenger cars.

Presently, the European region stands out as a leader in implementing green hydrogen commercialization plants and supports the growth of the green hydrogen market. In contrast, regions including Latin America, the Middle East, and Asia Pacific are positioning themselves as future export hubs. The Middle East & Africa (MEA) region has abundant renewable energy sources, such as solar and wind, allowing the production of green hydrogen at a lower cost. This competitive advantage positions the MEA as a significant region in the export market, potentially challenging the established players in Asia Pacific and Europe.

The global landscape for green hydrogen projects has been characterized by diverse budget allocations and varying implementation rates, leading to a complex and slowly evolving market. While many countries have earmarked substantial funds for the green hydrogen initiatives, the execution of projects has encountered delays and challenges. Some countries in the pilot stage are revising and elevating their targets, thereby indicating a growing commitment to achieving green hydrogen milestones in the near future.

A complex interplay of budget allocations, project implementations, and strategic planning characterizes the global green hydrogen market. The transition from pilot to commercialization, the export-oriented strategies of many countries, and the regional dynamics in renewable resource availability collectively shape the trajectory of the green hydrogen market on a global scale.

FUTURE EXPORTERS OF GREEN HYDROGEN

India aims to become a leading exporter of green hydrogen, targeting a production goal of 5 million tons per year by the end of the decade. The country, currently focused on green hydrogen research facilities, is anticipating export markets to drive demand, allowing it to leverage its low production costs and emerge as a key supplier. Despite objections from oil refiners, the government announced the launch of 48 projects capable of producing 3.5 million tons annually in 2023. The demand from the fertilizer industry is considered a potential avenue, and the government has released guidelines and USD 2.1 billion in subsidies to support the hydrogen sector, which includes electrolyzer manufacturers. However, domestic users may face challenges transitioning from gray to green hydrogen without demand-side incentives. Globally, the International Energy Agency (IEA) will demand about 180 million tons of hydrogen by 2030, allowing India to capture a significant share.

Australia is well positioned to become a prominent exporter of low-carbon hydrogen to Japan and South Korea owing to its abundant renewable energy resources, the availability of land and water, and a robust hydrogen project development pipeline. The country's mature industrial sector, export experience, and strong relations with Japan and South Korea, the country's second and third-largest trading partners, respectively, provide a significant advantage in this sector.

The Australian government actively supports the hydrogen industry by investing USD 2 billion in the Hydrogen Headstart program for large-scale low-carbon hydrogen projects. Additionally, efforts are underway to establish the Guarantee of Origin, a top-tier certification scheme, to facilitate the export of Australian hydrogen products to diverse jurisdictions with varying requirements. The strong backing for low-carbon hydrogen development is evident at the state level, with Queensland allocating USD 62 billion for its Energy and Jobs plan, including hydrogen hub funding. Similarly, New South Wales announced USD 3 billion in incentives to augment hydrogen supply chains and substantially reduce the cost of low-carbon hydrogen. Australia must augment its pipeline projects beyond the initial stages and enhance its government support programs and strategies to effectively compete globally to maintain its leadership in the emerging low-carbon hydrogen market.

IMPACT OF TECHNOLOGY

The key technology for producing green hydrogen involves electrolysis, where an electrolyzer utilizes electricity from renewable sources to split water into hydrogen and oxygen. However, electrolyzers currently contribute significantly to the final cost of hydrogen production, making it imperative to create scale economies in manufacturing and enhance their performance for cost-effective clean hydrogen.

The electrolyzer technology is currently in its infant stage, rendering it relatively expensive for widespread adoption by countries. This high cost acts as a deterrent for underdeveloped nations from investing significantly in this technology. However, green hydrogen production costs will decrease as the market matures due to the emergence of cost-effective and advanced technologies. Reducing the cost of electrolyzers will play a pivotal role in making this renewable energy source more economically viable.

The potential impact of technology in the green hydrogen market extends beyond cost reduction. With continuous technological advancements, the efficiency of electrolysis processes is slated to improve, resulting in higher production yields and further contributing to cost-effectiveness. Moreover, the transition to green hydrogen depends on technological advancements, supportive policies, and international collaborations. Governments and regulatory bodies play a crucial role in incentivizing the adoption of green hydrogen technologies through subsidies, tax breaks, and research funding initiatives. The collaborative efforts at the global level can facilitate the exchange of knowledge and expertise, thereby accelerating the development and dissemination of cost-effective green hydrogen technologies.

The substantial increase in global electrolyzer manufacturing capacity, driven by various national policies, indicates a collective commitment to advancing green hydrogen technology. This can reduce the overall cost of hydrogen production, making it more competitive in the energy market. Moreover, the emphasis on achieving an installed capacity of over 5,700 GW by 2050, as mentioned in the scenario limiting global warming to 1.5°C, underscores the pivotal role of electrolysis technology in meeting the ambitious climate targets and transitioning toward a more sustainable energy future. This highlights the importance of technological advancements and global collaborations in driving the growth of the green hydrogen market and influencing its positive environmental impact.

Another decade will be required for green hydrogen to reach cost parity with fossil fuels. During this period, the ongoing technological advancements and supportive policies will contribute to gradually reducing production costs. As green hydrogen costs become more competitive, underdeveloped countries are estimated to show increased interest and invest in this sustainable energy source. This transition holds promise for mitigating the environmental impact of energy production and presents economic opportunities for those nations embracing the green hydrogen market.

SEGMENTATION INSIGHTS

INSIGHTS BY TECHNOLOGY
The alkaline electrolyzer technology accounted for the highest global green hydrogen market share in 2023. As the oldest electrolysis technology, alkaline electrolyzers are most widely deployed globally owing to the continuous stream of advancements and innovations in recent years. PEM electrolyzers are the second most preferred technology worldwide; their extended lifespan and superior efficiency distinguish them from alkaline electrolyzers. Alkaline and PEM electrolyzers possess distinct competitive advantages despite being technologically advanced and commercially available. Alkaline electrolyzers stand out for their cost-effectiveness in terms of installation, while PEM electrolyzers account for a significantly smaller physical footprint. Additionally, PEM electrolyzers boast of higher production rates and output pressures.

Emerging technologies, such as Solid Oxide Electrolysis Cells (SOEC) and Anion Exchange Membranes (AEM), are in their early development stages. However, significant growth potential exists as they move toward commercialization in the global market. Once these technologies gain traction and are integrated into the market, they can establish dominance in the future electrolysis landscape. The potential for market dominance becomes particularly noteworthy as these emerging technologies move from the nascent stage to widespread commercial adoption.

INSIGHTS BY SOURCE
The global green hydrogen market by source is segmented into wind, solar, and others. Wind energy, particularly onshore wind, has the largest share in powering green hydrogen production. Its abundance and cost-competitiveness make it a leading choice. Solar energy, while being slightly behind wind, is rapidly catching up. Its potential for decentralized production and integration with existing grids is appealing. Other sources in the green hydrogen market include geothermal, hydropower, and hybrids, which account for smaller shares but are slated to register the highest CAGR. Furthermore, the Middle East and North Africa (MENA) region, particularly the Gulf Cooperation Council (GCC) states, possess abundant renewable energy resources such as solar and wind power; this makes the region an ideal location for green hydrogen production. The UAE, in particular, benefits from the lowest solar power cost globally.

INSIGHTS BY END USER
The global green hydrogen market by end-user is segmented into refining, ammonia, and others. Green hydrogen can be applied as a feedstock in industries such as ammonia, methanol, refining, and steel; it can also be used as an energy carrier in fuel cells, energy storage, transportation fuel, and process heating. Among these options, the refining sector stands out as a key player, accounting for the highest market share. Furthermore, the refining market is adopting green hydrogen as a sustainable and low-carbon alternative to traditional hydrogen production methods, aligning with global efforts to reduce carbon emissions. As the demand for cleaner energy sources intensifies, green hydrogen is becoming a preferred choice for refineries aiming to enhance their environmental performance and comply with stringent regulatory standards. Additionally, the ammonia production sector is emerging as a consumer of green hydrogen, further contributing to the diversification of end-user demand within the growing green hydrogen market.

GEOGRAPHICAL ANALYSIS

Europe accounted for the highest global green hydrogen market share, valued at over USD 2 billion in 2023. The European Union, particularly through initiatives such as the 2050 Low Carbon Strategy (published in 2018) and the Green Pact for Europe (presented in 2019), has outlined comprehensive plans to decarbonize a significant portion of its renewable electricity energy consumption. A key component of this strategy involves leveraging hydrogen as a renewable energy storage medium to address the gaps in energy needs. The EU aims to increase the share of hydrogen in its energy mix from 2% to potentially 14% by 2050, thereby recognizing its potential to effectively reduce and replace fossil fuels in the challenging-to-decarbonize sectors such as steel, chemicals, and transport. Such factors are projected to support the market growth during the forecast period.

Australia, the U.S., and Spain are poised to lead the global green hydrogen market by the decade's end. These three countries will be closely followed by Canada, Chile, Egypt, Germany, India, Brazil, and Morocco, highlighting the diverse global participation in the emerging green hydrogen market. The unexpectedly strong entry of Australia into the top ranks of this sector can be attributed to the Australia Renewable Energy Hub, which is scheduled to commence operations in 2030. However, the potential delays in this project can shift the country’s expected annual production of 1.5 million tons of annual green from 2029 to 2030.

Numerous African nations, particularly those around the Northern and Southern Tropics, possess abundant solar and wind resources and a significantly untapped hydropower potential, particularly along the Congo and Nile rivers. Countries like Nigeria, Algeria, and Angola account for some of the world's largest gas reserves. These nations are exploring blue hydrogen as a low-carbon alternative to traditional fossil fuels to diversify their economies.

This wealth of resources has sparked considerable interest and involvement from various European countries, with Germany playing a prominent role. The German government has collaborated with several African nations to create the Hydrogen Potential Atlas; the country has allocated USD 45.7 million to support Namibia's National Green Hydrogen Development Strategy. Furthermore, Germany is engaged in discussions with the Democratic Republic of the Congo regarding the potential revival of the contentious Inga Dam III project. Germany has established hydrogen offices in economies including Angola and Nigeria to foster dialogue on fossil fuel export.

The green hydrogen market in North America is gaining momentum owing to the region’s decarbonization efforts and the increasing interest in clean energy. Government support and policies are crucial in developing the green hydrogen market. Various North American countries, including the US and Canada, have expressed interest in promoting hydrogen in their clean energy strategies. SoHyCal, North America's largest operational green hydrogen production facility, has commenced production in Fresno, California.

COMPETITIVE LANDSCAPE

The global green hydrogen market is marked by a diverse competitive landscape, encompassing various technologies and players across different segments. Several companies actively contribute to the industry's development, with competition arising from traditional hydrogen production methods, green hydrogen technology providers, and companies selling green hydrogen as an end product. The traditional hydrogen production methods, represented by established players including Linde, Air Liquide, and Air Products and Chemicals, continue to optimize efficiency and reduce costs. These companies pose a challenge to adopting green hydrogen as the improvements in traditional methods may impact the cost-effectiveness of the transition to greener alternatives.

Green hydrogen technology providers, such as Hydrogenics, ITM Power, NEL, Plug Power, and McPhy Energy, play a crucial role in the green hydrogen market. These companies typically offer centralized electrolyzer solutions powered by renewable energy sources or utilize carbon sequestering techniques. The evolution of their technologies and the scale of their operations contribute to the competitive dynamics of the green hydrogen market. The global green hydrogen market presents opportunities for growth and innovation as companies strive to position themselves as leaders in this evolving landscape. The ongoing technological developments, coupled with increased investments in research and development, are shaping the market trajectory. The competition is not just between technology providers; it involves the broader market participants seeking to capitalize on the growing demand for green hydrogen across various industries.

In response to the growing global emphasis on sustainable energy solutions, numerous companies actively engage in partnerships and collaborations within the green hydrogen market. Through joint efforts, the companies aim to accelerate the adoption of green hydrogen, thereby contributing to a more sustainable and low-carbon future while fostering innovations and technological advancements in the renewable energy sector. For instance, in 2023, Plug Power, SK E&S, K-water, and SK Plug Hyverse entered into partnerships to boost the growth of the green hydrogen market. These companies decided to develop national green hydrogen facilities, enhance technologies, and promote domestic and international ventures. For instance, SK Plug Hyverse plans to manufacture PEM electrolyzers in Korea and establish a giga-factory. The collaboration aligns with the carbon neutrality goals and aims to lead in the clean energy industry.