The world is witnessing an unprecedented surge in investments in electrolysis for hydrogen production, particularly in the realm of green hydrogen. While this marks significant progress in the transition to clean energy, it also highlights the challenges and ambitions surrounding the shift away from fossil fuels.
In 2022, global spending on electrolyzer installations reached a staggering $0.6 billion, doubling the number recorded in 2021. This revelation comes from a recent report by the International Energy Agency (IEA), signaling a growing commitment to green hydrogen technologies worldwide.
Notably, an additional $500 million was spent on hydrogen production projects that incorporate carbon capture, storage, and use technology, further underlining the momentum behind sustainable hydrogen.
Push for Low-Emission Hydrogen
While electrolysis investments have surged in recent years, they must continue to accelerate at a rate of 70% annually until 2030 to align with the carbon neutrality scenario of 2050. The IEA estimates that approximately $41 billion in investments will be required to achieve this goal by 2030.
The majority of electrolysis and carbon capture projects’ investments since 2021 have been driven by a relatively small number of large-scale hydrogen projects. These projects, despite adding limited new operational capacity compared to 2021, represented a record level of spending in 2022.
One of the standout projects that received the final investment decision in 2022 is the NEOM green hydrogen project in Saudi Arabia. With a planned capacity of 2 gigawatts, it is expected to become operational by 2026, making it a major contributor to the green hydrogen landscape.
Similarly, the Sultanate of Oman adopted the final investment decision for a green hydrogen and ammonia production project with a capacity of 320 megawatts. This project is part of a comprehensive strategy aimed at doubling production multiple times by 2030.
The Middle East, particularly the Arabian Gulf region, is expected to witness a surge in electrolysis investments for hydrogen production. China, in 2022, reached a final investment decision for a hydrogen production project in Xinjiang Province with a capacity of 26 megawatts. This project is set to commence operation in June 2023.
Europe is not far behind in the green hydrogen race. Shell, a multinational energy company, approved the Holland Hydrogen I project with a capacity of 200 megawatts, slated for operation by 2025. In Sweden, H2 Green Steel is on the cusp of making a final investment decision for a massive 700 MW electrolyzer and a new steel production plant.
Policy Support Fuels Investment
In 2023, investment decisions for proposed projects are expected to rise, thanks to supportive policies announced in the United States, Europe, Canada, Japan, India, and several other countries. The United States approved its largest-ever tax exemption package worth $370 billion for clean energy projects, including hydrogen.
Europe is also making strides, with the European Commission approving the establishment of a European Hydrogen Bank to finance environmentally compliant projects. Additionally, the Commission is considering financing proposals to aid potential hydrogen exporters and support electrolyzer manufacturers.
The volume of subsidies for low-carbon hydrogen projects has surged fourfold in the past two years, exceeding $280 billion by mid-2023, according to Bloomberg New Energy Finance (BloombergNEF). The United States accounts for 49% of global aid, with Europe at 27% and the Asia-Pacific region at 4%, focusing primarily on research and development.
As countries worldwide adopt national hydrogen strategies, the hydrogen production race has expanded. Seven Arab nations, including Saudi Arabia, the UAE, Qatar, Oman, Egypt, Morocco, and Algeria, have entered this global race through ambitious projects.