Global hydrogen markets are expanding at a rapid clip, with projections suggesting the sector could reach $410 billion by 2030, up from roughly $155 billion today. Much of this growth rests on policy-driven momentum—particularly in the EU, Japan, and South Korea—where hydrogen strategies are tightly woven into decarbonization pathways. Yet the trajectory is anything but linear, as structural barriers continue to blunt scale-up efforts.
A critical challenge lies in the cost equation. Despite falling renewable electricity prices, green hydrogen production remains two to three times more expensive than fossil-based hydrogen. Electrolyzer costs, hovering at $900–1,200/kW, must fall significantly if the sector is to hit the International Energy Agency’s cost-parity scenarios for the 2030s. Deployment numbers suggest progress but remain marginal: installed electrolyzer capacity stood at just 1 GW in 2022, a fraction of the 100–200 GW required by the end of the decade to align with net-zero roadmaps.
Transport and storage provide another friction point. While pipelines offer the most cost-effective bulk option, conversion infrastructure is largely absent. Liquid hydrogen transport, though technically feasible, suffers from a 30–40% energy penalty, undermining its efficiency case. Ammonia and LOHC carriers provide alternatives but introduce additional conversion costs and safety concerns. The absence of harmonized technical standards further complicates cross-border trade ambitions, particularly between Europe, the Middle East, and Asia.
Policy incentives are attempting to bridge these gaps. The U.S. Inflation Reduction Act’s $3/kg production tax credit has triggered a surge of project announcements, with over 10 Mtpa of clean hydrogen capacity now in the pipeline. In Europe, the Hydrogen Bank and Contracts for Difference schemes aim to reduce offtake risk by guaranteeing price stability. Yet analysts caution that subsidy-driven expansion risks overshooting demand, as downstream sectors—steel, refining, shipping—remain hesitant to commit to long-term contracts without clearer signals on carbon pricing and regulatory timelines.
Industrial demand, which accounts for 90 Mt of current hydrogen consumption, remains concentrated in refining and ammonia production, both heavily dependent on grey hydrogen. The pivot to green variants requires not only cost-competitiveness but also retrofitting existing facilities—investments that many firms are reluctant to undertake absent policy compulsion. In steelmaking, pilot projects in Sweden and Germany highlight technical viability but underscore the financing gap: capital costs are up to 40% higher than blast furnace alternatives, with uncertain payback horizons.
Emerging markets present both opportunity and uncertainty. Countries with abundant renewables—such as Chile, Morocco, and Australia—position themselves as export hubs. However, the lack of established hydrogen trade routes raises the risk of stranded assets. Japanese and Korean import plans remain cautious, tied closely to ammonia co-firing in power plants rather than wholesale hydrogen adoption.
The sector’s momentum is therefore best read as a tension between ambition and inertia. Scaling supply is technically feasible but economically fragile; demand-side uptake is technologically proven but commercially hesitant. Without synchronization between production scale-up, infrastructure build-out, and end-user adoption, the hydrogen economy risks developing in fragments rather than as a coherent global market.
