Europe’s dominance of the global hydrogen industry appears to be slipping due to the rapid increase in planned hydrogen projects in North America, according to a report by Aurora Energy Research.
Electrolyzer projects worldwide have jumped by 18% in the last six months, reaching a capacity of one terawatt of electricity. While Europe is still the largest region for new hydrogen projects, its share has fallen from 63% six months ago to 56%. The report predicts that Europe will lose its majority share by 2025. Europe has been an early adopter of new low-carbon technologies such as hydrogen electrolyzers, electric vehicles, and solar power, but the continent has been slow to respond to the US Inflation Reduction Act. The Act earmarked $369bn for green energy programs and has spurred US companies to invest in the hydrogen industry.
Hydrogen is a clean-burning gas that plays a central role in decarbonizing heavy industries such as steel and chemicals. The International Energy Agency states that low-emission hydrogen production needs to rise from its current level of less than 1% of current total production to more than 90 million tons by 2030 to achieve net-zero carbon emissions by 2050. Electrolyzers use renewable electricity to split water to produce green hydrogen, which is considered emission-free energy. Hydrogen can also be generated using fossil fuels, but that output isn’t considered clean unless the greenhouse gas emissions released when producing it are captured and stored.
Europe still leads in building a regional market for hydrogen, which includes developing hydrogen producers and consumers in proximity and local infrastructure networks to help transport the fuel. However, much of the industry is still in the early planning stages of development, and only 1% of the one terawatt of planned hydrogen projects have begun construction, while 86% are in the early planning stages of development.
Aurora Energy Research forecasts that European low-carbon hydrogen prices will fall from €7 a kilogram in 2025 to €2.8 a kilogram by 2050, as new supply comes online. Meanwhile, demand for hydrogen in Europe is expected to rise by 60% by 2030 and increase threefold by 2040, compared with 2023.
Europe’s shrinking share of hydrogen projects is a direct consequence of the bloc’s slow response to the US Inflation Reduction Act and its delay in developing concrete regulation for renewable hydrogen, according to Dilara Caglayan, a lead hydrogen researcher at Aurora. The US offers straightforward, generous tax credits to clean hydrogen producers, while the EU took many months to work out the details of its incentives, which generally involve more red tape.